From self-regulation to government oversight
Despite the industry ’ s self-regulating efforts , 26 the current global art market is facing growing pressure to comply with antimoney laundering ( AML ) regulations . In 2020 , the European Union introduced the Fifth Anti-Money Laundering Directive ( 5AMLD ), which added art market participants into the EU ’ s AML and counter-terrorist financing ( CTF ) regimes . The U . K . has implemented the directive by introducing the Money Laundering and Terrorist Financing ( Amendment ) Regulations 2019 , which went into effect in January 2020 . 27 In the U . S ., the Anti-Money
Laundering Act of 2020 ( AMLA ) amended the Bank Secrecy Act ( BSA ) to include antiquities dealers , “ Including an advisor , consultant , or any other person who engages as a business in the solicitation or the sale of antiquities .” 28 AMLA also required the U . S . Department of the Treasury to consider the extent of vulnerability of the rest of the art market to money laundering and to make recommendations on whether and how to regulate the entire industry . 29
Under these new or impending regulations , art dealers and galleries dealing with antiquities and / or artworks , depending on the jurisdiction , are subjected to the same obligations as financial institutions ( FIs ), including reporting and record keeping requirements . 30 However , the art market presents unique challenges when it comes to detecting money laundering activities , as the red flags can vary considerably from those seen in traditional FIs . Any organization , including FIs , subjected to AML requirements and working with art players are well-advised to refine their checklists for detecting money laundering to better align with the unique characteristics of the market . One key issue is the relatively low threshold for reporting transactions of $ 10,000 or more , which is more easily attainable in the industry than in other sectors . 31
Another challenge will be to overcome the market ’ s traditional culture of discretion . Now , a business has customer due diligence obligations and is consequently required to identify the customer and the beneficial owner . 32 Further , small dealers and large auction houses will need to ensure a risk-based approach is implemented to determine the necessary resources , measures and controls to mitigate risks .
Conclusion
Urged by the ongoing war in Ukraine , several governments have embarked on a concerted effort to focus an unprecedented level of attention on the art market . 33 Regardless of the stage of implementation , be it existing , pending or potential legislation , all participants in the international art market and FIs serving art-world players as clients need to enhance their scrutiny and deter potential criminal activities .
Sophie Balay , senior director , Vidocq
Irina Tarsis , art historian , attorney and founder of the Center for Art Law 34
The authors would like to thank Cameron Field , CAMS , vice president of Vidocq , for his advice on this article , and Joseph Gergel , Jemima Gravatt and Filip Radzikowski , who are interns with the Center for Art Law , for their assistance and contributions .
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