The Center for Art Law Report on Anti-Money Laundering and Art [1] is an informative and comprehensive consultancy exploring anti-money laundering (AML) practices in the art sector in EU Member States and the UK , following the implementation of the EU’s Fifth Anti-Money Laundering Directive in 2018. This directive has placed global art under greater scrutiny by EU anti-money laundering regulations, at least due to the agreement on development of investment in art with terrorist activities.
What sets this report apart is its pioneering effort in compiling a consultant of this nature. It presents responses to a survey conducted through leading art law experts in 14 jurisdictions, providing valuable insights. The report examines the AML legislation that is applied in the country, its technique up to non-fungible tokens (NFTs) and the diversity of sanctions in place. This technique not only allows for a comprehensive understanding of the various legal landscapes, but also raises awareness of the implications for art market players in Europe and beyond.
In Austria, the technique for combating money-laundering is comprehensive and encompasses laws, such as the Anti-Money Laundering in Financial Markets Act, the Register of Beneficial Owners Act and the Trade Act. These regulations prioritize due diligence, owner identification, and ongoing monitoring of business relationships. Particular attention is paid to politically exposed persons (PEPs) and transactions involving high-risk countries, requiring increased due diligence. Failure to comply with those regulations can result in significant penalties.
In Belgium, a law has been enacted in reaction to the fifth European AMLD, which came into force on 1 January 2022. This law applies to art transactions and covers art galleries, dealers, auction houses, and loose ports, but excludes artists and the public. Museums. It defines “works of visual art” and clarifies that NFTs are not included in this category. The AML regime in Belgium requires the registration of art market players and applies to those who interact in normal advertising activities involving works of art.
These summaries from Austria and Belgium illustrate the EU’s strategy to regulate the fight against money laundering in the art sector. They demonstrate the meticulous regulatory frameworks and express the compliance needs imposed on art market players. It is regrettable, however, that the document does not provide direct comparisons with the American technical system, which would have contributed a greater share of the differences between the two regions in the fight against money laundering in the art world.
Perspectives on anti-money laundering (AML) in the art market differ especially in the United States. In the United States, the main law regulating anti-money laundering is the Bank Secrecy Act (BSA), created in 1982 and subsequently amended by the Anti-Money Laundering Act of 2020, which is part of the National Defense Authorization Act (NDAA) of 2020. The latter deals in particular with the regulation of “antiquities”.
These are the main facets of American Art’s AML regulations:
1. Scope of regulation: The AML Law 2020 includes provisions for persons “engaged in the antiques industry”. This includes advisors, experts and anyone interested in the antiques sales industry. However, the precise definition of which establishments or Americans will be included in those regulations is still being finalized.
2. Rulemaking and Implementation: The responsibility for determining the scope of rulemaking lies with the U. S. Treasury, in collaboration with the FBI, the Attorney General, and the Department of Homeland Security. Factors such as the size, type and location of the business will be taken into account. as when deciding which Americans or companies will be regulated.
3. FinCEN Concerns: The US Treasury’s FinCEN has expressed concerns about cash laundering and terrorist financing in the art and antiques trade.
4. Proposed Rulemaking: In 2021, FinCEN published an Advance Notice of Proposed Rulemaking, soliciting comments on similar aspects of the BSA’s application to the antiquities trade. However, as of July 2023, no regulations have been drafted or proposed under the AML Act, and FinCEN failed to meet the deadline set by Congress to take this action.
5. High dangers/red flags: The main dangers or red flags related to money laundering in the art market still need to be clarified in the implementing regulations. However, the issue is in the exchange of high-value antiquities and in the identity of the real buyers, as well as the agents or intermediaries involved in the transactions.
6. Recordkeeping and Reporting Needs: Current regulations for monetary establishments include reporting monetary transactions in excess of $10,000 and filing suspicious activity reports (SARs). However, the express needs applicable to antique dealers and to a wider range of participants in the art market are still being finalized.
7. Reporting System: FinCEN provides an electronic SOR filing formula, which allows regulated entities to report suspected money laundering.
The one carried through the United States is still in the progression phase. Key aspects, such as the scope of regulation, key threat points, and express reporting and record-keeping requirements, have yet to be finalized. This is in contrast to the more established and detailed frameworks of the European Union, where the Fifth Directive has been implemented in other member states, accompanied by express rules for art market participants.
Although this report is cutting-edge and comprehensive, it is vital to note that it does not constitute legal advice. Rather, it is a valuable compilation that complements our understanding of the complexities of AML legislation from Art. The inclusion of the U. S. comparison techniqueThe U. S. Securities and Exchange Commission adds an extra layer of depth, making it a must-read for professionals and enthusiasts interested in navigating the complex intersection of art and AML regulations. Overall, this is a wonderful read for those interested in anti-money laundering legislation or the global art market.
[1] Center for Art Law is a Brooklyn-based nonprofit organization that provides educational resources and systems for the advancement of a colorful arts and legal community. Center for Art Law – At the Intersection of Visual Arts and Law (itsartlaw. org)