Case Presages Mandatory BSA Obligations for Antiquities Dealers under the AML Act
In the midst of the invasion of Iraq and the subsequent civil instability, thousands of cultural artifacts were stolen from the National Museum of Iraq. Among them: the Dream Tablet of Gilgamesh (the “Dream Tablet”), a clay tablet at least 3,000 years old, inscribed with part of the oldest works of narrative poetry in the world, the Epic of Gilgamesh.
The Dream Tablet illegally wound its way to the United States in 2003, and Hobby Lobby purchased it in 2014 for $1.67 million. Now, it is returning to Iraq. Per a July 27, 2021 Department of Justice (“DOJ”) press release, the Eastern District of New York ordered Hobby Lobby to forfeit the Dream Tablet because its importation violated the United States’ ban on the importation of Iraqi archaeological and ethnological materials.
Although this is not a pure money laundering case, this forfeiture action implicates the intersection of the antiquities and art trades and anti-money laundering (“AML”) concerns, a subject we cover frequently, including in a recent guest post by on potential AML regulations for the antiquities and art market. Of course, the Anti-Money Laundering Act of 2020 (“AML Act”) in part imposes Bank Secrecy Act (“BSA”) obligations on antiquities dealers by defining a “person engaged in the trade of antiquities, including an advisor, consultant, or any other person who engages as a business in the solicitation or the sale of antiquities” as a “financial institution” covered by the BSA. The Dream Tablet case illustrates the issues that antiquities dealers will have to face under a mandatory BSA/AML regime, including the filing of Suspicious Activity Reports (“SARs”).
The Dream Tablet of Gilgamesh
The Dream Tablet endured a fascinating journey. According to the DOJ’s amended complaint, in 2001, a U.S. antiquities dealer (the “Antiquities Dealer”) viewed numerous clay tablets “on the floor of an apartment in London, England.” The Antiquities Dealer visited the apartment again in 2003, accompanied by an expert on Cuneiform, the writing system used in ancient Mesopotamia. Deciding the tablets were valuable, the Antiquities Dealer purchased them for approximately $50,000 and had them shipped to the United States. Contrary to United States’ law, the sender allegedly failed to properly declare the tablets upon arrival stateside.
The Antiquities Dealer then sold the Dream Tablet with an allegedly false “provenance letter” – a document memorializing the chain of custody for the antiquity. Rather than state that the Dream Tablet arrived from London in 2003, the allegedly false provenance letter stated that Antiquities Dealer purchased the Dream Tablet in 1981 in San Francisco.
The Dream Tablet was eventually sold in 2013 to a major international auction house (the “Auction House”). When the Auction House asked about the Dream Tablet’s provenance, the Antiquities Dealer allegedly reported that the provenance “was not verifiable and would not hold up to scrutiny in a public auction.” Nevertheless, the Auction House sold the Dream Tablet for $1.67 million through a private sale to Hobby Lobby, which intended to donate it to the Museum of the Bible in Washington, D.C.
Certain details remain murky. After the Museum obtained the Dream Tablet, it conducted additional due diligence into its provenance, and allegedly learned conflicting information about the Dream Tablet’s origins. Although how the DOJ learned about the Dream Tablet’s suspicious past is not publicly available, this action is part of a larger DOJ investigation into thousands of potentially looted Iraqi artifacts that came into Hobby Lobby’s possession. In 2011, U.S. Customs and Border patrol seized a number of tablets, resulting in a similar DOJ forfeiture action, United States of America v. Approximately Four Hundred Fifty Ancient Cuneiform Tablets and Approximately Three Thousand Ancient Clay Bullae. The DOJ used forfeiture to return over 5,500 allegedly looted artifacts to Iraq and fined Hobby Lobby $3 million.
As for the Dream Tablet, Hobby Lobby entered into a stipulation of settlement with DOJ on July 15, 2021, and it is set to be repatriated to Iraq.
Hobby Lobby has pursued separate relief. In early 2021, it filed a bevy of claims against the Auction House, including breach of warranty of title, breach of implied and express warranty, and fraud. That case remains pending in the Eastern District of New York.
The AML Act
It is nearly impossible to predict whether this case would have been any different if the Antiquities Dealer and the Auction House had been subjected to the BSA when they crossed paths with the Dream Tablet. Major auction houses already have pursued for years their own voluntary AML policies and procedures. Similarly, the Responsible Art Market (“RAM”), an industry-led non-profit organization whose purpose is “to raise awareness amongst Art Businesses of risks faced by the art industry,” publishes AML guidelines for the industry. Those guidelines explain the importance of risk assessments, Know-Your-Customer (“KYC”) policies, and researching a work’s provenance. However, the AML Act now makes dealers in antiquities subject to the BSA as a matter of law, not choice. The regulations which the Financial Crimes Information Network (“FinCEN”) must promulgate under the AML Act presumably will impose on antiquities dealers KYC duties and an obligation to file SARs to report suspicious transactions to FinCEN. The AML programs used to discharge those obligations and detect suspicious activity will have to be risk-based; that is, the programs’ depth and sophistication will have to be commensurate with the risk posed by the particular activity and customers.
In the context of dealing in ancient Iraqi artifacts, an AML program should consider the following: the particularly strict rules restricting the importation of Iraqi artifacts to the United States after 1990; the significant potential penalty for violating those restrictions (forfeiture); and the importance of investigating and verifying an artifact’s provenance. Assuming that the government’s allegations are true, a fully functioning AML program may have alerted to such red flags as the fact that the Antiquities Dealer first saw the Dream Tablet not carefully preserved behind glass, but on the floor of an apartment building, or the fact that the Antiquities Dealer told the Auction House that the provenance would not pass muster should the Dream Tablet be sold at a public auction. As always, the success of any AML program depends upon the people involved.
This case is also a reminder that civil forfeiture continues to be a critical tool in the DOJ’s arsenal to combat antiquities- and art-related crime. According to the DOJ’s press release, “Thwarting trade in smuggled goods by seizing and forfeiting an ancient artifact shows the department’s dedication to using all available tools, including forfeiture, to ensure justice.” The amended complaint here relied on some relatively esoteric statutes – but which may become more common: the DOJ sought forfeiture “pursuant to 19 U.S.C. § 1595(c)(1)(A), as stolen Iraqi property that was introduced or attempted to be introduced into the United States contrary to 18 U.S.C. §§ 545 and 2314; and pursuant to 19 U.S.C. § 2609 as designated archaeological or ethnological material or an article of cultural property exported from Iraq contrary to 19 U.S.C. § 2606.”
The imposition of mandatory BSA obligations, along with the threat of forfeiture, may place antiquities dealers in precarious positions. Presumably, they will now monitor for transactions indicating potentially illegal activity. Such activity may be detected at any stage of the process. And suspicious activity will have to reported to FinCEN. What happens when an antiquities dealer learns that it possessed or sold a piece – or currently holds a piece – that previously had been smuggled into the United States, contrary to federal law? If the AML Act requires the antiquities dealer to, in effect, self-report in a SAR, the ultimate result may be forfeiture of the antiquity. Regardless of any regulatory penalties under the BSA, the specter of such business loss should be a powerful motivator for AML compliance.