Lawmakers are cracking down on the ‘unregulated’ US art market. Here’s how a new anti-money laundering law will affect dealerships

The U.S. antiques trade will come under much tighter scrutiny in 2021 than in the past.

On Jan. 1, the Senate overruled President Trump’s veto of the National Defense Authorization Act of 2021, a bill that includes a new law requiring antique dealers to comply with the law’s requirements. on bank secrecy. This means that dealers will now have to adopt anti-money laundering programs designed to eradicate illegal practices.

One of these requirements is to identify and record the so-called “ultimate beneficiary” – or the true owner of a limited liability company. Now, savvy collectors and investors who rely on offshore entities and front companies to conceal their true identities when performing crafts, especially high-value ones, will have a harder time doing so.

The US Treasury Department should write regulations on specific policies that antique dealers must implement. Congress has already given the department guidance on what to address, including suggesting that regulations vary by company size, transaction size, transaction location, and whether the dealer must identify the buyer when working through an agent or intermediary.

The new regulations could also extend beyond the antiques market. This year, the Treasury Department is expected to complete a study to determine if there is evidence of money laundering in the broader art market. The Senate Banking Committee will then use the findings to consider whether the same anti-money laundering provisions applied to antique dealers should apply to all art dealers.

According to an art lawyer, the result of this study is “inevitable: an alliance of government regulators, class-conscious lawmakers and art market critics will seize the opportunity to convince the Biden cabinet to regulate the art trade”. says Michael McCullough of New York firm Pearlstein and McCullough.

Photo: Angela Pham/BFA

Observers in the auction and art gallery markets have closely watched the bill, which follows related legal action in the UK.

A Christie’s representative said the auction house “welcomes the opportunity to work with U.S. regulators on appropriate and enforceable anti-money laundering guidance.”

The Art Dealers Association of America (ADAA), meanwhile, is in talks with congressional committees about the bill in hopes of balancing the burden on dealers.

“The ADAA has sought to ensure that any new regulations are properly supported by data on the magnitude and scope of any identified issues,” the organization said in a statement. His legal and public policy advisers have worked with legislators to “generally introduce and educate them about the dynamic small businesses that make up the art dealer community in the United States.”

The most difficult aspect of creating a workable anti-money laundering policy, says McCullough, “is finding the right balance between complying with the law and still honoring a client’s need for discretion and confidentiality.” .

Anti-money laundering programs typically cost thousands of dollars a year to implement, as well as a lot of time and effort, according to Washington, DC-based attorney Peter Tompa, who represents organizations that lobby for museums and dealers.The costs for small and micro businesses are considerable,” he says.Moreover, it is impossible to “fly under the radar screen” of such requirements; these regulations are enforced by banks who will close non-compliant accounts.

Many in the industry say they have expected tougher legal scrutiny for some time. Last year, a US Senate subcommittee released a strongly worded report in the international art market, calling it “the largest unregulated legal market in the United States”. This analysis left “no doubt”, according to attorney Nicholas O’Donnell, “that regulators have the art market in their sights and that the market must respond if it is to have any say in the surveillance that is sure to occur.

To follow Artnet News on Facebook:

Want to stay one step ahead of the art world? Subscribe to our newsletter to receive breaking news, revealing interviews and incisive reviews that move the conversation forward.

Back To Top