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“Notice and Comment”: How Industry Can Help Shape the New Anti-Money Laundering Regulations for the Antiquities Market

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Background 

On January 1, 2021, Congress enacted the Anti-Money Laundering Act of 2020 (the “AML Act”) as part of the National Defense Authorization Act (NDAA) for 2021.  

The AML Act amends and expands the longstanding Bank Secrecy Act (BSA) in several ways.  Most notably, for those involved in the antiquities market, this new BSA amendment will soon apply the BSA’s anti-money laundering (AML) requirements to any “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, subject to regulations prescribed by the [Treasury] Secretary.”1

In essence, the United States’ AML laws will soon apply, in some fashion, to individuals and companies involved in the antiquities market.  

If the AML Act was enacted at the beginning of this year, are antiquities market participants already subject to the AML requirements in the BSA? 

Not yet.  U.S. federal law often comprises two components:  the legislation (enacted by Congress) and the regulations, also called rules or requirements (written and carried out by Executive Branch departments and agencies).2  Rules provide more detail for how to comply with the legislation after a public notice and comment process.

Here, Congress has enacted legislation in the form of the AML Act.  That legislation, in turn, requires the Treasury Department to draft and issue the new regulations that will apply to the antiquities market.   

The AML Act requires the Treasury Department to issue proposed rules within 360 days of January 1, 2021.3  It also specifies that the new requirements on the antiquities market won’t take effect until the “effective date of the final rules issued by the Secretary of the Treasury . . .”4  Final rules cannot be issued without permitting the public to weigh in on any proposed rules during a “notice and comment” period.  This means that before the antiquities market can be subject to any rules, the rules must be drafted, made public and open for comment, and revised into final rules–a process that is likely to take several months. 

However, financial institutions, as defined under the BSA and already subject to the BSA’s anti-money laundering requirements, should be aware of a March 9, 2021, notice issued by the Financial Crimes Enforcement Network (FinCEN), which is the specific Treasury Department bureau that imposes and carries out the BSA regulations.  

The notice, titled “FinCEN Informs Financial Institutions of Efforts Related to Trade in Antiquities and Art,” alerts financial institutions that illicit activity connected with the antiquities market could already be affecting them.  It also includes instructions for filing Suspicious Activity Reports (SARs) for transactions relating to art and antiquities.  

Organizations that were already subject to BSA requirements before the AML Act was enacted should be sure to review the FinCEN notice.  

How can antiquities market participants have a say in the new regulations?

Before federal rules can be finalized, the federal agency that is drafting them must publish the proposed rules and open them to comment by the public, during what is known as a “notice and comment” period.  The public can comment on the rules through the Regulations.gov website.

The agency can choose to involve the public before publishing proposed rules, by holding informal conversations with interested people and organizations.  It can also publish an “Advanced Notice of Proposed Rulemaking” in the Federal Register, to which interested individuals may respond by submitting comments and recommendations.5  

Once the proposed rules are drafted, the agency must publish them as a Notice of Proposed Rule Making (NPRM) in the Federal Register.  The public is then encouraged to submit comments via Regulations.gov.  Examples of comments on other proposed rules can also be found on Regulations.gov. 

What are the proposed regulations likely to say?

The AML Act requires the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), which imposes and carries out the BSA regulations, to coordinate with the FBI, Attorney General, and Homeland Security Investigations (HSI) to consider several factors when drafting its proposed rules.  These factors are the best indication of what the regulations will address: 

  • (A) the appropriate scope for the rulemaking, including determining which persons should be subject to the rulemaking, by size, type of business, domestic or international geographical locations, or otherwise;
  • (B) the degree to which the regulations should focus on high-value trade in antiquities, and on the need to identify the actual purchasers of such antiquities, in addition to the agents or intermediaries acting for or on behalf of such purchasers;
  • (C) the need, if any, to identify persons who are dealers, advisors, consultants, or any other persons who engage as a business in the trade in antiquities;
  • (D) whether thresholds should apply in determining which persons to regulate;
  • (E) whether certain exemptions should apply to the regulations; and
  • (F) any other matter the Secretary determines appropriate.6 

When can the public comment on the proposed regulations?

FinCEN has not yet issued a Notice of Proposed Rulemaking for the antiquities market regulations; it is required to do so within 360 days of January 1, 2021.7  

Once it issues the Notice, FinCEN will likely specify a comment period of at least 30-60 days.  It may also hold public hearings where people can make statements and submit data. 

1 NDAA Sec. 6110(a)(1)(B), to be codified at 31 U.S.C. Section 5312(a)(2)(Y), available at https://www.congress.gov/bill/116th-congress/house-bill/6395/text.
2 “Regulations” and “rules” are typically used interchangeably, as they are in this FAQ. See https://www.federalregister.gov/uploads/2011/01/the_rulemaking_process.pdf note 1.
3 Id. Sec. 6110(b)(1).
4 Id. Sec. 6001(a)(2), emphasis added.
5 See https://www.federalregister.gov/uploads/2011/01/the_rulemaking_process.pdf.
6 NDAA Sec. 6110(b)(2)(A)-(F).
7 Id. Sec. 6110(b)(1).

About the Author: Betsy Feuerstein is an attorney and member of the Antiquities Coalition’s Financial Crimes Task Force. Her practice has focused on international economic sanctions, anti-money laundering, and anti-corruption matters. Ms. Feuerstein earned her J.D. at New York University School of Law, and earned a B.A. in Political Science and Art History from Northwestern University.

G20 Prioritizes the Fight Against Cultural Racketeering with High Level Event of Key Stakeholders

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Antiquities Coalition Urges Coordinated Action to Combat the Illicit Trade in Art and Artifacts

Last week, Deborah Lehr, Founder and Chairman of the Antiquities Coalition, joined leaders from government, law enforcement, and civil society in the Group of 20’s (G20) first public program tackling the cultural racketeering crisis. The April 9 webinar, Protection of Cultural Heritage and the Prevention of Illicit Trafficking, opened a series of virtual events that will lead up to a planned in-person convening of Cultural Ministers from all G20 member states later this year. The Antiquities Coalition was honored to be one of the few non-governmental organizations invited to share its expertise on this important topic along with distinguished individuals and institutions from around the world.

As part of its Presidency of the G20, Italy is organizing these programs to develop recommendations for G20 countries about the risks their markets face from transnational crimes via art and artifacts, including smuggling, money laundering, and terrorist financing. The G20, the lead forum for international economic and financial cooperation, brings together the governments and central bank governors from 19 members including the United States and the European Union. Under Italy, it has prioritized combating the illicit trade, as well as other threats facing cultural heritage such as climate change. 

“The G20 is in a unique position to make a difference,” Lehr noted during the April 9 meeting,  because “together its membership accounts for 90% of the worldwide art market.” She stressed that while past efforts to combat cultural racketeering dealt almost exclusively with cultural ministries, only a whole-of-government approach and international cooperation will be effective. She commended the G20, under Italy’s leadership, “for recognizing the need for political will at the top to halt this pillaging of history and the robbing of the economic vitality of countries dependent upon cultural tourism.”

The webinar featured prominent policymakers and leaders of international organizations including Dario Franceschini, Minister of Culture of the Italian Republic; Brigadier General Roberto Riccardi, Commander of the Carabinieri for the Protection of Cultural Heritage; Corrado Catesi, Head of the INTERPOL Works of Art Unit; and Maria Chiara Malaguti, President of UNIDROIT; as well as senior representatives from the World Customs Organization, the International Criminal Court, and UNESCO. Lehr presented alongside top experts from a wide range of countries, including Italy, Australia, Belgium, China, France, Mexico, Saudi Arabia, South Africa, Syria, and Turkey. Of the over 30 speakers in the session, she stood out as being one of the only American participants. 

As G20 considers where it can best target its efforts, Lehr recommended five actions that it should take as an institution or through its members: 

  • Better Understand the Problem. The lack of reliable statistics on the size of the illicit trade has hampered governments abilities to take the appropriate actions. Therefore, the G20 could make a major impact by commissioning research to quantify crimes in art and antiquities. This work would also be furthered by encouraging G20 members to be vigilant in tracking and reporting on their own statistics.
  • An Awareness Campaign. The G20 could use its platform to help policymakers, the private sector, and the general public better understand the threats from cultural racketeering and why it is important to only buy antiquities with a verified provenance. 
  • Strengthening the Legal Framework. The international legal framework for dealing with the illicit trade was developed in the 1970s. It is time to upgrade conventions and create new institutions, while encouraging member countries to review their own laws and regulations. 
  • Capacity Building. It is not easy to recognize an ancient amphora from a recent one. Training border patrol and customs officials, as well as designated dedicated investigators and prosecutors, can make a significant difference. The Carabinieri—considered the gold standard—demonstrate what an impact this can make.
  • Commit to Continuing Action. A statement in the final communiqué would send a strong message that top global leaders are dedicated to stamping out this crime.

In addition, the Antiquities Coalition proposed hosting an annual summit of the key players, including countries of origin and market countries, law enforcement, the private sector and others. Such an event, held on the margins of the G20, would provide an opportunity for key stakeholders to find ways to work together in support of our shared goal—stopping the robbing of our shared heritage.

The Italian G20 Presidency held two more culture webinars this week, on April 12 and April 13.

To watch Lehr’s remarks, visit here (at the 1:43:20–1:48:20 timestamp).

To watch the full webinar recordings and view the program of events, visit here.

Antiquities Coalition Highlights Need for U.S.–Turkey Bilateral Agreement in The Art Newspaper

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The Antiquities Coalition recognized the merits of the recent cultural memorandum of understanding (MOU) between the United States and Turkey in comments published on February 3 in The Art Newspaper.

“For the [UNESCO] treaty to have domestic effect under American law, an MOU is needed,” Antiquities Coalition Executive Director Tess Davis told journalist Ayla Jean Yackley, referring to the 1970 UNESCO Convention on the Means of Prohibiting and Preventing the Illicit Import, Export and Transfer of Ownership of Cultural Property, which the Antiquities Coalition explored in a recent story map celebrating the treaty’s fiftieth anniversary. “US import restrictions can deal a major blow against the global black market in looted Turkish antiquities.”

The import restrictions, which the United States and Turkey signed on January 19, apply to certain archaeological and ethnological materials—including various kinds of archaeological materials created between 1,200,000 BC and AD 1770, as well as various kinds of ethnological materials created between the 1st century AD and 1923—that have not been licensed by the Turkish government for legal exportation.

While this agreement does not advance Turkey’s efforts to repatriate the thousands of antiquities it has already lost—many, presumably, to Western collectors and museums—it will facilitate responsible cultural exchange for years to come.

The agreement is not without controversy, as opponents of the MOU argue that Turkey has not fulfilled its obligations as a State Party to the 1970 UNESCO Convention, alleging that the country has failed to provide adequate protections for the cultural heritage of its minority groups.

In response to that perspective, Davis told Yackley that this MOU can be a “powerful tool,” having the potential to encourage Turkey to make greater strides in defending the cultural heritage of all of its peoples.

“Advocates for minority cultural heritage in Turkey should view this MOU not as an obstacle but as a stepping stone to further their critical work,” Davis said. “It gives them a mechanism to make their voices heard and realise much-needed change.”

AC Founder and Chairman Deborah Lehr Advocates to Protect Art Market From Money Launderers in Op-Ed

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A 150-page report released by the U.S. Senate’s Permanent Subcommittee on Investigations earlier this month revealed that two Russian billionaires—construction and energy magnates Arkady and Boris Rotenberg—exploited the $28.3 billion American art market to skirt U.S. sanctions and launder no less than $18 million.

What’s more, when it comes to taking advantage of the American art market’s lack of laws and regulations, this pair is far from alone: According to what one subcommittee staffer told Politico reporters, the findings published through this inquiry are likely to represent “only the tip of the iceberg.”

Antiquities Coalition Founder and Chairman Deborah Lehr reflected on the investigation in an August 8 op-ed for The Hill, highlighting how the PSI now echoes the Antiquities Coalition and other legitimate art advocates—not only in labelling the art market as “the largest legal, unregulated market in the United States,” but also in recommending that Congress amend the Bank Secrecy Act so as to regulate high-value art transactions.

“For our national security and global standing, we must add the multibillion-dollar art industry to the community of private-sector combatants in the battle against money-laundering and terrorist financing,” Lehr urged.

Read Lehr’s full op-ed here.