The Financial Action Task Force (“FATF”) Plenary was held on February 22-24, bringing together delegates from around the world to meet in Paris and discuss a variety of global financial crimes and ongoing risk areas. In a historic move, FATF decided to suspend the Russian Federation from membership in the intergovernmental organization, based upon its actions in Ukraine over the past year. We will discuss that decision, as well as the other major outcomes of the Plenary, which involve beneficial ownership, virtual assets, ransomware, the art and antiquities market, and changes to FATF’s so-called “grey list.”
The Financial Crimes Enforcement Network (“FinCEN”) issued on December 22 a Financial Trend Analysis regarding Bank Secrecy Act (“BSA”) filings during the period of March to October 2022 (the “Report”) reflecting financial activity by Russian oligarchs the time of Russia’s unprovoked military invasion of Ukraine. This publication also refers to three prior alerts issued by FinCEN highlighting red flags on Russian oligarchs, high-ranking officials, and sanctioned individuals, on which we blogged here, here, and here. FinCEN published the Report pursuant to the Anti-Money Laundering Act’s requirement that FinCEN periodically publish threat pattern and trend information derived from BSA filings.
Overall, FinCEN found that BSA data filed on financial transactions of Russian oligarchs, high-ranking officials, sanctioned individuals, and their family members in 2022 showed transactional patterns indicative of corruption and sanctions evasion, including:
- the movement or transfer of funds or ownership of assets and trusts;
- the purchase of high-value goods or property; and
- changes in financial flows with links to property or companies in the United States.
On April 14, 2022, the Financial Crimes Enforcement Network (“FinCEN”) issued an advisory on kleptocracy and foreign public corruption. At a high level, the advisory stresses the importance of financial institutions focusing their efforts on detecting and targeting the proceeds of foreign public corruption. This advisory aligns with President Biden’s establishment of the fight against corruption as a core national security interest, as well as FinCEN’s identification of corruption as a national priority for anti-money laundering and countering the financing of terrorism. The advisory seeks to provide financial institutions with typologies and potential indicators associated with kleptocracy and other forms of foreign public corruption, such as bribery, embezzlement, extortion, and the misappropriation of public assets. The advisory further identifies 10 financial red flag indicators to assist financial institutions in detecting, preventing, and reporting suspicious transactions associated with kleptocracy and foreign public corruption.
Continue Reading More from FinCEN to Financial Institutions on the Kleptocracy – With a Continued Focus on Russia
Sanctions involving Russia is a front-burner issue for all businesses, but particularly for financial institutions. As we previously blogged, the Financial Crimes Enforcement Network (“FinCEN”) issued on March 7 an alert calling for increased vigilance in the face of potential evasion of Russian sanctions. On March 16, FinCEN issued its second alert on the topic (the “Alert”), reiterating the need for increased vigilance and assisting financial institutions in detecting suspicious transactions involving high-value assets to evade sanctions.
We discuss here the Alert, which provides guidance to financial institutions on how to identify suspicious transactions relating to the use of certain high-value assets by Russian elites, their family members and their “proxies.” The Alert reminds financial institutions of the importance of quickly identifying suspicious activity related to the disposition of sanctioned Russian assets. The Alert also highlights the international and domestic task forces that were formed to effectuate the sanctions laws we describe below, emphasizing the need for cross-agency collaboration and information sharing to achieve the common goal of sanctioning Russia’s power players. However, and as we discuss, the Alert unfortunately offers no guidance on how “proxies” should be identified or defined.
Continue Reading Russian Sanctions Redux: FinCEN Issues Guidance on Suspicious Transactions and Evasion Using High-Value Assets
But AML Concerns Linger As To “High End” Art and NFTs
On February 4, 2022, the U.S. Department of the Treasury published a study (the “Study”) on the facilitation of money laundering (“ML”) and terrorist financing (“TF”) through the trade in works of art. The study was commissioned as a result of Section 6110(c) of the Anti-Money Laundering Act of 2020 (the “Act”), which required Treasury to examine art market participants and sectors of the art market that may present ML/TF risks to the U.S. financial system, and examine what steps regulators might take to mitigate these risks.
According to the press release accompanying the Study, “[s]everal qualities inherent to high-value art – the way it is bought and sold and certain market participants – may make the high-value art market attractive for money laundering by criminals. These include the high dollar value of transactions, transportability of goods, a longstanding culture of privacy and use of intermediaries (e.g., shell companies and art advisors), and the increasing use of high-value art as an investment class.” As we will discuss, the Study proposes four scenarios—two regulatory and two nonregulatory—to mitigate money laundering risks in the art industry. Ultimately, however, the Study concludes that, “[w]eighed against other sectors that pose ML/TF risks, . . . the art market should not be an immediate focus for the imposition of comprehensive AML/CFT requirements.” (emphasis added). Accordingly, any ML/TF regulation of the art trade will not happen soon.
Ironically, dealers in antiquities – an industry dwarfed by the size of the global art market – are not so lucky, because Congress already has subjected them to anti-money laundering (“AML”) duties. As we blogged, the Act amended the Bank Secrecy Act’s (“BSA”) definition of “financial institution” to include those “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.” The Financial Crimes Enforcement Network (“FinCEN”) still must issue implementing regulations for antiquities dealers.
Continue Reading Treasury Report: No Immediate Need for BSA Regulations for the Art Industry
Lawmakers Targeted “Gatekeeper” Professions Following the Pandora Papers Leak
Motivated by revelations contained in the recently-released Pandora Papers, on October 6, 2021, four U.S. Representatives – Tom Malinowski (D-NJ), Maria Elvira Salazar (R-FL), Steve Cohen (D-TN), and Joe Wilson (R-SC) – introduced House Resolution 5525, named the Establishing New Authorities for Business Laundering and Enabling Risks to Security (“Enablers”) Act. Generally, the Pandora Papers are an 11.9 million document stockpile published by the International Consortium of Investigative Journalists (“ICIJ”) that revealed the offshore accounts of dozens of world leaders and more than one hundred billionaires, celebrities, and business leaders. Analysis of the leaks unveiled how the wealthy allegedly used offshore accounts, hidden trusts, and shell companies to hide trillions of dollars, evade tax collectors, and launder money.
The Enablers Act targets the so-called “middlemen” in the United States who allegedly assist with those bad acts. In a press release, Representative Wilson stated bluntly who he believed to be the “U.S. enablers of kleptocracy”: “unscrupulous lawyers, accountants, and others” that allegedly fail to conduct adequate due diligence in international transactions.
The Act, if passed, would amend the Bank Secrecy Act (“BSA”) to require the Treasury Department to promulgate due diligence requirements for the “middlemen,” which include investment advisors, art dealers, attorneys involved in financial activity, accountants, third-party payment providers, and others.
The Act is nascent proposed legislation that is still subject to refinement as it winds its way through the House Financial Services Committee. Suffice to say, however, there are some initial questions about the bill’s scope and function that give us pause. The details are catalogued below.
Continue Reading The ENABLERS Act Seeks to Impose BSA/AML Requirements on an Array of “Middlemen” Professionals
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…
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”).
Continue Reading DOJ Obtains Forfeiture of the Dream Tablet of Gilgamesh
Today we are very pleased to welcome guest blogger Tess Davis, who is the Executive Director of the Antiquities Coalition. Tess, a lawyer and archaeologist by training, oversees the organization’s work to fight cultural racketeering worldwide, as well as its award-winning think tank in Washington. She has been a legal consultant for the U.S. and foreign governments and works with both the art world and law enforcement to keep looted antiquities off the market. She writes and speaks widely on these issues — having been published in the New York Times, the Wall Street Journal, CNN, Foreign Policy, and top scholarly journals — and featured in documentaries in America and Europe. She teaches cultural heritage law at Johns Hopkins University, and is a Term Member of the Council on Foreign Relations. In 2015, the Royal Government of Cambodia knighted Tess for her work to recover the country’s plundered treasures, awarding her the rank of Commander in the Royal Order of the Sahametrei.
We reached out to Tess because Congress passed the Anti-Money Laundering Act of 2020 (“AMLA”) on January 1, 2021. This sprawling legislation in part applies the Bank Secrecy Act (“BSA”) to antiquities dealers by defining them as “financial institutions” – and suggests that the BSA later may apply to the art trade as well by requiring a study on money laundering and the art trade. We have blogged repeatedly on the fascinating intersection between the art and antiquities industry and BSA/AML compliance and money laundering concerns. This also is a topic that has garnered significant media interest, including in a recent article in the New York Times. For ease of reference, the AMLA’s requirements for factors to be considered for forthcoming regulations on the antiquities trade, and for the factors relevant to the study on the art trade, are described here.
The Antiquities Coalition convened the Financial Crimes Task Force; their materials, including a detailed joint report, Reframing U.S. Policy on the Art Market: Recommendations for Combating Financial Crimes, are available here. Antiquities, art and money laundering also was the subject of a panel at PLI’s May 2021 Anti-Money Laundering Conference, at which Tess was a panelist.
This blog post again takes the form of a Q&A session, in which Tess responds to questions posed by Money Laundering Watch about potential AML regulations regarding the antiquities and art markets. We hope you enjoy this discussion on this important topic. – Peter Hardy and Alex Levy…
Continue Reading Congress Regulates the Antiquities Market – and Perhaps the Art Market – for AML Compliance: A Guest Blog.
Art & Antiquities; Beneficial Owners; Foreign Corruption — and More
We are really pleased to be moderating, once again, the Practising Law Institute’s 2021 Anti-Money Laundering Conference on May 11, 2021, starting at 9 a.m. This year’s conference again will be entirely virtual — but it will be as informative, interesting and timely as…