FATF: US Should Apply Anti-Money Laundering and Terrorist Financing Laws to High Risk Actors in the American Art Market
March 16, 2023
The Antiquities Coalition welcomes a new study from the Financial Action Task Force (FATF) on Money Laundering and Terrorist Financing in the Art and Antiquities Market. The 57-page report explores the links between money laundering, terrorist financing, and cultural property, identifying several factors that make the USD $65.1 billion market attractive to criminals and terrorists seeking to launder illegal proceeds or otherwise fund their activities. It notes that some countries have taken proactive action to mitigate these risks, but concludes more needs to be done: many jurisdictions do not have sufficient awareness and understanding of the risks, resulting in a lack of law enforcement resources and expertise, as well as difficulties pursuing cross-border investigations.
FATF warned that the art and antiquities market is vulnerable to this misuse, and likewise that governments are currently ill positioned to fight back, due to a number of challenges such as:
- difficulties in tracing the origin of cultural objects;
- a history of privacy and the use of third-party intermediaries in the sector;
- inadequate measures, or none at all, to identify and verify customers;
- a low number of suspicious transaction reports filed with Financial Intelligence Units;
- a lack of prioritization of investigations in this area;
- limited resources, awareness, and expertise by operational authorities; and
- difficulties with cross-border investigations.
The report urges countries to strengthen their understanding of the current threats, while providing advice on successful strategies for responding. It also identifies several risk indicators that can help public and privacy sector entities identify suspicious activities, and highlights the importance of strengthened anti-money laundering (AML) and counter-terrorist financing (CFT) measures. It additionally stresses the importance of rapidly identifying and tracing cultural objects involved in money laundering or terrorist financing to aid the seizure and confiscation of items, as well as any associated illicit proceeds.
The report includes some good practices that countries have taken to address the challenges they face, including:
- the establishment of specialized units and cross-disciplinary networks of experts;
- enhanced domestic and international information sharing;
- access to relevant databases; and
- cooperation with experts and archaeologists to help identify, trace, investigate and repatriate cultural objects.
The 60-page report was published on February 27 and reinforces many of the Antiquities Coalition’s findings and recommendations from its 2020 Financial Crimes Task Force Report. Indeed, in that study, the Antiquities Coalition called on FATF to generate a typology report to identify money laundering and terrorist financing vulnerabilities related to the art and antiquities trade. Other recommendations reinforced in the FATF report include calling on the public and private sectors to:
- work together to strengthen information sharing, including having national customs and law enforcement agencies contribute data on their cultural property seizures to the World Custom Organization (WCO), for inclusion in its annual Illicit Trade Report;
- update guidance and training for law enforcement to include the unique risks and opportunities presented by the art market;
- use FinCEN’s existing tools, such as targeted record-keeping and reporting requirements, to better understand threats to the art market from financial crimes; and
- apply AML/CFT requirements to high-risk art market participants.
The American art market remains largely excluded from the U.S. Bank Secrecy Act (BSA), the 1970 statute that still governs AML and CFT efforts in the United States. The 2020 AML Act was the first major update to the BSA in almost twenty years, and among many other things, added antiquities dealers to the list of individuals that must assist the U.S. government in preventing and detecting financial crimes. In addition to expected businesses like banks, the BSA had 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.
The 2020 AML’s Act inclusion of antiquities dealers was just one small part of a wider legislative overhaul, that has left Treasury with enormous tasks before it in the months and even years ahead. FATF’s report on Money Laundering and Terrorist Financing in the Art and Antiquities Market reinforces the need to prioritize the regulation and protection of this market in the United States.
Read the FCTF Report here.