Time and time again, the Antiquities Coalition has reported on antiquities that have been looted from historic sites, smuggled out of their home countries by organized crime groups, and sold to the highest bidders, with the profits being used to fund violent crime and conflict all over the world.

We’ve seen enough—and so has INTERPOL. In May 2021, INTERPOL expanded on its Stolen Works of Art Database by launching the ID-Art app, now available to the general public for free through major app stores. 

The Antiquities Coalition spoke with Corrado Catesi, coordinator of the INTERPOL’s Works of Art Unit, to learn about what this app can do—and why we need it now more than ever.

Cultural property agreements (CPAs) between the United States and foreign governments are important tools to combat cultural racketeering. Under U.S. and international law, the United States can join CPAs to prevent looted and stolen antiquities and artifacts from entering the American art market, fighting the illicit trade while allowing the legal trade to continue and even thrive. 

Read our FAQ to learn more about these agreements, why they are important, and how they are achieved. 

 

What are Cultural Property Agreements (CPAs)?

Under the 1983 U.S. Convention on Cultural Property Implementation Act (CCPIA), the United States may enter into separate international agreements with other States Parties to the 1970 UNESCO Convention on the Means of Prohibiting and Preventing the Illicit Import, Export and Transfer of Ownership of Cultural Property (1970 UNESCO Convention). These memoranda of understanding can be bilateral (between two governments) or multilateral (between more than two governments). Either way, they close American borders to illegally exported archaeological and ethnological artifacts from the requesting country or countries, while protecting the legitimate art market and increasing responsible cultural exchange.

The United States has signed CPAs with a growing number of countries—including China, Egypt, and Italy—generating mutual respect, strengthening global law enforcement, and protecting American institutions and collectors from becoming unknowing criminal accessories.

 

Why are these CPAs important?

CPAs help to stop criminal activity at U.S. borders by keeping looted and stolen art and artifacts out of American markets. By restricting the import of undocumented cultural objects—those which lack a so-called “provenance,” or paper trail—they fight cultural racketeering, while allowing the legitimate trade to continue and thrive. In doing so, they protect the vast majority of responsible collectors, dealers, galleries, auction houses, and museums from being misused by criminals. Finally, they also aim to lessen global demand for illicit objects—especially since the U.S. makes up some 42% of the global art market—while increasing responsible cultural exchange.  

 

What is the 1970 UNESCO Convention?

Much of international law can be found in treaties, which are binding agreements between or among States. The 1970 UNESCO Convention is the foremost international agreement to combat the looting and trafficking of cultural heritage. Its States Parties work together against cultural racketeering by removing its causes, putting a stop to its practices, and repatriating looted and stolen cultural objects to their country of origin. Moreover, “the import, export or transfer of ownership of cultural property effected contrary to the provisions adopted under this Convention by the States Parties thereto, shall be illicit.” 

Currently, there are 140 States Parties to the Convention, including the United States, which was the first major market country to join in 1983.

 

What is the CCPIA?

Each country has its own process for enforcing international law in its own domestic legal system. In the United States, the President must first receive the “advice and consent” of the Senate before ratifying a treaty, and even then the agreement must be separately implemented into U.S. law (often through an act of Congress). The CCPIA (19 U.S.C. 2601 et seq.) is the United States’ domestic implementing legislation for the 1970 UNESCO Convention.

Again, the CCPIA enables the United States to join the Convention’s other States Parties in CPAs, which prospectively restrict the import of undocumented archaeological and ethnological materials into the United States, while promoting responsible cultural cooperation and exchange. Under certain circumstances, it also authorizes import restrictions on an emergency basis, absent a full agreement. 

 

What other commitments are found in the CCPIA?

In addition to providing for CPAs, the CCPIA also prohibits the import into the United States of cultural objects that were inventoried and stolen from another State Party’s public institutions (e.g.,  museums). 

 

What are the requirements for a CPA?

Under the CCPIA, in addition to being a State Party to the 1970 UNESCO Convention, there are four determinations a government must meet to enter into a CPA with the United States:

1. The country’s cultural patrimony is in jeopardy from pillage of archaeological and/or ethnological materials.
2. The country has taken measures to protect its archaeological and ethnological heritage consistent with the 1970 UNESCO Convention.
3. Other countries that have a significant trade in the archaeological and/or ethnological materials that would be subject to import restriction by the United States are also taking steps to prevent the import of these materials.
4. A CPA with the country is in the interest of the international community to encourage the exchange of cultural materials.

 

What is the process for achieving a CPA?

The process is not complex, but requires several steps. 

A State Party to the 1970 UNESCO Convention may request a CPA from the U.S. Department of State through diplomatic channels. This request should be accompanied by a “Statement of Facts” and supporting documentation that together address the four required determinations under U.S. law (see above). The request is then reviewed by a Presidentially-appointed and independent body—the Cultural Property Advisory Committee (CPAC)—which will make a recommendation to the decision maker (usually the Assistant Secretary for Educational and Cultural Affairs) as to whether the determinations are satisfied.

Government-to-government negotiations then begin to finalize an agreement. Import restrictions go into effect when the agreement is signed, a notice is posted in the Federal Register, and the Designated List is published.

 

What is CPAC?

The CCPIA tasks the Cultural Property Advisory Committee (CPAC) with reviewing requests from foreign governments for CPAs and then making recommendations as to whether the statutory determinations are met. 

CPAC is composed of eleven members who are appointed by the President and represent different constituencies, including the general public, the archaeological and anthropological community, the trade (i.e., collectors and dealers), and the museum community. 

In making their decision, they accept public input in the form of written and oral testimony. 

 

What types of materials do CPAs cover?

CPAs can be used to restrict the import of at-risk:

• archaeological objects: those “of cultural significance,” at least 250 years old, and “normally discovered” from excavation or exploration, and 
• ethnological objects: “products of a tribal or non industrial society” and of cultural importance. 

Additionally, to be covered, the export of these objects must also be restricted by the requesting country’s own laws.

The types of objects protected by an agreement are published in a document called a “Designated List,” which is made available in the Federal Register. 

 

What don’t CPAs cover?

CPAs are not retroactive, meaning they do not cover materials that were exported from the requesting country before the agreement went into effect (even if those objects were illegally exported). They likewise do not restrict the import of objects that were legally exported. Finally, they only include the types of antiquities and artifacts that are published on the Designated List (see above).

 

How long do CPAs last?

A CPA lasts for only five years, but may be renewed an indefinite number of times. The renewal or extension of an agreement follows a similar process as an initial agreement and the same four determinations described above must be met again. Likewise, emergency restrictions are effective for no more than five years from the date of the State Party’s request, but may be extended for three years. 

 

Will CPAs harm the legal trade in art and antiquities? 

No. Cultural objects that left the country legally after an agreement can continue to enter the United States.

CPAs are not retroactive. Cultural objects that left a country, legally or illegally, before the agreement are not impacted. This protects collectors, dealers, auction houses, and museums from unknowingly dealing in stolen property. 

Additionally, the agreements provide a platform for cooperation for diplomats, law enforcement, and those working in the arts and culture, through which both countries work to fight the illicit trade and strengthen our broader bilateral relationship. 

 

Do CPAs give foreign governments ownership of cultural property?

No. CPAs implement import restrictions—they do not vest ownership of cultural property in any State Party, nor do they grant the United States the authority to determine who owns that cultural property. Ownership of cultural property is determined by other U.S. and foreign laws.

 

How do CPAs impact human rights and minority groups? 

The importance of human rights, specifically international protections for minority rights, has been a cornerstone of U.S. foreign policy advocacy for over two generations. 

CPAs can be a powerful tool for the United States to engage with partner countries about these issues, and specifically, on the preservation of minority cultural heritage. These agreements provide a framework through which the U.S. government can encourage other countries to accept, adopt, and enforce international rules and norms with regard to cultural heritage and its intersection with human rights. CPAs also offer American advocates for minority communities abroad a mechanism to make their voices heard and advocate for needed change.

 

How can the public follow U.S. diplomatic progress in negotiating and adopting CPAs?

Announcements of meetings and more information on the CPA process, including a list of current agreements in effect, can be found on the U.S. Department of State’s Cultural Heritage Center website.

Before a CPAC meeting at which a new agreement or the renewal of an existing agreement is considered, members of the public may submit comments on the proposed CPA via Regulations.gov and/or request time to give testimony during a CPAC public session.

As central banks around the world compete to develop their own digital currency pilot programs, art auction houses have embarked on a similar race to adapt to consumer trends and the modernization of the international financial regime. Following the Non-Fungible Token (NFT) craze in the beginning of 2021, there has been the gradual acceptance and incorporation of cryptocurrencies across a variety of respected institutions from investment to retail e-commerce. Although Bitcoin has garnered plenty of attention over the last 4-5 years, it has not yet received this amount of general acceptance from incumbent players across economic sectors. This most recent inclusion of cryptocurrencies in the art market signals a larger scale transformation of consumer preferences and economic developments. With more transactions occurring digitally and more art sales occurring over the Internet due to social distancing measures from the coronavirus pandemic, art showcases and major players in the industry have developed online viewing rooms for their pieces, signaling their digital agility and growing favor for innovative sales processes. As private ownership of artwork becomes far more prevalent and public ownership (museums, galleries, public organizations) inherently decreases, there is increasing need for this appeal to the general public and the growing body of participants in the art industry.

Getting Up to Speed

Alongside the transition of physical auction processes, are the forms of payment that Christie’s, Sotheby’s, and Phillips are beginning to accept from their clients. Starting with the Christie’s sale of Beeple’s $69 million piece “Everydays: The First 5000 Days” in March 2021, it seems there has been a constant jockeying among incumbent players to modernize their own processes. Christie’s has continued to build upon the momentum of this first sale by hosting more NFT auctions in the past month, further legitimizing their existence amongst traditional art. Seemingly in reaction to this disruptive strategy, Sotheby’s conducted their own auctions of NFT digital art in April, even announcing their newest auction “Natively Digital: A Curated NFT Sale,” in the past few weeks. The collection will be sold between June 3-10 and will “represent the first time a major auction house will bring together a group survey of the leading NFT artists to auction. Hosted directly through Sotheby’s online auction platform, Natively Digital will feature some of the most sought after works made throughout the seven-year history of the medium.”

Two weeks ago, Sotheby’s also announced that it would accept a crypto payment for the upcoming auction of a physical Banksy piece. Simultaneously, Phillips auction house responded quickly in its own way by saying that it would also accept crypto payments for its upcoming auction of their own Banksy piece. Both Sotheby’s and Phillips have stated that they will use a Coinbase wallet to complete the transaction.

Jean-Paul Engelen, Deputy Chairman and Worldwide Co-Head of 20th Century & Contemporary Art at Phillips noted that “this marks the first time a major auction house in Asia will accept Bitcoin or Ether as a payment option for a physical work of art. This follows our success of Phillips’ inaugural NFT sale of Mad Dog Jones. It’s the natural progression in testing the constant changes in our market. Whether we like it or not is irrelevant we have to test the waters.” The CEO of Pace Gallery, Marc Glimcher, is another leader in the art space, and has also noted about NFTs that “Just as the invention of the art gallery empowered the impressionists who had been rejected by the establishment for nearly a decade, similarly the NFT marketplace empowers the digital art revolution which has been underway since the turn of the 21st century.”

So, in the past month, we have seen all three major auction houses announce that they will accept payments for art in the form of cryptocurrency – specifically, Bitcoin or Ethereum. These announcements come at the same time as these best-known cryptocurrencies skyrocket in value, reaching levels 6x and 18x of their value just one year ago. Each auction house taken on its own type of digital innovation, from the adoption of NFT’s to the use of cryptocurrencies for legitimate payment in auctions. Though much of digital strategy for modern businesses is forced to be reactive and flexible with market trends, this process has appeared to be especially competitive amongst the key players. Each has taken its own step to be disruptive in the industry and signal to the outside world that they are not “old guard,” but rather are prepared to shift with rapid technological innovations, trends, and consumer preferences.

Diana Wierbicki, Partner and Global Head of Art Law at Withersworldwide said that “auction houses are competing for interest from this new audience. They all want to be perceived as relevant to a potential new class of collectors,” in reference to the sale of NFTs and the use of digital currencies.

What does this mean for buyers, sellers, and intermediaries in the art market? Does this trend have broader implications even for those who have not been involved in art ownership or sales? Where do we go from here? Though many who are not closely associated with the art market may adamantly say that this has nothing to do with them, the widescale adoption of digital currencies implicates everyone in modern society. New acceptance in the art market simply signals another large regulatory body that has recognized the importance of digital currencies and thus accelerated their push to relevance across the world. Wider access to this asset class may also end up including a much larger body of participants in art auctions for years to come.

Wendy Cromwell, founder of boutique advisory Cromwell Art said “the fact that both Sotheby’s and Phillips are accepting payment in crypto-currency for a painting by one artist, Bansky, says it all. Just like the anonymous Banksy, the buyer who pays with crypto can hide his or her identity. This is a perfect storm for the auction houses, where art has often been a vehicle for money laundering. Dark money + dark buyer equals regulatory nightmare. It will be interesting to see what kind of legal protections are in place for the seller, who may even be Banksy himself!”

Historical Basis

The art market, which has traditionally tracked the performance of the economy and provided a key store of wealth in times of pullback or recession, can offer us valuable tools for anticipating the trends of the broader economy. A historical view of the art market and global economic trends shows us that in the past, private citizens have viewed artwork as a safe, lower risk investment. As recently as the financial crisis of 2009, there is data supporting the idea that artwork provides a safer store of wealth in volatile economic times. As noted by the Ugo Scalia Art Advisory, “…while sales volume at auction (shrunk) by 27.2% that year (2009), the S&P fell twice as much with a 57% loss; and it took only 2 more years for the art market to exceed its 2007 level, while the stock exchange had to wait until 2013 to do so.” This shows that much of the liquidity that was created during the economic drawback was reinvested into artwork – hence, art as a reliable store of wealth for difficult times.

From a quick glance at the chart below, we can see the different features of the stock, property, and artwork markets, gaining an understanding for why art has been seen as a strong store of wealth and why we have seen such an inclination for digital innovation in this sector. Traditionally, the liquidity, divisibility, regulation, and transparency of the art market have all been low. Low transparency in transactions is largely due to the lack of regulation and the insistence of larger players to remain anonymous. Divisibility remains low due to the uniqueness of each piece of art and beneficial ownership, while liquidity remains comparatively low as a result of fewer players being actively involved than in the stock market. High polarization in the art market necessarily refers to the contrast between low frequency, high value transactions, and low value, higher frequency transactions. Historically, the bulk of the value that is transacted in the art market occurs through relatively few pieces due to consolidation of wealth and increasing private ownership.

Concepts Defining the Art Market

Liquidity: Ability for an individual or firm to quickly purchase or sell an asset without causing a drastic change in the asset’s price

Divisibility: Ability to be divided into pieces, shares

Polarization: polarized market in which the bulk of the number of transactions (volume) is concentrated at the lower end of the market, while the bulk of sales value (prices times quantities sold) is concentrated at the higher end of the market

Regulation: Standards, policies, procedures, and governing bodies that determine interaction of buyers and sellers in a market

Transparency: Anonymity or beneficial ownership of a piece of art; the ability of a participant in a transaction to know their counterpart

Transaction Costs: Finding buyers, potential forgery, significant fees for auction house intermediation services, including the verification of authenticity and provenance of the artwork

Modernization and the Digital Dollar

As one begins to think about the transition of the art market to match modern day trends and consumer preferences, it is clear that some of the above features are subject to change. The introduction of NFTs, “stock-like” ownership in artwork (see: masterworks.io), transactions in the form of digital currencies, and increased access to a previously small group of art owners all have strong influence on the shape of the modern art market. With an uncertain economic climate ahead, this shift to cryptocurrencies, democratization of the previously “reserved” art market, and lower barriers to entry may signal a larger shift in the global economy. The transition of traditional auction houses in the art market to a digital model for physical processes and financial transactions is the clear result of rapidly shifting consumer preferences and new opportunities in technological innovation.

Though Bitcoin and Ethereum have been the digital currencies of choice out of the gate for art auction houses, there is reason to believe that central bank digital currencies (CBDCs) could soon rise to be the preferred medium of value transfer. Considering recent calls from national governments for more transparency in art transactions, including beneficial ownership and “clean”, verifiable financial flows, it is reasonable to think that a CBDC may be able to offer better compliance and ultimately greater integration with governmental policy. As more individuals become involved in the art market and digital transactions grow in popularity, the desire of the federal government to maintain oversight of money laundering and terrorist financing will grow. In the United States, the Digital Dollar could provide a digital currency solution that reduces transaction costs, increases compliance, and effectively adapts to the modern economy.

Diana Wierbicki, Partner and Global Head of Art Law at Withersworldwide, noted that “the willingness of auction houses to accept Bitcoin and Ether demonstrates their desire to broaden their collector base and reach a new audience. If you Google the news about this, you will note that the story was not only picked up by art news outlets but also by news outlets focused on cryptocurrency and finance generally. This is a great public relations move for the auction houses. Hopefully the audience that is interested in reading about payment of cryptocurrency for art will also take an interest in other aspects of art sales.”

Large Scale Transitions

The art market is becoming more accessible to a wider range of people, new forms of art are beginning to emerge (NFTs) and participating in auctions is easier than ever before. Digital currencies are removing many former barriers to entry, liquidity and divisibility in art are increasing, and rising inflation in the economy could trigger a shift to greater investment in the art market. All of these trends, along with modernization of the global consumer, are leading to greater adoption of previously “taboo” and “illegitimate” digital currencies. These localized shifts in the art market could provide a useful lens from which to view greater market trends and the viability of digital currencies as a whole. This could ultimately pave the way for central banks to increase development of CBDCs to compete with – and remain relevant in – emerging markets as popular decentralized cryptocurrencies gain popularity.

At the same time, the evolution of the art market and digital currencies will likely collect substantial attention from regulatory authorities. Former Senior US Treasury Official Chip Poncy has noted, “Protecting the integrity of the art market and of virtual currencies has become more important as both sectors have grown in popularity while remaining vulnerable to demonstrated abuse by illicit actors. The long-term growth and stability of both sectors will depend in part on implementing effective counter-illicit financing controls, which can become mutually reinforcing if designed and implemented in a coordinated and strategic fashion.”

With all of this in mind going forward, investors, consumers, and policymakers would benefit from tracking auction house actions as they continue to jockey for position in the digital innovation race.

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About the Author: Michael B. Greenwald is Director at Tiedemann Advisors. He is a fellow at Harvard Kennedy School’s Belfer Center for Science and International Affairs and a Senior Fellow at the Atlantic Council Geoeconomics Center and the Financial Crimes Task Force at the Antiquities Coalition. From 2015-2017, Greenwald served as the first US Treasury attaché to Qatar and Kuwait.

This article is supported by research advisor Logan Weber. Weber is a graduate of Harvard University and graduate student at Texas A&M University studying International Affairs.

Image Credit: Namecoin/DeviantArt

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. 

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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).

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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.