FinCEN Takes First Step in Antiquities Rulemaking
On September 23, 2021, the Financial Crimes Enforcement Network (FinCEN) took the first formal step toward writing new rules that would subject dealers in antiquities to the federal anti-money laundering laws and regulations. FinCEN’s Advance Notice of Proposed Rulemaking (ANPRM) solicits information about a range of issues to assist FinCEN in drafting a proposed rule, including the appropriate scope of the rulemaking, the types of antiquities industry participants that should be subject to the rule, and whether certain monetary thresholds and exemptions may be appropriate.
What Does Section 6110 of the AMLA Require?
Section 6110 of the Anti-Money Laundering Act of 2020 (AMLA) expanded the list of “financial institutions” under the Bank Secrecy Act (BSA) to include dealers in antiquities. Specifically, 31 U.S.C. § 5312(a)(2) was amended by adding “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, subject to regulations prescribed by the Secretary[.]” Section 6110 also requires FinCEN to propose rules no later than December 27, 2021.
Why Are FinCEN and Congress Focusing on Antiquities?
As part of the ANPRM, FinCEN included a discussion of the potential for money laundering, terrorist financing, and other illicit financial activity through trade in antiquities, including certain features that make the antiquities market prone to exploitation by illicit actors to evade detection by law enforcement. These features include client confidentiality; challenges associated with accurately documenting provenance; the use of intermediaries; and unregulated customer due diligence practices. FinCEN also flagged the small size, ease of transport, and subjectivity of prices of antiquities as additional risk factors.
Notably, in March of 2021, FinCEN issued a notice about its efforts under Section 6110. The notice included an alert to financial institutions already subject to BSA obligations (e.g., depository institutions, money services businesses) about the types of crimes that may be related to antiquities and art and provided specific SAR-filing instructions for reports of activity involving antiquities and art.
Request for Comments
FinCEN is soliciting comments generally relating to the scope of coverage of the proposed rules, what sorts of risks or mitigants exist with respect to the antiquities market, and how antiquities should be defined, including the difference between antiquities and works of art. Several notable questions include:
- 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 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?
- How should “trade of antiquities” be defined for the purposes of FinCEN’s regulations? Should FinCEN distinguish between the commercial, for-profit trade of antiquities and non-commercial, not-for-profit activity? If so, how?
Comments on the ANPRM are due no later than October 25, 2021. Financial institutions or other industry participants interested in the BSA/AML reform, related rulemaking, and the impact on their businesses may contact any of the authors of this Advisory or their usual Arnold & Porter contact. The firm's Financial Services team would be pleased to assist with any questions about the reform or BSA/AML compliance and enforcement more broadly.
© Arnold & Porter Kaye Scholer LLP 2021 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.