On January 1, 2021, Congress voted to override President Trump’s veto of the National Defense Authorization Act for Fiscal Year 2021,[1] which includes provisions that will have significant implications for the antiquities market, and could eventually impact the art market as well.

The New Legislation Extends Bank Regulations to Dealers of Antiquities

Tacked onto the sprawling National Defense Authorization Act is the Anti-Money Laundering Act of 2020 (“AMLA”)[2], which provides measures intended to combat money-laundering and other illicit activities in the trade of ancient artifacts.

The AMLA amends the 1970 Bank Secrecy Act to add antiquities dealers, advisors and consultants to its definition of “financial institutions,”[3] which means that transactions involving the trade in antiquities will, for the first time, become subject to the same levels of scrutiny historically reserved for banks and other parties to more traditional financial transactions.[4]

This change is designed to bring greater transparency to the trade in ancient artifacts, where the anonymity of buyers and sellers has historically provided a way to shroud illicit transfers of money and sales of counterfeit goods.  Proponents of the legislation hope that requiring disclosure of information about the real, natural people involved in antiquities transactions will better position regulators to identify and prosecute criminal activity within the antiquities market.

The AMLA also includes a wide range of other measures not specific to the antiquities market.  These other measures (including the “Corporate Transparency Act”) are designed to improve transparency for national security, intelligence, and law enforcement agencies and financial institutions concerning corporate structures and insight into the flow of illicit funds through those structures, and to discourage the use of shell corporations as a tool to disguise and move illicit funds.

Proponents of regulating the antiquities trade contend that greater transparency in the antiquities market will not only help protect against money laundering, but also discourage looting, thwart fraud, and better position buyers of cultural artifacts such as museums to establish their true provenance.  However, antiquities dealers and nonprofits such as the American Council for the Preservation of Cultural Property have maintained that reports of illicit transactions and money-laundering within the antiquities trade are overblown, and that compliance with the law will be costly and overly burdensome.

FinCEN Will Propose Implementing Regulations Within One Year

The AMLA requires the Secretary of the Treasury (acting through the Director of the Financial Crimes Enforcement Network (“FinCEN”), a bureau within the Treasury Department) to propose regulations to implement the legislation within a year of its enactment.[5]  In developing proposed regulations, FinCEN will consider “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” as well as whether monetary thresholds should apply in determining which persons to regulate and whether certain exemptions should apply.[6]  The addition of antiquities dealers to the purview of the law will come into force on the effective date of the final rules issued by the Secretary of the Treasury.[7]

The AMLA Also Requires a Study on the Role of Art in Facilitating Money Laundering & Terror Financing

Although the AMLA does not go so far as to extend the formal regulatory requirements of the Bank Secrecy Act to participants in the broader art market, it does call for a study to assess the extent to which the art trade facilitates money laundering and terrorist financing, including an analysis of “the degree to which the regulations, if any, should focus on high-value trade in works of art,” and “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 works of art.”[8]  The study is to be completed within a year of enactment of the AMLA.

In light of the Congressional mandate to conduct this study, we expect that dealers and other players in the art market may well ultimately become subject to the same level of scrutiny as antiquities dealers and traditional financial institutions.  Already, in July 2020, as previously reported on this blog, a Congressional investigation into money-laundering in the art world revealed that two Russian oligarchs had used anonymous shell companies to trade art and thereby bypass U.S. sanctions.  At the conclusion of that investigation, the Senate issued a 147-page report—titled The Art Industry and U.S. Policies that Undermine Sanctions—in which the staff of the Senate Committee on Homeland Security and Governmental Affairs attributed the illicit activity to secrecy and anonymity within the art market, and called for stricter regulation, increased monitoring and greater transparency.[9]  In response to that Senate report, the Office of Foreign Assets Control (“OFAC”) of the Treasury issued an advisory in which it provided guidance for participants in the art market who face potential sanctions risks that arise from dealing in high-value artwork.  We previously reported on that advisory here.

Although major auction houses have their own anti-money-laundering policies in place, those policies do not always lead to identification of the true beneficial owners behind a transaction.  Moreover, those voluntary anti-money-laundering programs do not apply to private transactions that occur outside of those auction houses, which account for the majority of art sales, according to the Senate report.  Expanding the Bank Secrecy Act to apply to art dealers would require uniform disclosures and more rigorous due diligence, which could lead to more effective law enforcement in the art market.  But compliance with additional regulations will likely be costly for participants in the art market, and may lead certain transactions further underground.

Over the next year, as Congress continues to study the extent to which the art market plays a role in money-laundering and terror financing, art dealers and other participants in the art market would benefit from revisiting (and perhaps tightening) their voluntary anti-money-laundering policies in an effort to avoid imposition of mandatory requirements in the future and retrospective scrutiny of transactions handled in the interim.

More information about the AMLA is available here.

[1] William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021, Pub. L. No. 116-283 (116th Cong., 2d Sess. (2020) ), available here: Text – H.R.6395 – 116th Congress (2019-2020): National Defense Authorization Act for Fiscal Year 2021 | Congress.gov | Library of Congress

[2] Pub. L. No. 116-283, Division F.

[3] Pub. L. No. 116-283 § 6110(a).

[4] The statute does not define the term antiquities, which has no fixed meaning across the art world.  For instance, Christie’s notes on its website that its “Antiquities department offers a wide range of ancient works of art from across the Mediterranean world, including Greece, Italy, Egypt and the Near East, dating from the Neolithic period through to 1000 A.D.” See Christies.com, Ancient Art & Antiquities, Ancient Art & Antiquities | Christie’s (last accessed 1/10/2021).  Israeli law, on the other hand, includes objects dating all the way up until the year 1700 A.D. (and even certain objects from after that date).  See Israel Antiquities Authority, Israel Antiquities Authority (last accessed 1/10/2021).  We believe it likely that the implementing regulations will provide a cut-off date or other clarification about the scope of the term.  Otherwise this ambiguity could well lead to litigation.

[5] Pub. L. No. 116-283 § 6110(b).

[6]  Id.

[7]  Id.

[8] Pub. L. No. 116-283 § 6110(c).

[9] Committee on Homeland Security and Governmental Affairs, Permanent Subcommittee on Investigations, Staff Report: The Art Industry and U.S. Policies that Undermine Sanctions (2020), available at Microsoft Word – FINAL REPORT VERSION EMBARGOED (27JULY2020) (senate.gov)