Consistent with efforts in recent years to apply banking laws to the art market, the prospects of passage of a bill in Congress that would apply those rules to a broad category of advisors and attorneys have recently increased. The “ENABLERS Act,” a gimmick of nomenclature apparent from the moment it was proposed, was briefly attached to the annual National Defense Authorization Act, which in keeping with longstanding tradition easily passed the U.S. House of Representatives on July 14, 2022. This tactic, which was also used to extend the reach of the Bank Secrecy Act to antiquities dealers in 2021, greatly enhances the odds that what seemed initially like an unserious publicity stunt might become law. Readers of the Art Law Report will not be surprised at a critical view here of the effort to place a square peg—the art market—into a round hole—bank oversight. This bill is considerably worse, however. Compounding the confusion is that despite widespread coverage about its attachment to the NDAA, the ENABLERS Act as originally proposed is not in the version of the NDAA that passed the House of Representatives last week (it was added then revised, notwithstanding at least one report to the contrary). What was approved for the moment omits the worst parts of the ENABLERS Act. But the perception that it is a done deal ironically may have the effect of lowering vigilance about its prospects. Even if this bill never becomes law, it has come much closer than it should have.
Topics: Congress, Supreme Court, House of Representatives, AML, Money laundering, FinCEN, Financial Crimes Enforcement Network, Illicit Art and Antiquities Trafficking Protection, suspicious activity reports, Bank Secrecy Act, 31 U.S.C. § 5312(a), National Defense Authorization Act, Treasury Department, ENABLERS Act, NDAA, art market regulation, Tom Malinowski, dealers in antiquities, JOHN HENRY WIGMORE, Berd v. Lovelace, Federal Rules of Evidence, Panama Papers, International Consortium Investigative Journalists, Offshore Leaks database, English Chancery Court, Blackburn v. Crawfords Lessee, Pandora Papers
On January 1, 2021, the U.S. Senate overrode President Trump’s veto of the National Defense Authorization Act for 2021 (NDAA), a bill that (perhaps surprisingly) included rules affecting the art market. Specifically, the new law subjects antiquities dealers to the provisions of the Bank Secrecy Act, requires registration of the ultimate beneficial ownership of limited liability companies, and directs the Financial Crimes Enforcement Network (FinCEN) at the Department of the Treasury to conduct a study of money laundering in the art market. Long considered but only now passed, the bill is a significant step into regulating the U.S. art and antiquities market, though still far less invasive than the European Union’s current approach. The new regulations raise questions about the cost benefit balance of compliance, but leave no doubt after last year’s Senate report that regulators have the art market in their sights and the market must respond if it wants to have a say in the oversight that is sure to come.
Readers here will be familiar with our support for and participation in the Responsible Art Market Initiative’s common-sense approach to diligence and responsible practices, and this development is no exception. As I tried to spotlight in the RAM New York webinar we hosted last fall, whatever one thinks of the regulations or the regulators, these things are happening. And while we expressed skepticism that FinCEN is the right body to conduct a study of the art market, the market has a choice here. We can complain, or we can get involved in the dialogue. I would rather be at the table in the discussion than outside the room. The FinCEN study may not be ideal, but it is an opportunity that responsible actors will ignore at their peril.
Topics: OFAC, European Union, Terrorist financing, Responsible Art Market initiative, Money laundering, FinCEN, Financial Crimes Enforcement Network, Office of Foreign Assets Control, Bank Secrecy Act, Department of the Treasury, 31 U.S.C. § 5312(a), limited liability companies, National Defense Authorization Act, President Trump