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Bank Secrecy Act threatens art dealers
Penny graph, By David Eppstein - Own work, CC BY-SA 4.0.


SANTA FE, NM.- Art dealer groups, from tribal art organization ATADA to CINOA, the largest global art and antiques trade association, have announced their opposition to U.S. legislation and asked members to contact their Representatives and voice their concerns. HR 5886, subtitled, “The Illicit Art and Antiquities Trafficking Prevention Act,” would apply the Bank Secrecy Act to dealers in art and antiquities. The bill is now before Congress’ House Financial Services Committee and appears headed rapidly toward passage in the House of Representatives.

Currently, the Bank Secrecy Act applies to banks, financial institutions, credit card institutions, casinos, and dealers in precious metals. The new legislation would require U.S. art and antiquity dealers to follow similar FinCen reporting rules. Republican Congressman Luke Messer, who introduced the legislation, claims it is necessary to stop money laundering through art and antiquities that funds terrorist organizations.

A letter from CINOA President Clinton Howell to Congressman Hensarling, chairman of the Financial Services Committee, points out the lack of any evidence that antique and ancient art dealers are engaged in money laundering in the first place. He also notes the bill’s high burden in time and expense of compliance, and to the fact that art dealers are already subject to recordkeeping through requirements set by banks.

Regulators would set the rules at their discretion later, but congressional sources said the reporting requirements would likely be similar to those for bullion and raw gem dealers. If passed, the bill would require art dealers with as little as $50,000 in annual purchases/sales to report transactions and collect client’s personal information.

Art businesses subject to FinCen anti-money laundering (AML) requirements would have to follow an elaborate reporting system, establish anti-money laundering programs, do independent testing to monitor compliance and file suspicious activity reports for amounts as low as $2000. If a business is non-compliant, the consequences could include closure of the business’ bank accounts and even imprisonment.

The vast majority of U.S. art purchases are by check, credit card, or wire transfer, all of which pass through banks and financial institutions already subject to FinCen tracking and reporting requirements.

Numismatic groups have rallied to express concerns that common, inexpensive, and difficult to sell items such as collectible coins will have the same documentation requirements as gold and silver bullion or diamonds. There are an estimated 5,000 firms that deal in coins in the United States, mostly small businesses or sole proprietorships with sales under $1 million per year.

Others have noted that the privacy of art collectors will be at risk, and data collected could be used by federal authorities for ‘fishing expeditions’ into hitherto private art collections. Expectations of privacy among collectors selling because of hardship would no longer exist. FinCen shares information in each business’ file with law enforcement in the US and 90 other nations and with IRS and tax authorities in 70 other countries.

HR 5886 – Legislation Applying Bank Secrecy (BSA) Act to Dealers in Art & Antiquities
What Legislation Does

• Legislation gives the Treasury Department’s Financial Crimes Enforcement Network (FinCen) unrestricted authority to regulate and impose reporting requirements on art & antiquities dealers

What This Means
• Art Businesses subject to FinCen anti-money laundering (AML) requirements must:

o Establish an AML Program which will require art businesses to:
 File IRS/FinCEN Form 8300, file FinCEN Form TD F 90-22.13, file FinCEN Form 105 to establish an AML program
 Appoint a Compliance Officer responsible for meeting FinCen AML regulations and rules
 Ongoing AML training for employees
 Independent testing to monitor AML program and compliance
 File suspicious activity reports (SARS)

• Art becomes a regulated business with other regulations likely to follow
Who Is Impacted

• Legislation gives FinCen total discretion to determine which art and antiquities dealers need to maintain an AML program and report to FinCen

• Low dollar compliance thresholds established by FinCen for currently regulated businesses indicate most art dealers would be required to maintain AML programs and report activity and transactions
o For example, the threshold on jewelers is only $50,000 in annual purchases/sales of jewels & precious metals
o Thresholds in other regulated industries are a low as $2,000 for Suspicious Activity Reports (SARs) and $1,000 for currency transactions

• FinCen has the authority to change thresholds at any time

• Bottom line, most art dealers would be required to maintain an AML program which includes customer due diligence and monitoring systems as part of the compliance program.

Who Sees Your Filings
• Ends client confidentiality for art dealers

• FinCen shares information business’ file with:
o Law enforcement in US and 90 other nations
o IRS and tax authorities in 70 other nations

What Happens if Non-Compliant
• Bank closes your accounts

• You may be jailed

Is This Needed
• NO – Money laundering is probably a smaller problem than in other industries because art is not liquid; art dealers already must report cash transactions over $10,000 and operate through the highly regulated banking system. Regulation will hurt legitimate dealers, do little to deter thieves.

For more information, see Art Trade Reacts to Threatened Bank Secrecy Act
Contact Kate Fitz Gibbon, Cultural Property News, info@committeeforculturalpolicy.org





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