The industry group representing U.S. art dealers responded Wednesday to the introduction of legislation proposing that arts and antiquities dealers join a list of regulated businesses under the Bank Secrecy Act (BSA).
“If passed, the new legislation would impose on ‘dealers of art and antiquities’ the same financial reporting requirements that apply to major financial institutions under the Bank Secrecy Act,” the Art Dealers Association of America (ADAA) said in a statement. “This could impose an unnecessary and onerous regulatory burden on galleries—small businesses all across the country that do not have the infrastructures or resources required to undertake the reporting and attendant filings for something that has not presented itself as a major problem.”
The bill, introduced last Friday, would mark the first time the federal government has proposed regulation over art dealers as a group, according to Michael McCullough, a partner at the art-law focused firm Pearlstein McCullough & Lederman LLP.
The legislation follows a trickle of high-profile cases over the past few years involving art and antiquities, such as the Hobby Lobby case, in which the CEO of the crafts store bought thousands of illicitly
obtained objects, many smuggled from Iraq; the 1MDB case, in which a Malaysian billionaire, Jho Low, bought and sold works by
, and others at auction allegedly with government funds
; and the recent case involving Matthew Green, a London art dealer charged with helping to launder money
obtained through securities fraud with the sale of a $9 million
“Art can be used for money laundering, like other high-value items,” said Nicole Healy, a partner in the Redwood City office of Ropers Majeski Kohn & Bentley, and the author of Anti-Money Laundering Deskbook: A Practical Guide to Law and Compliance. “The thing about art is it’s worth whatever someone’s going to pay for it.…That makes it especially useful for money laundering.”
The BSA is a 1970 statute that originally aimed to prevent domestic money laundering, and now encompasses terrorism financing and other transnational financial crime. The bill to add arts and antiquities dealers to the BSA’s purview was introduced by Luke Messer, representative of Indiana’s sixth congressional district (the eastern and southeastern part of the state), who made headlines earlier in May for sending the Nobel Prize Committee a letter formally nominating
President Trump for a Nobel Peace Prize. The extent of his familiarity with the art market is unclear, and his office did not respond to requests for comment. The bill, of which he is the sole sponsor, does not define what an art dealer or antiquities dealer is.
“The congressman is not in an area where there’s a big art market,” said McCullough. “It’s being proposed under rubric of international financial crime.”
McCullough said that Congress has typically been supportive of legislation aimed at battling transnational crime and terrorism, which means it could eventually see the light of day, if it were to pass both houses and get signed into law by the president. Because, in its current form, the bill does not define what an art dealer is, writing the specific regulations would fall to the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN), McCullough said, based on his conversations with Rep. Messer’s staff.
The first step would be defining what a dealer is, which, given the heterogeneity of the art market, could prove difficult.
“They come in all shapes and sizes,” said Jo Laird, an art lawyer who is of counsel at Patterson Belknap Webb & Tyler LLP. “They can be large galleries with a number of different locations, or they can be literally someone in Kansas working out of their apartment.”
How would it impact dealers? U.S.-based art dealers are already subject to prohibitions on money laundering, but the new legislation could saddle them with additional reporting requirements, such as flagging suspicious activity
to the Treasury. Furthermore, U.S. law bans any illicit conduct that takes place in the U.S. or uses U.S. facilities, such as a U.S. bank, whether by an international dealer or domestic dealer, Laird said.
Right now, McCullough said, few art dealers are set up for that kind of compliance, and it would take them some money and time to put reporting and monitoring systems in place.
“It’s something people can learn,” he said.