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Antiquities Coalition Pens Support for Increased Regulations in Arts & Cultural Heritage Law Committee Newsletter

December 14, 2020

The Fiscal Year 2021 National Defense Authorization Act (NDAA) is all but sure to become U.S. law as of December 14, having passed in Congress with a 335-78 vote in the House on December 8 and a 84-13 vote in the Senate on December 11. Among other things, the NDAA will remove antiquities dealers’ current exemption from what are now standard anti-money laundering (AML) laws and regulations under the Bank Secrecy Act (BSA).

Prior to these recent developments, Antiquities Coalition Executive Director Tess Davis submitted her support for the NDAA’s enhanced regulations in an op-ed for the Fall 2020 newsletter of the Art & Cultural Heritage Law Committee, a committee of the American Bar Association Section of International Law.

In “Increased Regulation Deters Crime—and is Good for the Art Market,” Davis asserted that “criminal misuse of the art market is threatening not only U.S. national security and economic integrity—but also responsible collectors, dealers, galleries, auction houses, and museums,” citing the U.S. Permanent Subcommittee on Investigations’s July 2020 Rotenberg report (“The Art Industry and U.S. Policies that Undermine Sanctions”) and the Office of Foreign Assets Control’s October 2020 Advisory and Guidance on Potential Sanctions Risks Arising from Dealings in High-Value Artwork.

“The Rotenberg report and OFAC advisory underscore why the $28.3 billion American art market is called the country’s largest unregulated industry,” Davis wrote. “Art stands alone, among sectors of similar risk and size, in its exemption from the Bank Secrecy Act (BSA).”

After explaining what the Bank Secrecy Act (BSA) does and what businesses it applies to, Davis highlighted the illogical loophole at hand: had the Rotenbergs been dealing in goods or services covered by the BSA, the businesses involved would have been required to, as Davis described, “take basic steps to ensure the transactions were not covers for financial crimes.”

Many of these steps, Davis noted, align with the safeguards created by following the best business practices of the 21st century art market—but without a legal requirement, adherence to these best practices is essentially optional.

Davis did not ignore the primary concerns of art and antiquities dealers, who, she wrote, fear “not only an erosion in their business culture, which for centuries has been built on discretion, but also increased compliance costs in an economic recession.” 

That said, Davis countered these arguments by pointing not only to the fine print of the NDAA, but also to the effects of such legislation on similar and global markets.

“[A]ny regulations would only be crafted after an extensive ‘notice and comment’ period, during which the art market would have ample opportunity to work with the government in tailoring effective rules,” Davis wrote. “And comparable sectors have continued to thrive under the BSA, as has the European art market under similar measures, providing countless lessons from which to learn.”

Aside from protecting U.S. interests, Davis added, increased due diligence will also help the art market avoid “reputational harm, attorneys’ fees, and potential civil criminal liability.”

“To couch the proposed changes in political terms, the art market’s policy of ‘don’t ask, don’t tell’ has failed,” Davis concluded. “Through the BSA or other means, it is time to move on to ‘trust—but verify.’”

To read the full article, click here.