Financial Crimes Task Force Report Provides a Road Map for Other Steps that Should be Taken by the U.S. Government and Private Sector to Bar Criminals from the American Art Market

As we announced in a press statement here, today Congress passed H.R.6395, the National Defense Authorization Act for Fiscal Year 2021 (NDAA), which among other things removes antiquities dealers’ current exemption from what are now standard anti-money laundering (AML) laws and regulations under the Bank Secrecy Act (BSA).  H.R. 6395 is an important first step to combat financial crimes facilitated through the art market—but it is just a first step. There are many additional actions that can be taken to safeguard our national security, economic integrity, and responsible collectors, dealers, galleries, auction houses, and museums. 

The Antiquities Coalition convened the multi-stakeholder Financial Crimes Task Force to protect the American art market from criminal misuse. This September, the Task Force released Reframing U.S. Policy on the Art Market: Recommendations for Combating Financial Crimes. This report details how the $28.3 billion American art market, the largest in the world, is threatened by money laundering, terrorist financing, and other related crimes, while providing solutions on how to address these challenges. Those recommendations most relevant and applicable to the passage of H.R. 6395 include: 

1) For H.R. 6395, the Secretary of the Treasury will be already providing an extensive “notice and comment” period for all stakeholders to ensure that any forthcoming regulations are clear, effective, and appropriate in scope. It is critical that the art market work with the U.S. government to tailor these rules, recognizing that increased due diligence protects not only U.S. interests, but those of the art market as well. 

2) Related to the above, the Financial Crimes Enforcement Network (FinCEN), which safeguards the United States financial system from illicit use, should immediately start extensive outreach to the art market and financial sector, including nationwide conference calls, local and regional meetings, and online webinars. Through such awareness raising, FinCEN should seek to educate these key players about the risks facing their sectors, giving them the knowledge and tools needed to fully comply with any regulatory changes, and enlist them as allies. 

3) H.R. 6395 does not cover art dealers. Antiquities dealers are just part of a much larger art market—a $64.1 billion global market, of which 44% is in the United States. It is critical that Congress apply the BSA to all dealers in cultural property, as, again, it has already done for all other sectors of comparable risk and scale. 

The 2018 5th Anti-Money Laundering Directive of the European Union required dealers for art transactions of €10,000 or more to comply with anti-money laundering regulations, including verifying the seller, buyer, and ultimate beneficial owner (which, as the name suggests, refers to the person or persons who ultimately benefit from a piece’s sale). The United Kingdom and Switzerland now have similar requirements. By making dealers in antiquities subject to the BSA, Congress has taken action to prevent the United States art and antiquities market from becoming a safe haven for financial criminals dodging stricter regulations abroad.

To learn more about how the U.S. government can partner with the private sector to protect the American art market from financial crimes, read the full Antiquities Coalition Task Force Report and explore our other interactive resources here. 

To learn more about how H.R.6395 will impact the art market, read our press statement here and FAQ here.

As we announced in a press statement here, today Congress passed H.R.6395, the National Defense Authorization Act for Fiscal Year 2021 (NDAA)—which, among other things, removes antiquities dealers’ current exemption from what are now standard anti-money laundering (AML) laws and regulations under the Bank Secrecy Act (BSA). 

This FAQ answers frequently asked questions on the new law, why it is needed, and what comes next.

What does the NDAA change in the BSA?

The National Defense Authorization Act for Fiscal Year 2021 (NDAA), among other things, comprehensively modernizes the Bank Secrecy Act (BSA) and provides for the establishment of a coherent set of risk-based priorities. The BSA was first enacted in 1970 and remains the regulatory framework for AML and counter-terrorism financing efforts in the United States. After almost twenty years without major reform, today’s BSA update brings much needed provisions that adequately address present day challenges and opportunities.

What does the BSA have to do with national security?

Under the BSA—which, again, is the country’s primary AML law—designated entities must assist the government in preventing and detecting financial crimes. While what this requires varies according to the individual or institution involved, in general, the law reinforces good business practices like performing customer due diligence and record keeping. In some cases, it may also involve anonymously reporting suspicious activity. In addition to expected businesses, such as banks, the statute already applied to sellers of precious metals, stones, jewels, automobiles, planes, and boats, as well as to casinos, real estate professionals, travel agencies, and pawn shops. 

Why are these changes needed?

The overarching goal in making these changes is to broaden the mission of the BSA to safeguard national security. The update closes significant gaps in AML and counter-terrorism financing efforts, including by adding the trade in antiquities to coverage under the BSA. In addition, the U.S. Department of Treasury and its law enforcement partners will conduct a study on the risks posed by the facilitation of money laundering through the art market.

How does this affect the antiquities market?

Title LXI, “Strengthening Treasury Financial Intelligence, Anti-Money Laundering, and Countering the Financing of Terrorism Programs,” closes a major loophole by beginning to remove the art market’s current exception from what are now standard laws and regulations protecting all other sectors of comparable risk and size—and, with them, our national security and economic integrity.

Specifically, Sec. 6110(a) applies the BSA to “a person engaged in the trade of antiquities, including an advisor, consultant, or any other person who engages as a business in the solicitation or the sale of antiquities.”

How will the BSA be applied to dealers in antiquities?

Importantly, Sec. 6110(b)(2) requires the Secretary of the Treasury (acting through the Director of FinCEN), in coordination with the FBI, HSI, and Attorney General, to consider the appropriate scope for the rulemaking before issuing a proposed rule. The antiquities market’s input will be critical to tailoring effective rules during the “notice and comment” period to come. But, judging from other sectors, regulations would likely include anonymously reporting suspicious activity, performing customer due diligence, and record keeping. So, basically, good business practices in the 21st century, which are already required by the art market’s own industry guidelines and best practices.

What other industries are regulated by the BSA?

As its name suggests, the BSA clearly applies to banks, but it also covers a wide range of businesses much more similar to the art market—sellers of precious metals, stones, jewels, automobiles, planes, and boats, as well as casinos, real estate professionals, travel agencies, and pawn shops. 

What about the art market?

The art market’s absence from this list has long been a major loophole, the consequences of which were made clear in the bipartisan Congressional report The Art Industry and U.S. Policies that Undermine Sanctions, released in July 2020. This report, published by the U.S. Senate’s Permanent Subcommittee on Investigations after a two-year investigation, revealed how a pair of Russian oligarchs evaded sanctions and laundered millions of dollars through leading American auction houses and dealers. The art market’s continuing exemption from standard laws and regulations gifted these sanctioned Russians with an easy backdoor into the world’s biggest economy.

Recognizing this, Sec. 6110(c) requires that the Secretary of the Treasury, in coordination with the Director of the FBI, the Attorney General, and Secretary of Homeland Security, conduct a study of the art market, considering almost exactly word-for-word the same considerations as taken in rule-making for the antiquities market.  The important distinction is that Sec. 6110(c) does not require a rule to be issued following the conclusion of the study.  Notably, the study will determine whether information on certain transactions in the trade of works of art has a “high degree of usefulness” in criminal, tax, or regulatory matters.

To learn more about how the U.S. government can partner with the private sector to protect the American art market from financial crimes, read the full Antiquities Coalition Task Force Report and explore our other interactive resources here. 

To learn more about how the U.S. government can build on H.R.6395, read our press statement here and follow-up post here.