Terracotta Army near the city of Xian, China.

On September 23, the Financial Crimes Enforcement Network (“FinCEN”) issued an advance notice of proposed rulemaking (“ANPRM”) to solicit comment on questions related to the implementation of anti-money laundering (“AML”) rules in the antiquities market.

As we have previously blogged, the Anti-Money Laundering Act of 2020 amended the Bank Secrecy Act’s (“BSA”) definition of “financial institution” to include individuals “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, subject to regulations prescribed by the [Treasury] Secretary.” FinCEN must propose rules no later than December 27, 2021.

As part of the ANPRM, FinCEN included a discussion of the potential for money laundering, terrorist financing, and other illicit financial activity in the antiquities market, including certain features that make the trade of antiquities appealing to bad actors (FinCEN an advisory notice in March of 2021 alerting financial institutions with existing BSA obligations about illicit activity associated with the antiquities and art markets). According to FinCEN, the ANPRM “is an important step in strengthening U.S. national security by protecting the U.S. financial system from money launderers and terrorist financiers that seek to exploit the antiquities trade.”

Several notable questions in the ANPRM include:

  • How should “antiquities” be defined for the purposes of FinCEN’s regulations? Should jurisdictional or territorial considerations be taken into account when determining how antiquities should be defined (e.g., foreign cultural heritage laws)? How is an antiquity distinct from a work of art?
  • Identify and describe the roles, responsibilities, and activities of persons engaged in the trade in antiquities, including, but not limited to, advisors, consultants, dealers, agents, intermediaries, or any other person who engages as a business in the solicitation or the sale of antiquities. Are there commonly understood definitions of particular roles within the industry? Who would be considered within or outside such definitions?
  • How are transactions related to the trade in antiquities typically financed and facilitated? What, if any, information does a buyer typically learn about the seller, consigner, or intermediary involved in the sale of antiquities?
  • Should FinCEN establish a monetary threshold for activities involving the trade in antiquities that would subject persons involved in such activities above that threshold to FinCEN’s regulations, but exempt persons whose activities fall below that threshold?
  • What, if any, difficulties are associated with requiring the disclosure of or otherwise obtaining beneficial ownership information for legal entities engaged in the trade of antiquities, including foreign legal entities that may be outside the scope of current or future U.S. beneficial ownership reporting requirements?

The importance of the proposed regulation is dependent, in part, on the breadth of its reach.  Based upon the ANPRM’s use of phrases like “the solicitation or the sale of antiquities” and “financed and facilitated,” one might suspect that FinCEN is contemplating rules that would apply to a wide range of people, businesses and institutions. Comments are due October 25.

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