Congress Poised to Apply Banking Rules to Antiquities Market

The antiques trade, long feared by regulators as a fertile ground for money laundering and other illegal activities, will be subject to more scrutiny under the laws passed by Congress on Friday that override President Trump’s veto.

The provisions to tighten control of the antique market were included in the sprawling National Defense Authorization Bill vetoed by Mr Trump last week and which the House and Senate overruled Monday and Friday.

Regulators have long feared that the opacity of the antique trade, where buyers and sellers themselves are rarely identified to the parties to a transaction, has made it an easy way to disguise illegal money transfers. The new legislation empowers federal regulators to develop measures to break the secrecy of transactions.

“We believe this type of legislation is long overdue,” said John Byrne, an attorney with 30 years of anti-money laundering experience. “This is an area where clearly organized crime, terrorists and oligarchs have used cultural artifacts to move illicit funds.”

The dealers resisted the move. With the new legislation, however, Congress expanded the 1970 Banking Secrecy Act, which strengthened federal control over financial transactions, to include trading in ancient artifacts.

Exactly how the new law works will be determined next year by the Financial Crimes Enforcement Network, an office of the finance department, in consultation with the private sector, law enforcement agencies and the public. Legal experts expect the new rules for antiques to be similar to those of the precious metals and jewelry industries, with certain transactions reported to authorities who will then determine if they are suspicious. The law also seeks to end the use of shell companies to hide the identity of buyers and sellers.

The sponsors of the new measure described it as an urgently needed reform.

“For the past decade, we’ve worked with all industries and stakeholders to come up with a bill that will satisfy everyone,” said New York Democrat Carolyn B. Maloney, who introduced the Corporate Transparency Act in 2019 and later led the bill into it Defense Package. “We have got to the point where we have built so much support that it became impossible to defy the bill.”

The Corporate Transparency Act has been opposed by antique dealers who opposed the obligation to disclose customer information and the additional costs of complying with the law. The art industry has fought against similar laws that would have extended the banking secrecy law to the art market.

Federal data shows that Christie’s auction house has paid lobbyists more than $ 100,000 in the past two years to influence the results of such actions. A spokeswoman for the auction house, Erin McAndrew, said the compliance department already complies with anti-money laundering standards that were passed by the European Union in 2018.

She said that “Christie’s welcomes the opportunity to work with US regulators on appropriate and enforceable” anti-money laundering policies in the art market.

Guard dogs have been calling on Congress for years to tighten regulations on the antiques trade. The looting of heritage sites in countries like Syria and Iraq has created a growing black market for antiques from the Middle East. Law enforcement agencies abroad have confiscated hundreds of artifacts that officials believe may have resulted from previous excavations carried out by terrorist groups such as ISIS.

“The proposed legislation will start to fill a huge void,” said Tess Davis, executive director of the Antiquities Coalition, a nonprofit that oversees the illicit trade in artifacts.

“The business model of a pawn shop is not that different from that of a Sotheby’s or Christie’s,” she added. Pawnbrokers, however, fall under the scope of the Banking Secrecy Act, but auction houses do not. “Why should the rules of a corner shop selling stereos in Milwaukee be stricter than a billion-dollar auction house in Manhattan?”

However, some traders claim that reports of black market transactions and money laundering are exaggerated. A trader, Randall A. Hixenbaugh, the president of a nonprofit called the American Council for the Preservation of Cultural Property, has called statistics on trafficking unfounded and opposed the new regulations.

“Virtually all large dollar transactions in the antique art business are conducted through financial institutions and instruments that are already covered by the Banking Secrecy Act,” said Hixenbaugh. “Criminals who want to launder illegitimate funds could hardly choose a worse good than antiques.”

Legislatures that helped draft the new rules said they were guided by what they learned from Congressional hearings and from industry experts. Unesco warned in 2020 that the development of online sales platforms and social networks had facilitated the illegal sale of antiques and that existing regulations could not contain the black market.

The new legislation calls for a study on the role of art in money laundering and terrorist financing. (A recent Senate report outlined how at least two Russian oligarchs exploited the opaqueness of the art world to evade US sanctions.) If the study finds a link between the art market and illegal activity, it could be after review Congress triggered the creation of rules similar to those that now apply to the antiques trade. The regulators have also signaled that the banking secrecy law could be further extended to the art market.

“You need to know who is buying and selling,” said Byrne. “The argument that you are not required to report suspicious activity because you are in the private sector does not work. Banks lost that argument 30 years ago. “

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