In September 2021, FinCEN issued an advance notice of proposed rulemaking (ANPR) to solicit public comment on the implementation of Section 6110 of the Anti-Money Laundering Act of 2020 (the AML Act).

AML Act Section 6110 amends the Bank Secrecy Act (BSA) to include in the definition of “financial institution” a “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 Secretary [of the Treasury].”

FinCEN sought comment from relevant bodies regarding the potential for money laundering, financing of terrorism, and other illicit financial activity in the antiquities industry; the existence of any safeguards in the industry to guard against this potential; the effect that compliance with BSA requirements could have on the antiquities industry; what additional steps may be necessary to protect the industry from abuse by money launderers and other malign actors; and which actors within the antiquities trade should be subject to BSA requirements.

SEE FINCEN’S ORIGINAL ANPR: AML REGULATIONS FOR DEALERS IN ANTIQUITIES, SEPTEMBER 2021.

As an AML service provider with specialism serving the international art market, and with plans to incorporate antiquities, jewellery and other related items into our compliance services at a later date, we responded to FinCEN’s consultation as an industry ‘stakeholder’.

ArtAML’s response serves to provide relevant insight to assist with the US implementation of AML for antiquities and, potentially, works of art.

KEY TAKEAWAYS

The funding and facilitation of antiquities

Based on experience with the art market, the lack of compliance experience results in some professionals not being aware of potentially ‘suspicious activity’. While high-value cash transactions are already caught under AML legislation in the UK, there is a lack of awareness of existing compliance requirements and, in turn, associated education in the art market, and a like-for-like knowledge gap could exist in the antiquities sector in the USA.

Operations by foreign-based participants in the antiquities market

Our experience of regulation in the UK is that cross-jurisdictional issues are extremely difficult to deal with; a UK art dealer at an art fair in the US is still required to abide by requirements of the UK legislation. Non-UK dealers exhibiting at art fairs in the UK are also expected to comply with UK legislation. The latter is made particularly difficult because the existing UK government procedures and information sources currently only cater for UK registered entities.

Risks associated with the trade in antiquities

Based on the art market, risk is high when an AMP does not know the identity of a customer or where the work is going. More generally, provenance is paramount for antiquities. A related risk is the reliance on others’ provenance. The quality of provenance varies from business to business, and it’s possible that a seller has a conflict of interest in the quality of information provided.

Distinction between antiquities and works of art

Given the difficulty of defining ‘antiquity’ and ‘art’, regulations need to be a) simple enough for the market to understand; b) clear enough for enforcement officials to understand; and c) flexible enough to allow for changes needed as implementation challenges arise.

Monetary thresholds for activities involving trade of antiquities

For the art world, having a threshold per-transaction is very helpful as it allows dealers to easily assess if they fall under the regulations or not.

Extending elements of AML/CFT to the trade in antiquities

Some element of proportionality should be built into the regulations – a business run by a single individual has much less resources than an international auction house. The risk-based approach recommended by the FATF has much merit, since it means that a small business selling an item for $1m is expected to put in significantly more effort than for a sale of $20K.

Application of know-your-customer requirements to the trade in antiquities

As with the art market, antiquities dealers are likely to be concerned about the effect upon their sales of asking ’embarrassing questions’ of their customers. It’s worth remembering that once regulations are imposed, then there is a task to educate buyers as well as dealers. Another challenge for both the UK art and antiquities markets is that there is no overarching professional body for the sectors. This has led to smaller provincial dealers often being unaware of the new regulations, and the same will apply to the US.

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