United States Calls for Public Comment on Anti-Money Laundering Rules for Antique Dealers

The US Treasury Department has begun the process of extending anti-money laundering requirements to antique dealers, as part of an effort to close a long-standing hole in US laws that protect against crime financial.

The department’s Financial Crimes Enforcement Network, or FinCEN, issued a notice on Thursday asking the public to comment on the potential rules, which have been mandated by Congress as part of an anti-money laundering reform law. adopted in January.

Legislation passed by Congress directs FinCEN to extend the requirements created by the Bank Secrecy Act of 1970 to the antiques market. This law requires financial institutions to take steps to develop and test anti-money laundering compliance programs, train staff, and designate a compliance officer to oversee compliance with the law.

Experts and lawmakers have long identified the largely unregulated art and antiques market as two areas they believe are ripe for exploitation by organized criminals and terrorist groups.

The FinCEN opinion focuses on the risks posed by the antique markets in particular, and it is unclear to what extent the regulations would apply to the art market as well. Antiques are generally distinguished from art in American laws in part by their age.

A recent lawsuit filed by the US Department of Justice illustrates how antiques can be the type of terrorist financing threat that lawmakers hope to mitigate with the new regulations.

The Justice Ministry filed a civil lawsuit in 2016 asking for the confiscation of antiques that authorities said were held by the Islamic State of Iraq and the Levant, also known as Daesh.

Officials said they believed the antiques, which included a gold ring, two gold coins and a carved stone, were collectively worth hundreds of thousands of dollars. The articles were shown in footage seized during a raid on the residence of a senior ISIS leader in Syria in May 2015, prosecutors said.

The lawsuit was the first time the United States had decided to confiscate antiques that were ISIL’s foreign assets, the Justice Department said at the time.

Prosecutors in their legal files alleged that the terrorist group was trading and selling antiques to finance its operations. The ISIL chief whose residence was searched was described in the seized documents as the chairman of the group’s “Department of Antiquities of the Ministry of Natural Resources”, prosecutors said.

A question posed by FinCEN in its opinion on Thursday is how antiques should be defined for the purposes of its regulation and how antiques are distinct from works of art.

The anti-money laundering law passed by Congress in January does not appear to oblige FinCEN to extend BSA requirements to art, although experts have raised similar concerns about the money laundering risks posed by this. Marlet.

A 2014 investigation by the US Senate Committee on Homeland Security and Government Affairs found that Russian oligarchs may have used high-value works of art to evade US sanctions imposed in response to the annexation by the United States. Russia from the Crimean region in Ukraine.

Since the industry is not subject to bank secrecy law, the major auction houses only have voluntary anti-money laundering programs and are not required to confirm the identity of a buyer. Instead, auction houses typically limit their due diligence to the buyer’s artistic advisor, according to the report.

The anti-money laundering law of Congress obliges FinCEN to conduct a study on the risks of money laundering and counterterrorism financing posed by the trade in works of art.

A key question around the rulemaking launched on Thursday is how antiques will be defined and to what extent that definition will also cover certain works of art, said Mayling Blanco, partner at the law firm Norton Rose Fulbright US LLP. .

The regulations, once finalized, could have a disproportionate impact on smaller antique dealers who do not already have staff focused on compliance issues as many large auction houses do, Ms. Blanco said.

In its opinion, FinCEN said it was seeking comments on whether to establish a monetary threshold below which certain transactions or activities involving antiquities would be exempt.

“It will be really important for the industry to take a decision on how the rule applies to them,” Ms. Blanco said.

The FinCEN notice on Thursday said a series of factors make the antiques market prone to money laundering, including customs regarding customer privacy and the subjectivity of antiques prices.

The opinion also requested information on the various roles and responsibilities of parties involved in the antiques trade, how antiques-related transactions are financed, and whether it is possible to show what percentage of transactions fall within a particular currency range.

The notice gives industry members and other interested parties until October 25 to submit their comments.

Write to Dylan Tokar at [email protected]

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