New Rules, Old Goods

This week, the OCCRP reported that an “owner of a swanky Manhattan art gallery, who sold ancient artifacts to major auction houses like Christies and Sotheby's, pleaded guilty to a conspiracy to knowingly have dealt in stolen goods.” It comes as the Pandora Papers investigation by the International Consortium of International Journalists (ICIJ)  revealed the art world’s embroilment in the offshore financial system leaving several museums, including the renowned Metropolitan Museum of Art, with some tough questions. While museum officials have suggested that “they follow industry ethics guidelines, and that the standards for acquiring antiquities have evolved over the years,” the art world will soon be held to a much higher standard as FinCEN turns its attention to items of a much older persuasion: antiquities.

On September 23rd, the Financial Crimes Enforcement Network (FinCEN) issued an Advanced Notice of Proposed Rulemaking (ANPRM) to solicit public comments regarding the regulation of the antiquities trade. This is a notable step as the Treasury Department continues to develop a framework for implementing the Anti-Money Laundering Act of 2020 (for more information on the AML Act of 2020, see our previous publications here or here). In particular, this ANPRM is the first step in the department’s focus on Section 6110 of the Act, which covers arts and antiques. 

The art and antiquities markets have long been difficult sectors to deal with when it comes to AML/CFT. Section 6110 of the AML Act is a major push in tamping down financial crime in this space. Most importantly, it amended the definition of “financial institution” within the Bank Secrecy Act (BSA) of 1970 to include “person[s] 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.” This brings participants in the art and antiquities market under much more scrutiny and now the Treasury is working to determine how it will craft regulations specific to it. 

The art and antiquities market is both large and difficult to regulate. Art Basel and UBS estimated the size of the global market at $63.7 billion in 2017, with just the U.S. alone composing about 42%. But this combination of being lucrative and having lax regulations makes it rife with opportunity for illicit value transfer. As the Antiquities Coalition put it, “looting is a practice as old as the sites being plundered, but due to the rising price of art and antiquities on the international market, cultural property has also become a lucrative vehicle for committing a wide range of financial crimes.” 

During the rise of ISIS, there were many reports regarding the plundering and sale of precious cultural artifacts from the Middle East. In 2018 ICE was able to return 3,800 ancient artifacts (2100-1600 BCE) to Iraq as well as a 1493 letter from Christopher Columbus himself back to Spain.  Earlier, in 2016, the aptly named “Operation Mummy’s Curse” targeted a transnational criminal network of antiquities smugglers dealing with ancient Egyptian antiquities. In fact, even the criminals themselves describe the art and antiquities market as full of opportunity. In a $50 million money-laundering operation involving a Pablo Picasso painting, one of the defendants said that while they initially proposed the real estate market to launder funds, they turned to art because it was the “only market that is unregulated.” 

However, this move by FinCEN to get stakeholder guidance on forthcoming regulations is a sign that this is changing. But it is also signaling further strides in the implementation of the provisions of the AML Act of 2020 more broadly. As these AML provisions continue to get expanded and implemented, it means that more and more vendors will need to employ proper customer due diligence - even if what they’re trying to buy is older (much older) than the BSA itself. 

Are you ready to see what Sigma can do for you? Request your Demo Today!

Request a Demo

Related Resources:

New Research Study Suggests Poor AML Oversight of Shell Companies by Financial Industry

This week, the ICIJ reported on a new study by a group of renowned academics that revealed that, despite past [..]

Read More

New FinCEN recommendations on environmental crimes

Last week, the U.S. Treasury Department’s anti-money laundering watchdog, the Financial Crimes Enforcement [..]

Read More

Heightened Scrutiny on Broker Dealer Compliance Following Court Ruling and Regulatory Action

Last week, the U.S. Supreme Court rejected a petition for review from Alpine Securities in its bid to argue [..]

Read More
Sigma Loading