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