Criminal Justice Insider
An in-depth review and analysis and of emerging topics in both federal and New York State criminal law. This blog explores developments in substantive and procedural criminal law, providing practical insights to the latest case law and statutory changes.
The Art of the Steal: US Tightens Leash on Money Laundering through the Opaque Art Market
It's no surprise that the art market is fertile ground for money laundering. The art market is the perfect storm of a decentralized and largely unregulated market where purchasers can shield their identities through proxies or shell companies and where the art can be shipped anywhere in the world and liquidated without the purview of the banking system. Unsurprisingly, the federal government is interested in ending the ability of the art market to launder criminal proceeds. It has adapted existing legislation to cover the art market while seeking to implement new regulations.
Money laundering is any financial transaction which seeks to conceal the proceeds of criminal conduct. It is in itself a crime and is often charged in connection with any crime that generates monetary return. See 18 U.S.C. Sec. 1956. Because money laundering is, by its nature and definition, designed to be concealed from view, the Government puts an onus on banks and other financial institutions to detect and report money laundering through the Bank Secrecy Act.
The Bank Secrecy Act, codified at 31 U.S.C. Sec. 5311, is a complex piece of legislation which requires banks and financial institutions to monitor for and report suspected money laundering activity. The reporting occurs mainly through “currency transaction reports” which require a financial institution to report to the Financial Crimes Enforcement Network any cash transaction exceeding $10,000 in one business day and “suspicious activity reports” which require a financial institution to report any activity it suspects is linked to money laundering or fraud.
On January 1, 2021, Congress passed the National Defense Authorization Act for the Fiscal Year 2021 over a presidential veto. Folded into that statute was the Anti-Money Laundering Act of 2020, which substantially expands the Bank Secrecy Act. Critical to the art market, the definition of a “financial institution” under the Bank Secrecy Act was expanded to any person engaged in the sale of antiquities including advisors and consultants. Accordingly, art dealers and advisors must now report large cash transactions as well as any transactions that may be linked to illegal activity.
This regulation marks a substantial change to the previously opaque nature of the art market. However, it is not without precedent. It follows similar efforts in Europe. For example in early 2020, Great Britain passed regulations requiring art dealers and auctioneers to determine the identity of the ultimate beneficial owner before it can engage in a transaction. A certified photographic identification and proof of address will be required prior to any transaction.
The current U.S. scheme does not go quite so far, though final regulations on how the Bank Secrecy Act applies to the art market have not yet been promulgated. Two things are for certain: (1) the days of the art market as a haven for illicit activity are coming to a close and (2) the antiquities trade is going to have to invest substantially in compliance in order to continue its business.
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06.28.2021 | PRACTICE AREAS: Criminal Defense