On September 23, FinCEN issued an Advance Notice of Proposed Rulemaking (ANPRM) for organizations in the antiquities market. This is one of the first actions by FinCEN to implement section 6110 of the Anti-Money Laundering Act (AMLA).
Although most purchases and sales of antiquities are legitimate, there have been documented cases of oligarchs and criminal leaders acting through agents to hide criminal proceeds through the purchase of art and antiquities.
Given this, the antiquities market has always been argued as a loophole in the Bank Secrecy Act. Section 6110 of the AMLA extends the requirements of the Bank Secrecy Act to the antiquities market which requires financial institutions to implement and adhere to an anti-money laundering compliance program.
The ANPRM follows the March 9th notice that outlines information about existing illicit activity related to the art and antiquities market and provides instructions for filing Suspicious Activity Reports (SARs). According to FinCEN, the existing illicit activity includes illicit excavation, smuggling, and or the sale of stolen and counterfeit objects. The proceeds from the sale may violate sanctions and or be linked to criminal networks and international terrorist organizations.
The Anti-Money Laundering Act
Distinguishing between art and antiquities will be critical in defining what organizations fall into section 6110. Mayling Blanco of Norton Rose Fulbright US LLP told the Wall Street Journal that “a key question around the rule-making launched Thursday is how antiquities will be defined and the extent to which that definition will also cover certain pieces of art”.
In 2016, the U.S. Justice Department alleged that the Islamic State of Iraq and the Levant (ISIL) sold antiquities to finance its operations. And while this case falls well within counter financing of terrorism efforts, it also highlights the opaque line between a work of art and antiquity that is usually defined by the age of the piece. For example, Merriam-Webster defines antiquity as “ancient times especially those before the Middle Ages.” The pieces in question were not modern works of art, but it does not stop other criminal organizations from buying or selling more modern works to layer and place funds within the financial system. Given this, many experts have raised concerns about money-laundering risks posed by the art market and it is likely that comments will be made about the definition of and extension to a work of art.
Many auction houses have already built their own anti-money laundering programs but the breadth of the program may come into question ahead of the final rulemaking. This includes client confidentiality, roles in the transaction, and how transactions are financed.
The ANPRM encourages organizations to submit comments by October 25, 2021.
To learn more about existing anti-money laundering regulations in art and antiquities, read our guide.