Art Law Report

Bill Introduced in U.S. House of Representatives Would Impose Money Laundering Reporting Requirements on Art Dealers

Posted by Nicholas O'Donnell on May 24, 2018 at 10:00 AM

Casting aspersions about the art market is a popular pastime.  And no doubt there is much about the commercial art world that invites this criticism, not least a tendency towards secrecy (or discretion, depending whom you ask).  Sometimes these criticisms lean into suggestions of rampant criminality or money laundering, for which there is actually scant support. That is to say, there is a common suggestion that the lack of a single regulatory scheme over the art market (which is not to say it is unregulated, another misconception) is evidence of participation by dealers or collectors in illicit activity. In fact, as we have written before, the far greater risk is of being used by bad actors trying to launder money through art transactions.  For this and other reasons, we were proud to assist in drafting the Responsible Art Market initiative U.S. country guide and the more recent toolkit that was launched in January.

A recent bill (H.R. 5886) may oblige us to update those guidelines.  Entitled the “Illicit Art and Antiquities Trafficking Protection Act,” the bill was introduced by Representative Luke Messer (R-IN) last week. 

A key component of money laundering and banking regulation is the obligation to report suspicious activities. For example, cash transactions greater than $10,000 must be reported to the Treasury department.  The Bank Secrecy Act (officially the Currency and Foreign Transactions Reporting Act of 1970) imposes these requirements on banks.  The bill proposes to add “dealers in art or antiquities” to the list of persons obliged to follow those reporting requirements.  As a result, among others, the inclusion of dealers would require them to ensure that potential clients are not among those being sanctioned by the Office of Foreign Asset Control (OFAC).  OFAC is the office that oversees compliance with sanctions against a broad range of people and governments targeted by the United States (think Cuba, Iran, Russia). 

Together these steps would impose on art dealers the kind of know your customer (KYC) that banks take for granted, and which honestly should already be part of a prudent business’s intake process.  Christie’s, for example (a RAM contributor) explained at last year’s launch in detail its own KYC and anti-AML procedures that are not necessarily required by law but as a matter of compliance aim to set the standard.

And while the art market is often oversimplified, these concerns are real.  Money laundering and terrorist financing a real issue, and frequently rely on unwitting participants who do not understand what is going on until it is too late.  Whether or not this bill becomes law, it is a reminder that good prospective policies are always the best protection against being taken advantage of. 

Topics: OFAC, Christie's Inc., Responsible Art Market initiative, Money laundering, AML Program, Know your customer, H.R. 5886, Luke Messer, Office of Foreign Asset Control, Illicit Art and Antiquities Trafficking Protection, KYC

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About the Blog

The Art Law Report provides timely updates and commentary on legal issues in the museum and visual arts communities. It is authored by Nicholas M. O'Donnell, partner in our Art & Museum Law Practice.

The material on this site is for general information only and is not legal advice. No liability is accepted for any loss or damage which may result from reliance on it. Always consult a qualified lawyer about a specific legal problem.

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