On March 9, 2021, the Financial Crimes Enforcement Network (FinCEN) published its first Notice related to one of the many changes made in the Anti-Money Laundering Act of 2020 (the AML Act), passed as part of the National Defense Authorization Act for Fiscal Year 2021, which we wrote about here. FinCEN’s guidance informs financial institutions about the AML Act’s provisions related to trade in antiquities and art, underscores that illicit activity related to antiquities and art may involve financial institutions and trigger reporting requirements, and provides specific instructions for filing Suspicious Activity Reports (SARs) related to suspicious activity involving antiquities and art.
The AML Act broadened the definition of “financial institutions” in the Bank Secrecy Act (BSA) to include persons “engaged in the trade of antiquities” and requires FinCEN to propose rules to implement this provision 360 days after the date of enactment of the law (January 1, 2021). While it remains for the Director of FinCEN, in coordination with the Federal Bureau of Investigation (FBI), the Attorney General, and the Department of Homeland Security’s (DHS) Homeland Security Investigations to clarify the scope of the rulemaking and determine whether any exemptions apply, those subject to the BSA’s reporting and recordkeeping requirements could extend to intermediaries in the sale or purchase of antiquities, such as consultants and advisors, in addition to dealers.
According to FinCEN’s Notice, illicit activity involving trade in antiquities and art might include looting, theft, illicit excavation of archaeological items, smuggling, the sale of stolen or counterfeit items, money laundering and sanctions violations. Those crimes may have links to transnational criminal networks, international terrorism, and persecution of individuals or groups on cultural grounds. Included in the Notice are specific instructions for filing SARs related to suspicious activity involving art and antiquities. FinCEN instructs financial institutions to reference “FIN-2021-NTC2” in SAR field 2 and provides a list of details to include in the narrative, if available. FinCEN also instructs financial institutions to select SAR field 36(z) (Money Laundering – other) as the suspicious activity type and to note whether the activity relates to antiquities, art, or both. Finally, with regard to stolen art or antiquities, FinCEN asks financial institutions to provide a detailed description of the item, indicate whether photographs are available, and provide information about the location where the reported individuals or entities are operating.
Though the definition of “financial institutions” does not yet extend to those engaged in the trade of art, the AML Act directs the Secretary of the Department of the Treasury, in coordination with the FBI Director, the Attorney General, and the Secretary of DHS, to perform a study of the facilitation of money laundering and the financing of terrorism through trade in works of art, which could be the harbinger of additional changes ahead.
The regulation of the art and antiquities markets in the United States is not without precedent. In 2018, the European Union’s Fifth Money Laundering Directive extended anti-money laundering laws to art businesses, and directed EU member states to implement it into their national laws by early 2020. Separately, sanctions evasion through the sale and purchase of high-value art was the subject of a bipartisan congressional report released by the Senate’s Permanent Subcommittee on Investigations last summer. Included in the report’s recommendations was the amendment of the BSA to add businesses handling transactions involving high-value art.
FinCEN’s guidance makes clear that the agency expects financial institutions to remain vigilant against illicit activity in the art and antiquities trade. Institutions should consider the sources of information addressing illicit activity in the art and antiquities trade identified by FinCEN, including an Interpol report, a U.S. State Department report, and a report by the UN Office on Drugs and Crime, in addition to their own experiences and other available information. This Notice also represents what is likely to be the first of several notices advising covered financial institutions of upcoming amendments to the BSA as a result of the AML Act. Financial institutions should continue to watch for additional guidance from FinCEN and other regulators.
In light of the AML Act’s new provisions, persons and businesses involved in the sale and purchase of art and antiquities should conduct a risk assessment to evaluate any money laundering-related vulnerabilities of their business, assess existing AML programs and policies for their sufficiency, and consider implementing policies and procedures if none exist.