Tuesday, January 11, 2022

A new GAO report finds that criminals and terrorists may attempt to use lawyers to launder money.  Cultural property attorneys should be vigilant.


A congressional watchdog charges that some arts and antiquities dealers, accountants, and “complicit lawyers” help fuel “money laundering strategies used by transnational criminal organizations and terrorist groups.”

The Government Accountability Office's (GAO) new report, titled TRAFFICKING AND MONEY LAUNDERING: Strategies Used by Criminal Groups and Terrorists and Federal Efforts to Combat Them, serves as a reminder that criminal networks may rely on lawyers to facilitate crimes like antiquities trafficking.

“The high-value art market is attractive to money launderers for reasons including a lack of transparency in transactions and anonymity among buyers and sellers,” the GAO finds, “partly because dealers act as intermediaries who facilitate transactions.”

Because lawyers also could act as facilitators, they must guard against abetting criminal conduct such as purchasing and reselling art and antiquities, where lawyers might “use their knowledge and abilities to help launder criminal proceeds."

Attorneys should be mindful of aiding other crimes too, such as creating shell companies to traffic cultural property or to conceal payments. According to the GAO report, the U.S. Treasury Department says that attorneys “may be complicit or willfully blind when creating shell companies for criminals to use to launder their illicit proceeds.”

Mislabeling customs entry forms to help skirt import restrictions placed on at-risk archaeological and ethnological material, securing improper tax benefits through charitable donation schemes that involve looted artifacts, and washing 
dirty antiquities money 
through client trust accounts illustrate other possible forms of complicity.

[Sidebar: client trust accounts: The GAO explains that "lawyers may use a type of client trust account, called an Interest on Lawyer Trust Account. These accounts are established at a bank and a complicit lawyer can use them as funnel accounts to direct funds to other accomplices or locations."]

In 2020, the American Bar Association warned attorneys about participating in client wrongdoing, putting bar members on notice that willful blindness is no excuse. "A lawyer may ... face criminal charges or civil liability, in addition to bar discipline, for deliberately or consciously avoiding knowledge that a client is or may be using the lawyer's services to further a crime or fraud," admonished the ABA Standing Committee on Ethics and Professional Responsibility.

The GAO published its latest report after FinCen (Financial Crimes Enforcement Network) "identified trafficking activity of transnational criminal organizations and terrorist groups as among the most significant illicit finance threats facing the United States." The agency's conclusion came on the heels of an Advisory issued by the 
Office of Foreign Assets Control in October 2020 that called on high-end art market participants to comply with U.S. sanctions regulations.

Last year, Congress adopted the Anti-Money Laundering Act and the Corporate Transparency Act to stem illicit financial flows. Lawmakers placed antiquities dealers were placed under the Bank Secrecy Act's reporting obligations as part of a broader legislative package that addressed defense and national security matters.

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Text and original photos copyrighted 2010-2022 by Cultural Heritage Lawyer Rick St. Hilaire, a blog commenting on matters of cultural property law, art law, art crime, cultural heritage policy, antiquities trafficking, looted, antiquities, stolen relics, smuggled antiquities, illicit antiquities, museum risk management, and archaeology. Any unauthorized reproduction or retransmission without the express written consent of CHL is strictly prohibited. The materials presented on this site are for informational purposes only and do not constitute legal advice. Retain a lawyer to receive legal help. The provision of this information to the reader, moreover, in no way constitutes an attorney-client relationship. Blog url: culturalheritagelawyer.blogspot.com.

Tuesday, December 21, 2021

Stag's Head Rhyton Manhattan District Attorney
Stag’s Head Rhyton, c. 400 BC from Milas, Turkey, site of
illegal excavations. Purchased by Steinhardt for $2.6 mil from
the Merrin Gallery in 1991. Loaned to The Met in 1993. Seized
by the DANY via judicial warrant. Currently valued at $3.5 mil.

Manhattan DA Cy Vance, Jr. signed a non-prosecution agreement with Michael Steinhardt in his last days as chief prosecutor.

What's in it, and what's not?

And why did the Antiquities Trafficking Unit not seek indictment?


In his final days as Manhattan’s district attorney, Cyrus Vance, Jr. stirred the cultural property world with the announcement of a controversial immunity deal between his office and New York hedge fund giant and philanthropist, Michael H. Steinhardt.

Steinhardt, a prolific collector of archaeological material whose name is synonymous with cultural property cases like U.S. v. An Antique Platter of Gold ("Golden Phiale") and the recently decided Republic of Turkey v. Christie’s, Inc, Michael Steinhardt, and Anatolian Marble Female Idol of Kiliya Type (“Stargazer”) will not be counted among the 17 that the NY district attorney’s antiquities trafficking team already has charged over the years. The last to be charged, in July, was a conservator for his alleged role in Subhash Kapoor’s smuggling ring.

Steinhardt, nevertheless, no longer will be able to purchase or sell archaeological material, a novel condition that prosecutors imposed to resolve the case of “IN THE MATTER OF A GRAND JURY INVESTIGATION INTO A PRIVATE NEW YORK ANTIQUITIES COLLECTOR.”

Accompanying the New York County District Attorney’s Office (DANY) non-prosecution agreement (NPA), filed on December 6, was a hefty “Statement of Facts” in which prosecutors coruscatingly advertised “the evidentiary basis for the conclusion that 180 antiquities possessed by Steinhardt currently valued at approximately $70 million, constitute stolen property under New York law.”

A supplemental press statement issued by DA Vance accused Steinhardt of having “a rapacious appetite for plundered artifacts without concern for the legality of his actions.” Manhattan's chief prosecutor severely criticized Steinhardt’s “decades-long indifference to the rights of peoples to their own sacred treasures” as “appalling,”

But Steinhardt flatly countered “that he did not commit any crimes related to his acquisition, possession, or sale of any antiquities,” a contention given weight by the Stargazer judge's conclusion—just 90 days earlier—that “found Steinhardt to be a credible witness, and [found that] Steinhardt detailed the efforts he took prior to purchasing the [Stargazer] Idol to gather more information about the history and the origins of the Idol.”

This article attempts to answer seven questions about the DANY's notable agreement with Steinhardt.


#1 What is an NPA?

A prosecution office's binding promise that it will not pursue criminal charges against a target or subject of a criminal investigation so long as the target or subject abides by conditions typically is documented in an NPA. Such agreements often are used by prosecuting attorneys to secure a person’s testimony against a more significant criminal target.

The NPA between the DANY and Steinhardt is not a witness cooperation agreement, however. Instead, it offers Steinhardt conditional immunity from prosecution for any potential wrongdoing committed over the course of 34 years of antiquities purchases, sales, and tax handling in exchange for the speedy restitution of 180 antiquities to their countries of origin.

Steinhardt’s agreement is with the DANY only, the agency that prosecutes state crimes like Criminal Possession of Stolen Property. There has been no announcement of lawyers reaching a parallel deal with the US Department of Justice (DoJ), the agency that prosecutes federal crimes like smuggling, making false statements on customs forms, or receiving stolen property in interstate commerce.

But that probably doesn't matter.

Bull's Head Manhattan district attorney
The Bull's Head investigation involved
Colorado art collectors Lynda and William
Beirwaltes, who purchased the marble object
in 1996 and sold it to Steinhardt in 2010, who
then loaned it to the Metropolitan Museum of
Art in 2017 before the DANY repatriated it to
Lebanon. The case spawned the creation of the
Steinhardt and federal authorities have wrangled before, most notably during the 1990s in the Golden Phiale case and in the Securities and Exchange Commission's Treasury notes investigation, which resulted in a $70 million settlement.

Yet it is highly unlikely that federal prosecutors would pursue antiquities-related charges against Steinhardt at this juncture given the resolution reached with NY prosecutors, and especially considering that the US Attorney's Office for the Eastern District of New York handed off its Bull’s Head investigation to the DANY in 2017. (See photo caption for more about the Bull's Head).


#2 What are the NPA's important conditions?

The terms of the NPA enjoin Steinhardt from obtaining antiquities ever again. Failure to follow this extraordinary condition—and several others—could result in prosecution. The DANY, in turn, has promised to free Steinhardt from the threat of any possible prosecution related to his decades-long antiquities collecting career.

Significantly, Steinhardt has agreed to:

  • “not acquire [as of December 3, 2021], either directly or through any assign or agent, any antiquities (defined as artifacts created before 1500 CE) for the remainder of his life;
  • “forever relinquish[] all right, title, claims to, and interest, if any, he may have under federal law or New York State law with regard to any and all [180 specifically listed] Antiquities” and not object to their repatriation;
  • “deliver [a sword, a 7-piece ivory set, and a red carnelian fish amulet] to DANY within 72 hours of locating them …;”
  • “not … make any public statement contradicting the provisions of this Agreement” unless he or his representatives “first consult with DANY to determine (a) whether the text of the proposed statement is true and accurate with respect to matters between DANY and Steinhardt; and (b) whether DANY has any objection to the statement;”
  • waive any delay of the statute of limitations or his rights to a speedy indictment and trial.

The DANY, meanwhile, has pledged to

  • “not prosecute Steinhardt for any crimes arising out of his current or prior acquisition, possession, sale, and tax treatment of antiquities;”
  • “not legally challenge the transfer, sale, gift, or bequest of [Steinhardt’s] remaining antiquities;
  • retain “the right to prosecute Steinhardt for the Antiquities” so long as “DANY determines that Steinhardt has violated any of the obligations of this Agreement.”

[Sidebar: Does the DANY's promise to forego any legal challenge to the sale of Steinhardt’s remaining antiquities infuse potential buyers with greater confidence to purchase those pieces, thereby increasing their monetary value?]


#3 What’s not in the NPA?

The DANY has not obligated Steinhardt to relinquish the Stargazer or any other artifacts that he owns or possesses beyond the 180 specified antiquities. The NPA also does not require him to admit to any of the information contained in the Statement of Fact's 167 pages (a common condition in an NPA); or to file annual reports to the DANY or, alternatively, to submit to periodic audits to confirm compliance with the NPA’s conditions; or to pay artifact repatriation costs; or to cooperate with authorities in antiquities trafficking investigations; or to testify against offenders, despite the Manhattan DA's sweeping allegation of a “sprawling underworld of antiquities traffickers, crime bosses, money launderers, and tomb raiders [that Steinhardt] relied upon to expand his collection.”


#4 Why did the DA make the NPA made public?


That was done, according to the DANY, “because of the strong public interest in the transparency of the criminal-justice process.” Moreover, prosecutors wished to reveal "[] the sheer volume of stolen antiquities currently in New York as a result of having been trafficked in the past by international trafficking networks; [] the scope of international antiquities trafficking networks that are still active; and [] the current efforts of law enforcement agencies around the globe...." The DANY correspondingly wanted "to share the results with our international partners so they may act pursuant to their official duties in their respective jurisdictions."

Also publicized were factors that DANY prosecutors consider when assessing whether an antiquity is stolen. Their publication gives notice to the antiquities trading and collecting communities in New York City—and their lawyers—that the Antiquities Trafficking Unit will scrutinize an individual, business, or institution for failing to apply basic due diligence when acquiring cultural property.

Prosecutors described these particular characteristics of stolen antiquities:
  • archaeological material that has made contact with known antiquities traffickers,
  • post-excavation photos in the hands of looters and traffickers,
  • dirt encrusting artifacts,
  • find-spot information known by non-archaeologists,
  • broken pieces orphaned from a whole piece,
  • archaeological objects sourced from an area experiencing violence,
  • unprovenanced antiquities appearing on the market following news of looting,
  • the abrupt debut of an unknown and unprovenanced hoard in the marketplace, and
  • sketchy provenance.

#5 What exactly is the Statement of Facts?

The Statement of Facts may look like a grand jury report, but it’s not. It is a prosecutor’s report. An order issued by the New York County Supreme Court permitted the DANY to summarize the grand jury's investigation, and the prosecutor's office added information that it learned on its own.

Prosecutors filed the Statement in support of the NPA. And while the NPA announced that the district attorney's “evidence would establish at trial that Steinhardt bought, sold, and otherwise dealt in antiquities, and that he knew, or should have ascertained by reasonable inquiry, that the [180] antiquities … were stolen,” in their Statement, prosecutors remarkably never wrote that Steinhardt actually knew the antiquities were stolen. They made numerous implications among the Statement's many pages, but the attorneys overwhelmingly focused attention on showing that the 180 antiquities possessed a stolen character. They did not demonstrate personal culpability through a clear offer of proof about what the actor said and did.


#6 What is written in the Statement of Facts?


In its pages, prosecutors described numerous antiquities; revealed their chains of custody through prominent dealers, galleries, auction houses, private collectors, and major museums; and named alleged criminal smuggling networks that looted, smuggled, laundered, and transferred antiquities.

Attorneys also explained the genesis of the DANY's interest in Steinhardt:
Over the course of this investigation [into the “Bull’s Head” and “Calf Bearer”], this Office learned that Steinhardt possessed additional looted antiquities at his apartment and at his Midtown-Manhattan office. As a result, this Office initiated a criminal investigation into Steinhardt’s acquisition, possession, and sale of antiquities in multiple locations in New York.

The DANY, importantly, revealed its legal thinking, offering insight about how Assistant District Attorney Matthew Bogdanos and the Antiquities Trafficking Unit that he leads respond to cultural property cases including:

“Once stolen, always stolen.”
Prosecutors highlighted this well-established legal principle in their Statement of Facts, "Once an antiquity is proven to have been stolen ... and regardless of when or where it was stolen, it can be legally seized and returned to the legal owner."

“In the business.”
The DANY likely would try to characterize Steinhardt, and those similarly situated, as "a person in the business of buying, selling or otherwise dealing in property" if it ever put him on trial for Criminal Possession of Stolen Property. Indeed, in the NPA, the district attorney's office wrote that "
the evidence would establish at trial that Steinhardt bought, sold, and otherwise dealt in antiquities, and that he knew, or should have ascertained by reasonable inquiry, that the antiquities ... were stolen."

A person in the antiquities business who possesses stolen property "is presumed to know that such property was stolen if he obtained it without having ascertained by reasonable inquiry that the person from whom he obtained it had a legal right to possess it." NY Penal L § 165.55. This presumption, which is rebuttable, gives prosecuting attorneys in NY—and prosecutors in about a quarter of the states that follow Model Penal Code § 223.6(2)—a powerful tool to root out systematic fencing operations and property trafficking networks.

Unlike the search warrant application that seized the Bull’s Head, where the DANY argued that the Beirwaltes were in the antiquities business (para. 70), the DANY did not plainly assert in its Statement of Facts that Steinhardt was in the business of buying, selling, or otherwise dealing in antiquities. The Statement only implied it, reciting that "since at least 1987 Steinhardt has been acquiring and selling antiquities, totaling more than 1000 antiquities valued at more than $200 million at the time of their purchase and doubling in value since." Prosecutors also peppered language throughout the Statement to reinforce this picture (e.g., "Steinhardt's purchase," "sold to Steinhardt," "purchased by Steinhardt," "Steinhardt's acquisitions," "Steinhardt paid," "sale to Steinhardt," “tried to consign," "Steinhardt's consignment").

The Larnax Manhattan DA
The Larnax
The implication that Steinhardt was “in the business” and presumed to have knowledge was hinted in the DANY’s searing description of the Larnax matter: “Steinhardt was complaining to [HSI] Special Agent John Paul Labbat about a subpoena from this Office [in 2017] that was being served requesting provenance documentation. Scoffing at the subpoena, Steinhardt pointed to the Larnax, saying, ‘you see this piece? There’s no provenance for it. If I see a piece and I like it, then I buy it.’”

Yet the NY district attorney must be acutely aware of the federal district court’s recent observation in Republic of Turkey that Steinhardt could be characterized as “an ordinary purchaser” who had “no standalone duty to investigate [provenance of the ‘Stargazer’], even if such a duty would attach to art dealers, museums, or other commercial actors.”

“Continuing crime.”
In its Statement, the DANY asserted that NY’s criminal statute of limitations would not run out after possessing a stolen artifact for five years; it only ends once the property is dispossessed: “The crime of criminal possession of stolen property … constitutes what the law refers to as a 'continuing crime,' continuing as long as the stolen object is possessed by anyone other than the legal owner.”

The DANY accordingly floated a lifesaver to archaeologically-rich countries in the wake of Steinhardt’s win in Republic of Turkey, a case where the federal district court found “that Turkey slept on its rights, which bars recovery [of the ‘Stargazer’] under the doctrine of laches.” The district attorney’s office proclaimed emphatically that “the equitable defense of laches, i.e., that a long delay in asserting a claim has prejudiced the adverse party—often raised in civil cases—does not apply in a criminal case.”

McClain/Schultz applies.
When pursuing Criminal Possession of Stolen Property cases that involve undocumented archaeological materials, the DANY opined that a seminal federal doctrine from the Fifth and Second Circuits should apply to New York law. Citing U.S. v. McClain, 545 F.2d 988, 1001 (5th Cir. 1977), prosecutors wrote, “It is well-settled that, standing alone, wrongful exportation of an antiquity from its country of origin does not constitute a crime under New York State’s criminal law. But once a country establishes a patrimony law, its ‘declaration of national ownership suffices to render an illegally exported item ‘stolen.’’” And citing United States v. Schultz, 333 F.3d 393, 410 (2d Cir. 2003), prosecutors asserted: “Notably, this basis of theft is independent of any other basis, such as looting. This is because the illegal removal of an antiquity in violation of the applicable patrimony law does not merely violate export-restrictions but a legislative fiat that is ‘intended to assert true ownership of certain property.’”

In other words, if a nation clearly declares ownership of antiquities buried beneath the ground, legal title to those antiquities remains with the country even after they are unearthed by looters and smuggled out of the country. These archaeological objects cannot be legally transferred to a buyer—even a good faith purchaser—because they are owned by the sovereign nation. That is because “once stolen, always stolen.”

Here in the Steinhardt case, the DANY concluded that “all 180 antiquities were taken out of their countries of origin following the effective date of their respective patrimony laws.”


#7 Why didn't the DA seek a grand jury indictment?

The DANY acknowledged that "pillaging of cultural heritage and subsequent trafficking of the stolen antiquities" is "historically under-investigated and under-prosecuted...." So why seize and send the same way that federal lawyers did in the Golden Phiale case?

There are many reasons why prosecutors choose not to pursue criminal charges when they have probable cause. They may not have compelling evidence to convict. They may have too few financial or human resources, particularly in a complex case. The crime might not be a priority. The likely sentence might not justify the investment of time and effort. There may be concerns about a defendant’s age or health. The DA may want to conclude a major case before leaving office. The list goes on.

The DANY’s stated reason is “the interests of justice.” DA Vance explained in his press statement that the better course here is “a resolution that ensures that a substantial portion of the damage to world cultural heritage will be undone, once and for all.” In practice. that means “this agreement guarantees that 180 pieces will be returned expeditiously to their rightful owners in 11 countries rather than be held as evidence for the years necessary to complete the grand-jury indictment, trial, potential conviction, and sentence.”

There is no doubt that the stolen objects would have been returned without the NPA. That commonly happens in theft cases. The key term here is expeditiously.

In the event of litigation, photos possibly could be substituted if the objects were repatriated prior to trial. But that would be a herculean legal task for the prosecution to accomplish in a case like this. In any case, the DANY certainly would want to hand jurors the real evidence because tactile evidence that jury members can see, touch, smell, and hear is best. The evidence would be returned to their owners at the conclusion of the case, which could be years away.

In the present matter, the DANY suggested that it was compelled to return the cultural objects now, arguing that NY Penal Law § 450.10(5) and NY County Law § 935 “mandate the return of seized property to its rightful owner” upon request or demand. So Steinhardt's assent smooths the way toward quick repatriation.

Needless to say, several questions remain. Have any or all countries of origin formally demanded the return of the cultural objects? Would they persist with such a demand after realizing that a grand jury indictment was bargained away? And considering that the artifacts have been absent from their countries of origin for so long, would it make a difference if their return waited another few years so that cases could be pursued in court?

Notwithstanding these questions, the DANY affirmed that it "has a long tradition of promoting respect for the rule of law by bringing justice to victims of crime-no matter who they are or where they are."

DA Vance’s other stated justifications for the NPA were “to shield the identity of the many witnesses here and abroad whose names would be released at any trial, to protect the integrity of parallel investigations in each of the 11 countries with whom we are conducting joint investigations, and to avoid over-burdening resource-scarce nations who would be called upon to provide witnesses in any grand jury or trial.” All three explanations are legitimate prosecutorial objectives.

Still, one may reasonably ask: Why couldn’t the DANY just bring one or two charges forward, assuming it has sufficient evidence? Charges do not have to be brought that encompass all 180 objects from all 11 countries. Consider too that the DANY already has disclosed over five dozen named witnesses; that countries like Italy, Israel, and others among the 11 are not resource-scarce; that funds surely could be acquired to fly and lodge a handful of overseas witnesses in one or two cases; and that parallel investigations might actually benefit from revelations made from even one case placed on a trial track

[Sidebar: Is the DANY really conducting a joint investigation with Syria, one of the 11 countries, given that U.S. diplomatic relations with Syria were suspended in 2012?]


P.S. One important last question.

Will the Antiquities Trafficking Unit remain intact when newly elected Manhattan District Attorney Alvin Bragg takes office?


[UPDATE 12/23/2021: "In the event of litigation, photos possibly could be substituted" has replaced the original phrase "probably could be substituted." "Possibly" is the better word choice. That is because substituting photos in lieu of physical evidence in a case of first impression like this one, which involves unique objects that the DANY would argue are owned by foreign nations, poses significant hurdles to the prosecution.]

[UPDATE  1/3/2022: Some have wondered whether the NPA actually might be a deferred prosecution agreement. A deferred agreement contains a defined termination date in the future when a person's postponed case no longer may be prosecuted. By contrast, this agreement does not describe a postponed prosecution, and its timespan is indefinite because it does not calendar a known date. At best, it holds itself out as a lifetime agreement; but that still means the agreement lacks a date certain. (Sidebar: Indefinite agreements typically are difficult to enforce). This agreement is best labelled a non-prosecution agreement with conditions, where the prosecution has suspended its pursuit of indictments rather than deferred its prosecution to a later date.]
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H/T Chasing Aprhodite for posting the NPA online here and the Statement of Facts here.

Photo credits: Manhattan District Attorney


Text and original photos copyrighted 2010-2021 by Cultural Heritage Lawyer Rick St. Hilaire, a blog commenting on matters of cultural property law, art law, art crime, cultural heritage policy, antiquities trafficking, looted, antiquities, stolen relics, smuggled antiquities, illicit antiquities, museum risk management, and archaeology. Any unauthorized reproduction or retransmission without the express written consent of CHL is strictly prohibited. The materials presented on this site are for informational purposes only and do not constitute legal advice. Retain a lawyer to receive legal help. The provision of this information to the reader, moreover, in no way constitutes an attorney-client relationship. Blog url: culturalheritagelawyer.blogspot.com.

Monday, November 8, 2021

Money Laundering and Antiquities Dealers

Antiquities sellers soon will be covered by the Bank Secrecy Act.

FinCen recently completed an advance public comment period over anticipated enforcement rules, sparking debate among heritage advocates, cultural property groups, archaeologists, dealers, auction houses, and museum directors.


The Anti-Money Laundering Act of 2020 (AML Act) is a hot topic in the cultural property world as the US Treasury Department’s Financial Crimes Enforcement Network (FinCen) prepares rules to enforce the new statute.

Heritage groups, cultural property advocates, archaeologists, museums, antiquities dealers, and auction houses clashed on issues ranging from the nature of the antiquities trade, whether the trade actually is involved with money laundering and terrorist financing (ML/TF), the need for confidentiality, who or what should be subject to new reporting requirements, and much more as they submitted written public comments.

The AML Act took effect when
Section 6110 of the massive National Defense Authorization Act became law in January. This section requires Suspicious Activity Reports (SARs) from those “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.”

“This action is an important step in strengthening U.S. national security by protecting the U.S. financial system from money launderers and terrorist financiers that seek to exploit the antiquities trade,” FinCen announced in a September 
news release.

The law brings antiquities dealers under the umbrella of the Bank Secrecy Act’s (BSA) anti-money laundering/countering financing of terrorism (AML/CFT) regime so that sellers of antiquities share the same legal duties already undertaken by jewelry and precious metals dealers. pawnbrokers, real estate closing professionals, casinos, vehicles salespersons, travel agents, and other high-value business participants. The BSA enlists these sectors and other financial institutions to root out marketplace abuse by 
undertaking customer due diligence and spotting questionable financial transactions. Suspicious reports are forwarded to law enforcement.

Because federal regulations must be adopted to implement the AML Act, FinCen issued an 
advance notice of proposed rulemaking in September and completed its public comment period on October 25, which garnered approximately three dozen thought-provoking submissions from opposing stakeholders.


Overview

One set of commenters identified ML/TF and illicit trade among the illegal activities that lurk beneath the antiquities market, which is why, they argued, the AML Act is needed. But several antiquities market participants claimed that ML/TF risks are non-existent, or at least not as bad as made out to be. They questioned the evidence that justified a burdensome new law, as they described it. Proponents of the AML Act further contended that secrecy—a staple of the antiquities market—inevitably attracts criminals, while antiquities sellers maintained that confidentiality constitutes an essential feature of the trade. Differences surfaced over additional cultural property questions, including:

  • Should FinCen’s regulations be broad or narrow?
  • Should the rules make a distinction about the kinds of objects that should be covered? Such as by age or by date? Or by dollar value of the transaction? Should ethnological objects be counted as antiquities? What about coins?
  • Should the rules apply to commercial transactions only, or should they embrace non-commercial transfers as well?
  • What about including museums and archaeologists in the BSA’s enforcement regime?
  • What about online sales platforms?


Risks in the Antiquities Trade

Cultural heritage protection advocates, archaeologists, and AML consultants generally described the antiquities trade as ripe ground for criminal infiltration. “Because of the lack of oversight, the antiquities sector provides a target rich environment for illicit actors,” wrote The Antiquities Coalition and its associated Financial Crimes Task Force (ACFCTF), emphasizing that the “risks of money laundering and terror finance, avoidance of sanctions, and other illicit financial crimes are very high with antiquities ….” The Antiquities Coalition also expressed concern over “built-in anonymity and masking of beneficial ownership, ineffective protection of artifacts at archeological sites in high-risk countries, counterfeits and forgeries, fraudulent provenance and use of social media in suspect transactions.” Global Financial Integrity estimated revenues from the cultural property market to be worth approximately $1.2 billion to $1.6 billion annually, the Antiquities Coalition reported, and “this market operates with a business model inherent with risk, including the ability to acquire and sell products with little to no proof of ownership, the use of anonymity in sales and auctions, and, of course, the ability to transact businesses in cash.”

The U.S. Committee of the Blue Shield (USCBS)—joined by the Archaeological Institute of America, the American Anthropological Association, and the American Society of Overseas Research—raised the “question of possible financing of terrorism,” warning that “[f]reshly looted archaeological artifacts … are particularly suited as a means of transferring funds internationally.” The USCBS explained that “[a]ntiquities are easily moved through different jurisdictions or maintained in freeport zones and other locations that make it difficult to trace the origins of a particular object.” “This problem,” the group highlighted, “is further exacerbated by the proliferation … of false or forged provenance documentation.” The USCBS pressed that dealers and auction houses also “engage in a variety of ‘creative’ financing schemes,” which the group conceded “may not be illegal,” but which illustrated how “art merchants are increasingly acting more like financial institutions in lending money, securitizing loans, and monetizing works of art.” The USCBS, furthermore, brought attention to UN Security Council Resolution 2347 that “noted the connections between looting, theft, and smuggling of antiquities and other art works and the funding of terrorism.”

Two United Kingdom-based AML compliance firms warned about latent potential illegalities that are concealed within the antiquities market. ArtAML advised that “there is a general lack of awareness of possible suspicious activity,” and that “with the exception of large auction houses that have voluntarily introduced compliance measures, the vast majority of industry players will not introduce such compliance measures until legally required to do so.” Corinth Consulting, moreover, named specific risks in the antiquities marketplace “such as theft, authenticity, provenance and illegal export from countries with national patrimony laws.” The firm assessed that the “illegal excavation and export risks seem more likely to occur in countries suffering from war, dictatorship or extreme poverty” and that “these factors may in turn increase the risk of terrorist financing.” For that reason, attention should be placed on the seller “and the need to ‘follow the object’” as opposed to “the typical ‘follow the money’ focus on buyers.”


Questioning Money Laundering and Terrorist Financing

Several advocacy and trade groups representing sellers and collectors predominantly rejected the risk-laden picture of the antiquities trade, and they criticized the AML Act and its forthcoming rules. The
Committee for Cultural Policy (CCP) called the regulations “inappropriate due to the lack of hard evidence for money-laundering activities by antiquities businesses in the United States.” The American Council for the Preservation of Cultural Property (ACPCP) objected that the AML Act became law “without there ever having been a single documented criminal case in the United States or Europe of antiquities being used as an asset with which to launder ill-gotten funds.” The Authentic Tribal Art Dealers Association (ATADA) derided “the false claims of involvement of the U.S. antiquities trade in general in money laundering or activities supporting terrorism.” Likewise, ConfédérationInternationale des Négociants en Œuvres d’Art (CINOA) expressed the view that “the scope of ‘illicit activity’ involving antiquities has been highly exaggerated by advocates of implementing such controls.” 

GlobalHeritage Alliance (GHA) protested that “FinCEN should focus on promulgating regulations solely designed to counter serious money laundering issues, and not be influenced by those with an axe to grind against the antiquities trade to issue overly complicated and draconian rules that can be exploited to repatriate artifacts in questionable cases.” The GHA specifically reproached the Manhattan District Attorney’s office for allegedly “misus[ing] investigative subpoenas for fishing expeditions directed against prominent New York City collectors.” The cultural property trade advocacy group portended that “there is a real danger information originally gathered to fight terrorism will instead be used to harass collectors and dealers in the hopes of forcing repatriations of objects to authoritarian countries ….”

Major auction houses, meanwhile, advised FinCen that the majority of their sales are not even cash-based, with
Christie’s explaining that “[c]ash transactions … in New York are rare” and that “the vast majority of auction house transactions are settled by bank wire transfer or credit/debit card.” Bonhams and Butterfields Auctioneers additionally called attention to the fact that “the revenue of entities in the art market is tiny when compared to that of the financial institutions.” Although Christie’s affirmed “that there can be money laundering and terrorist financing risk in the trade of antiquities,” it offered that “the vast majority of sales in antiquities are made for legitimate purposes.” In this vein, the ACPCP implored that transactions using “credit card, check, or bank transfer through an AML compliant financial institution must be exempt from further data collection and reporting.”


Secrecy in the antiquities market
Secrecy

The USCBS and its allies spotlighted opacity as a “key characteristic of the art market,” underscoring that there is “no requirement within the United States for an art merchant to maintain records of transactions or of the buyers, sellers, or consignors.” “[T]hat very secrecy,” USCBS argued, “is the reason why Know-Your-Customer (KYC) and Suspicious Activity Report (SAR) requirements are so necessary.” Notably, the group professed that “the antiquities market in the United States has indulged in even greater efforts to maintain secrecy of sales and those involved in transactions” as a result of “U.S. law enforcement efforts to interdict the illegal aspects of the antiquities market …, particularly … due to the activities of the New York District Attorney’s Office.” ArtAML observed, “While this [secrecy] can be for good reason such as collectors not wanting it to be known that they hold expensive items in a personal collection (potentially attracting robbery), this culture can open opportunities to criminals who wish to not be detected.”

The art market has been characterised by some as ‘opaque’ creating ML/TF risk,” Bonhams otherwise contended. “This is to overlook the reality that a seller’s identity will always be known to the parties needing to know it.” The auctioneer, therefore suggested, “Provided the intermediary – the auction house – knows the identity of both parties and can perform due diligence on those parties, it would not seem to us to be necessary to make further disclosure.”

Christie’s concurred, insisting, “Where an intermediary, such as an auction house, is involved, there is no business reason for buyers and sellers to have the right to know each other’s identity.” Christie’s pointed out, “Both buyers and sellers expect confidentiality and rely on an auction house’s discretion.” That is because there are “justifiable reasons of personal safety and security of the property. In addition, sales of objects may be necessitated by circumstances, some very sensitive, such as financial difficulties, family disputes, or divorce.” Christie’s added that their auction house and others “conduct reasonable due diligence on the property for sale and the parties to the transaction” and that “[p]rovenance appears in public sales catalogues, which are published on auction house websites and include information about an item’s country of origin and the date on which it left that country.” The ACFCTF, nevertheless, expressed a concern about fraudulent provenance circulating in the antiquities trade.

"[I]f it is to be made a legal requirement to identify principals in any transaction involving antiquities in the US,” Bonhams suggested “that it should only be necessary for one person in the transaction to carry out due diligence to establish agents/principals to ensure there are no ML/TF risks” in order to avoid an “unduly burdensome” situation “with no reliance allowed between entirely reputable entities.” Bonhams further advised that “[i]t would be much less burdensome if governments could set up and manage a mandatory register of beneficial ownership of all entities that carry on business in their jurisdiction.” And Christie’s, in a footnote, pushed for the opening of the Becchina and Medici archives to “strengthen the ability of legitimate market players to complete their diligence process.”


Who and What Should be Covered

FinCen regulations should be sweeping, according to stakeholders like the
Clooney Foundation for Justice. They “must be broad and stringent” in order to “provide law enforcement with information on illicit financial flows to further dismantle criminal networks currently exploiting the antiquities market.” That means the regulations must have “no monetary thresholds, stringent due diligence requirements, disclosure of beneficial ownership information, and comprehensive SARs filings,” asserted the human rights organization led by George and Amal Clooney.

In fact, attested the Antiquities Coalition, “[u]nless and until the U.S. public and private sectors close the loopholes … they will leave wide open the world’s biggest economy to money launderers, artifact traffickers, drug smugglers, kleptocrats, oligarchs, terrorists, and the many other criminals proven to have exploited the art and antiquities market’s weaknesses.”

But Bonhams retorted that “[i]f a balance is not achieved, any regulation will militate against the art market as a whole … rather than focussing on identifying any potentially suspicious transactions.”

Both Sotheby’s and the Antiquities Coalition agreed with the idea of globally harmonized rules, but for different reasons. Sotheby’s called for AML/CFT regulations to be “proportionate” and “risk based” so as “to preserve the US share of the art market,” which it called “considerable.” For the American antiquities market to remain competitive, Sotheby’s said that “it will be important that AML measures mandated in the US are similar to those imposed in jurisdictions outside the US.” The Antiquities Coalition concurred that, “[a]t a minimum, FinCEN should mirror the regulations in other major market countries.” However, the Antiquities Coalition stated that the rationale should be “to ensure that incommensurate regulations don’t present loopholes for bad actors to take advantage of the U.S. financial system.”

ArtAML recommended rules “a) simple enough for the market to understand; b) clear enough for enforcement officials to understand; and c) flexible enough to allow for changes needed as implementation challenges arise.”

Monetary thresholds

Given that market participants generally seek the narrowest application of FinCen rules, and given that overseas AML/CFT rules already establish monetary thresholds, several commenters argued for the adoption of a minimum dollar value that would serve as a predicate before the BSA’s requirements would kick in.

Primarily smaller sellers urged the highest thresholds—in the millions.
Marcy Schillay, a dealer in Native American art and artifacts, pleaded, “It would be a tremendous burden for me to have to report according to requirements by AML laws … that I would probably be forced to retire. I urge you to omit ‘antiquities dealers’ from the Bank Secrecy act for sales below $5 million.” Don Siegel, another dealer, agreed, as did the Director of Native American Art at Hindman/Cowan's Auctions. In a similar vein, Tegan Johnson urged a” $2 million annual [minimum] to protect the majority of smaller businesses from unnecessary investigation.” Additionally, the ACPCP urged that the “threshold for individual sales to new clients should not be less than $1,000,000, and “[t]he threshold for annual sales for a gallery specializing in ancient art must be over $3,000,000.”

CINOA, nonetheless, advocated “for concentration on only ‘high-value’ transactions and higher-risk ‘conflict zone’ associated antiquities,” suggesting a $500,000 threshold so that “micro-businesses will not be overburdened … and any risk associated with high value antiquities transactions would be addressed (especially in conjunction with existing reporting required by a third-party facilitator, such as banks or insurers).”

Seeking either a 10,000 USD or Euro threshold were auction houses and the USCBS et al. 
Both Christie’s and Sotheby’s agreed to a minimum transaction amount and suggested €10,000, roughly equal to the minimums used by the AML/CFT regulations of the United Kingdom and the European Union. “We are in favour of an industry wide threshold applicable on a transaction basis,” Sotheby’s wrote, because it “ensures a level playing field among market participants,” with Christie’s reminding that “[m]arket participants will need guidance from FinCEN on how to calculate the transaction threshold (e.g., whether it includes sales tax and commissions).” HindmanAuctions urged a $10,000 individual transaction threshold too, but “with an annual transaction threshold for sellers of $100,000.” And despite the fact that the USCBS and its allies “oppose the incorporation of any monetary threshold for the definition of what is an antiquity,” there was agreement that “the [FinCen] regulations should apply to transactions that are valued at more than $10,000 per transaction ….”

Antiquities, art, and archaeology

Even if a baseline transaction amount were to be selected by FinCen, which antiquities would be covered? Once again, the Antiquities Coalition advanced a broad, anti-crime approach. “We strongly believe that separately defining and regulating ‘art’ and ‘antiquities’ creates more problems than it solves,” pressed the organization. “As such, we have suggested that FinCEN consider regulating both art and antiquities as ‘cultural property,’” which would be categorized as “covered goods” under the BSA.

The USCBS also wished to cast a wide net over antiquities, but it applied an archaeological perspective to narrow the definition to “all objects that are at least one hundred years in age, that are the product of human activity, and that are of cultural, historical, art historical, archaeological, scientific, or religious significance.”

Market stakeholders echoed this archaeological approach
. The Art Dealers Association of America (ADAA) defined “antiquities” as “an object of archaeological interest,” and Hindman Auctions labeled an antiquity as “an archaeological object of ancient origin that was discovered through excavation or exploration underwater.” They are different from other works of art, the auction house said, because the “antiquity was preserved through burial on land or in the ocean.” Sotheby’s called antiquities “a category of art.”

The online seller,
1stdibs.com, stressed that antiquities should not include “more recent ‘vintage’ items or colloquial ‘antiques’ from the last century, or that are only a few hundred years old,” “natural items such as fossils or aged natural items,” or “older furniture, rugs, tapestries and furnishings for domestic or commercial furnishing [that] normally would not be considered ‘antiquities.’”

Cut-off dates

Several stakeholders suggested a cutoff date, hovering either around the beginning of the Middle Ages or approximately a millennium later.
The Holocaust Art Restitution Project (HARP) proposed, “Antiquities should be defined broadly as works of art and cultural objects made in antiquity. These works of art and objects should encompass objects of cultural significance created before the year 500 C.E., including objects that were discovered through archaeological means ….” HARP added, “Objects created before 500 C.E. that are considered to be works of art since their creation, i.e., objects that were not discovered as a result of any form of terrestrial or aquatic excavation, should also be considered antiquities for the purposes of FinCEN’s regulations.” The organization also boldly suggested that sellers "should be required to provide provenance for the object dating back to the year 1907 at minimum.”

The
CCP counseled that “an ‘antiquity’ should be defined as an artwork or artifact made for public or private use dating to before 500 A.D., the end of the Roman Empire ….” The GHA endorsed this concept but further recommended, “If FinCEN thinks a more recent date is more appropriate, 1500 AD makes sense because it roughly corresponds to the Renaissance, the Fall of Constantinople, the Discovery of the Americas, the end of Pre-Columbian civilizations, and the highpoint of Empires in China and India.”

Bonhams currently employs a more recent date for an antiquity in its business, explaining that its “traditional definition of antiquities is objects from 4000 BC to the 12th Century AD and geographically originating from Egypt, the Near East and Europe.” It confirmed that “other major auction houses are consistent in this approach,” and pointed out that “others use the term more broadly to include ancient Chinese, Tibetan, African, South-East Asian and South American….”

Ethnological objects

Mark Johnson, a Los Angeles dealer of ethnographic art, expressed concern that an even more recent cut-off date would encompass “[t]he vast majority of ethnographic art, which normally consists of non-excavated items like textiles, beadwork, basketry, costumes, and wood carving are less that 100 years old.” That is perhaps why several market participants backed specific exclusions for ethnological items.
We believe the U.S. domestic tribal and international ethnographic art trade should be specifically excluded from the definition of ‘antiquities’ and exempted from regulatory reporting requirements,” wrote the ATADA. Similarly, the owner of the MatoskaTrading Company anxiously was “concerned that I could become subject to onerous regulation should historic American Indian art become classified as an ‘antiquity.’”

Coins

Numismatic advocacy groups, at the same time, urged exemptions for coins and for coin dealers because, as the International Association of Professional Numismatists (IAPN) averred, the “antiquities and numismatic trade are distinct.” And both the IAPN and the Ancient Coin Collectors Guild (ACCG) advanced their contention that the numismatic trade has a low AML/CFT risk.

“All coin dealers,” the ACCG further claimed, “are micro or small businesses.” Therefore, “[i]mposing expensive and time-consuming regulations … may drive many out of business …. Without proof of a serious money laundering problem in the industry, coin dealers should not be subject to regulations designed for antiquities dealers.”

The IAPN, ACCG, and others drew attention to the fact that the United Kingdom carved out a coin dealer exception from its own money laundering regulations.

“The term [“antiquities”] should explicitly exclude coins and ethnological objects,” entreated the GHA, and the CCP likewise petitioned that an “’antiquity’ … should exclude coins manufactured for use in trade.” The GHA’s stated rationale was that coins “are traded separately from antiquities, are serviced by different trade associations, are the subject of separate academic treatment, and typically are of limited monetary value.”

The
National Federation of Independent Business (NFIB) took a step further by petitioning for a small business carve-out from the BSA’s AML/CFT reporting requirements. “America’s small businesses, and their owners and employees, should not have to yield their freedom,” NFIB scripted, “because the [Treasury] Department thinks doing so might someday and somehow contribute something of interest to the Department’s efforts against crime and terrorism.”

More carve-ins and carve-outs

The list of sought-after inclusions and exclusions abounded further as various stakeholders lobbied to add or subtract commercial and non-commercial transactions and other categories from the BSA’s mandate. Some highlights are presented:

  • USCBS et al.: “We believe that ‘trade in antiquity’ should include nonprofit as well as for-profit transactions.
  • “AAMD, on behalf of its members, urges FinCEN to exclude non-profit museums from any definition of participants engaged in the “trade in antiquities.”
  • “The ‘trade of antiquities’ should relate to commercial activity as opposed to charitable donations to museums and other institutions. GHA does not believe non-commercial, not-for-profit activity should be targeted. However, to the extent it is covered, it should include activities of US archaeologists excavating in countries with high risks of corruption, money laundering and terrorist activities.”
  • The ADAA “respectfully requests that FinCEN recognize the clear intent of Congress to narrowly cabin the scope of the BSA amendments to only capture dealers in antiquities and not dealers in art.”
  • ACPCP: “Members in good standing of the top dealer’s organizations should be exempt (CINOA, IADAA, AADLA) as they are already required to observe strict business practices that preclude suspicious transactions.”
  • Therefore, CCP recommends that if regulations are imposed on antiquities dealers that [] the definition of an “antiquities dealer” should be limited to businesses that actually purchase and sell art and artifacts….”
  • 1stdibs.com, Inc.: “Thus, any definition of ‘trade in antiquities’ should be careful to exclude online marketplaces that are neither the buyer nor seller of goods. This is particularly important for marketplaces that support a broad range of items and are not specialized in or limited to antiquities.”
  • Christie’s: “SARs should be encouraged but not mandatory, similar to the requirements for precious metals dealers.”


Next Steps

Regular readers of CHL will recall that this blog has been calling for a law like the AML Act in posts since 2014. Now that the statute has been enacted, final rules must be adopted. The AML Act requires the US Treasury Secretary to issue proposed rules by the end of December, and it is expected that FinCen will publish a notice of proposed rulemaking in the coming weeks. That will prompt another comment period before Treasury issues a final rule.

Meanwhile, similar BSA AML/CFT requirements for art dealers, advisors, consultants, and others engaged in the art trade will have to wait. That’s because Congress asked "Treasury and its law enforcement partners [to] further study the risks posed by the facilitation of money laundering through the trade in art."

Stay tuned.



Text and original photos copyrighted 2010-2021 by Cultural Heritage Lawyer Rick St. Hilaire, a blog commenting on matters of cultural property law, art law, art crime, cultural heritage policy, antiquities trafficking, looted, antiquities, stolen relics, smuggled antiquities, illicit antiquities, museum risk management, and archaeology. Any unauthorized reproduction or retransmission without the express written consent of CHL is strictly prohibited. The materials presented on this site are for informational purposes only and do not constitute legal advice. Retain a lawyer to receive legal help. The provision of this information to the reader, moreover, in no way constitutes an attorney-client relationship. Blog url: culturalheritagelawyer.blogspot.com.

Saturday, January 23, 2021

One Small Step Act

Cultural property on the Moon at Apollo and other sites of space exploration are to be protected by the "One Small Step Act."


Historical artifacts on the moon have rocketed into focus with the passage of the One Small Step to Protect Human Heritage in Space Act.

Introduced in Congress by Sen. Gary Peters (D-MI) in May 2019 and enacted into law last month by President Donald Trump, the newly adopted statute aims to preserve cultural property located on the lunar surface. The law requires NASA to include heritage preservation measures in vendor, grantee, and partnership agreements that relate to lunar activities.

The One Small Step Act points to specific safeguards published in NASA’s Recommendations to Space-Faring Entities: How to Protect and Preserve the Historic and Scientific Value of U.S. Government Lunar Artifacts. These recommendations aim to protect objects located at the Apollo, Surveyor, Ranger, and other landing sites and to preserve astronaut bootprints and lunar rover tracks.

Text and original photos copyrighted 2010-2021 by Cultural Heritage Lawyer Rick St. Hilaire, a blog commenting on matters of cultural property law, art law, art crime, cultural heritage policy, antiquities trafficking, looted, antiquities, stolen relics, smuggled antiquities, illicit antiquities, museum risk management, and archaeology. Any unauthorized reproduction or retransmission without the express written consent of CHL is strictly prohibited. The materials presented on this site are for informational purposes only and do not constitute legal advice. Retain a lawyer to receive legal help. The provision of this information to the reader, moreover, in no way constitutes an attorney-client relationship. Blog url: culturalheritagelawyer.blogspot.com.

Wednesday, January 20, 2021

Thailand lintels part of the cultural property forfeiture case in California.
Lintels 1 and 2 from the Asian Art Museum.
Photo: US Attorney Northern District of California.

Lintels allegedly taken unlawfully from Thailand and given to the Asian Art Museum in California are the subject of a federal forfeiture complaint that seeks repatriation of the cultural property.


The United States Attorney for the Northern District of California and lawyers for the City and County of San Francisco said yesterday that "a stipulation of settlement is likely forthcoming," which would end a dispute over the repatriation of two lintels from Thailand located in a San Francisco art museum.

The case of United States of America v. Two One-Thousand-Five-Hundred-Pound, Hand-Carved Lintels Removed from Religious Temples in Thailand (N.D.Cal. 2020-cv-07537) started when the Consul General of Thailand spotted the architectural elements on display at the Asian Art Museum in 2016. He demanded their return, but the museum reportedly said nothing until the U.S. government intervened, a
ccording to a civil forfeiture complaint filed by federal lawyers in October 2020, which seeks title to the cultural artifacts.

The court complaint describes a meeting that took place in May 2017 between the Thai Minister of Culture, the American Chargé d’affaires in Bangkok, and a Homeland Security Investigations (HSI) agent that discussed how the defendant property "belonged to two ancient temples in Northeastern Thailand and were designated as cultural artifacts protected under the laws of Thailand since 1935."

Archaeologists concluded that one lintel was from the Prasat Nong Hong Temple in Buriram Province, and the other was from the Prasat Khao Lon Temple in Sa Kaeo Province.

The forfeiture complaint recites that the City of San Francisco received the lintels as part of a donation from a collector (unnamed in court papers) who acquired the lintels in London and Paris in 1966 and 1968, respectively. 

"With respect to LINTEL 1," the U.S Attorney's Office writes, "the Museum had several letters that COLLECTOR 1 exchanged with representatives of GALLERY 1, telling the court that "one of the representatives of GALLERY1 and COLLECTOR 1 exchanged letters concerning the potential that at least one lintel that COLLECTOR 1 had purchased had been stolen from Thailand, and that another artifact had been taken out of Thailand illegally."

"With respect to LINTEL 2," prosecutors contend that "COLLECTOR 1 indicated that a Thai lintel in his possession had been reported stolen by the Thai government, and that the Thai government had asked COLLECTOR 1 to return the lintel."

Federal cultural property forfeiture cases like this one, where no bilateral agreement under the Cultural Property Implementation Act exists between the U.S. and Thailand, routinely rely on 19 U.S.C. § 1595a(c)(1)(A). That statute maintains that "merchandise shall be seized and forfeited if it is stolen, smuggled, or clandestinely imported or introduced."

Here, federal prosecutors assert that the Thai lintels constitute property owned by Thailand that was removed without permission, suggesting that the lintels are stolen property subject to legal forfeiture by the U.S. But they more expressly claim that "LINTELS 1 and 2 were imported into the United States in violation of Thai law, i.e. without the requisite export documents."

The U.S. does not enforce foreign export laws. But the McClain/Schultz doctrine--which goes unmentioned in the government's forfeiture complaint--allows U.S. courts to recognize a foreign export regulation when the foreign nation's cultural patrimony law clearly vests ownership in cultural property. 
Whether Thailand's patrimony law sufficiently grants such title is not made particularly clear in the court complaint. United States .v Schultz, 333 F.3d 393 (2nd Cir. 2003)United States v. McClain, 545 F.2d 988 (5th Cir.1977)

Prosecutors mention that both Thailand's 1934 Act on Ancient Monuments, Objects of Art, Antiquities and National Museums and its 1961 Act on Ancient Monuments, Antiques, Objects of Art, and National Museums "deem cultural artifacts, like LINTELS 1 and 2, state property." But the attorneys do not express that the lintels either constitute or are derived from proceeds traceable to a violation of the National Stolen Property Act under either 18 U.S.C. §§ 2314 or 2315. Instead, they emphasize that these patrimony laws "govern whether and/or when a piece of art is permitted to be exported from Thailand;" that they "forbade the unlicensed export of archaeological artifacts from specifically named archeological sites, including the Prasat Nong Hong and Prasat Khao Lon Temples;" and that "[n]o person or entity ever sought an application for an export license or other form of permission to take these lintels out of the Kingdom of Thailand prior to their removal from the country."

Such legal issues ultimately will prove academic. That is because the U.S. Attorney's Office tells the court that "significant discussions concerning settlement have taken place."

HSI Special Agent David Keller will discuss "US Law Enforcement’s Tool Box: Case Studies in Art and Antiquities Trafficking from Thailand" during a Cranfield University lecture taking place online on January 21, 2021. Register here.

UPDATE: FEBRUARY 11, 2021

Yesterday Magistrate Judge Donna Ryu dismissed the government's civil forfeiture claim after the United States and the City and County of San Francisco agreed to settle their dispute. The parties filed a stipulation on February 4 that calls for the return of the lintels to Thailand after the Asian Art Museum completes a formal deaccessions process and the Thai government files for administrative petition-and-remission with the U.S. Department of Justice. Once the museum surrenders the cultural objects to federal officials, the U.S. government will bear related expenses for the artifacts.

The forfeiture stipulation filed submitted to the court is typical in that its entry does "not constitute any admission of wrongdoing or liability" and "shall not be construed as a punishment or penalty."

The U.S. Attorney David Anderson reacted positively to the settlement, announcing“The United States is committed to returning stolen relics to nations seeking to preserve their heritage. We will use all our power, including civil forfeiture, to ensure that misappropriated cultural items are returned to their rightful owners.” His office's press release continued to emphasize that the lintels' export "renders them forfeitable under federal law," a legal interpretation that may not be as firm as suggested. But this legal claim is now moot because the case has been resolved successfully in the government's favor.

Text and original photos copyrighted 2010-2021 by Cultural Heritage Lawyer Rick St. Hilaire, a blog commenting on matters of cultural property law, art law, art crime, cultural heritage policy, antiquities trafficking, looted, antiquities, stolen relics, smuggled antiquities, illicit antiquities, museum risk management, and archaeology. Any unauthorized reproduction or retransmission without the express written consent of CHL is strictly prohibited. The materials presented on this site are for informational purposes only and do not constitute legal advice. Retain a lawyer to receive legal help. The provision of this information to the reader, moreover, in no way constitutes an attorney-client relationship. Blog url: culturalheritagelawyer.blogspot.com.

Saturday, December 5, 2020

The National Defense Authorization Act's anti-money laundering sections would shine a light on antiquities trafficking by revealing the true owners of shady antiquities import companies and by enlisting the help of antiquities dealers to report suspicious money transactions under the BSA.

NDAA requires antiquities dealers to file suspicious activities reports under the Bank Secrecy Act
Antiquities traffickers will find it difficult to hide smuggled archaeological imports behind anonymous shell companies and shifty payments if a popular bill winding its way through the halls of Congress is enacted into law this year. That would be welcome news to lawyers and law enforcement officials hoping to spread sunshine on an opaque cultural heritage market that is vulnerable to abuse by smugglers, fences, and money launderers.

Within the 4500+ pages of the William M. (Mac) Thornberry National Defense Authorization Act (NDAA) (H.R. 6395), a compromise bill to approve $740.5 billion in military and defense spending, are national security provisions that include money laundering counter-measures. One section requires company beneficial ownership information to be documented. Another enlists antiquities dealers to report murky financial transactions in line with
the Bank Secrecy Act's (BSA) filing requirements.

Law enforcement officers investigating trade fraud, receiving stolen property, and illicit financial flows connected with antiquities trafficking currently are hampered by statutes that permit corporations like import companies to be created in some states without recording their true owners. Meanwhile, unlike sellers of precious metals, stones, and jewels, antiquities dealers are not required to report suspicious financial transactions to authorities. Adoption of the NDAA would change this legal landscape considerably.

The NDAA enjoys bi-partisan support and already has passed both chambers of Congress by large majorities. The White House in recent days, nevertheless, has threatened to veto the bill unless certain legal protections for Big Tech giants are repealed. B
ecause the Senate recently adopted changes to the House version of the legislation, followed by conference committee action that resulted in the filing of a conference report on Thursday, the NDAA will be sent back to the House for its approval. That chamber may take up the bill as early as next week. Retiring Rep. Mac Thornberry [R-TX], for whom the bill is named, remarked"This year’s bill passed the House by a vote of 295 to 125 and passed the Senate 86 to 14. The conference agreement is an even stronger bill for U.S. national security and should be supported."

[UPDATES December 8, 2020 - The White House signaled opposition to the legislation, saying that it wants an "improved NDAA," explaining that it "fails to include critical national security measures, includes provisions that fail to respect our...our military’s history, and contradicts efforts...to put America first in our national security...." The House, meanwhile, adopted the conference agreement 335-78. December 11, 2020 - The Senate approved the conference report by a vote of 84-13. December 23, 2020 - The White House vetoed the legislation. December 28, 2020 - The House voted 322-87 to override the President's veto. January 1, 2021 - The Senate voted 81-13 to override the President's veto. Therefore, the NDAA has been enacted into law.]

The sens
e of Congress, articulated in the conference report, is that "more than 2,000,000 corporations and limited liability companies are being formed … each year" while "malign actors seek to conceal their ownership … to facilitate illicit activity." 
"[M]oney launderers and others involved in commercial activity," note lawmakers, "intentionally conduct transactions through corporate structures in order to evade detection, and may layer such structures, much like Russian nesting 'Matryoshka' dolls, across various secretive jurisdictions…." The conference report expresses Congress’ aim to “close[] significant AML-CFT gaps, including by adding the trade in antiquities to coverage under the BSA.”

Channeling the language of previously filed legislation known as the Corporate Transparency Act, Section 885 of the NDAA conference agreement authorizes the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) to securely collect company beneficial ownership information, specifically the names, dates of birth, and addresses of the actual owners of corporations, limited liability companies, and similar entities formed under state law. Stripping anonymity away from the true owners of companies and unveiling their identities to law enforcement will, according to the conference report, "protect vital United States national security interests."

Section 6110 of the NDAA (the Anti-Money Laundering Act), meanwhile, expands the BSA’s reporting requirements to those "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," requiring these parties to forward a Suspicious Activity Report (SAR) to FinCEN when a financial transaction appears criminal. 
CHL has urged this legal reform in blog posts since 2014.

But similar BSA reporting requirements for art dealers, advisors, consultants, and others engaged in the art trade will have to wait. That’s because the NDAA conference agreement simply calls on "Treasury and its law enforcement partners [to] further study the risks posed by the facilitation of money laundering through the trade in art" in order to determine, among other issues, "the extent to which the facilitation of money laundering and terror finance through the trade in works of art may enter or affect the financial system of the United States."

Art dealers came into particular focus earlier this year when the Senate Committee on Homeland Security and Government Affairs released "
The Art Industry and U.S. Policies that Undermine Sanctions," a July 2020 investigative report urging lawmakers to add the high-end art market to the list of business sectors that must comply with the BSA, calling the art trade "the largest legal, unregulated market in the United States."

Applying BSA reporting requirements to both art and antiquities dealers has been tried unsuccessfully in the past.

Should the NDAA be enacted into law, the Treasury Department must write regulations to implement the legislation. Any proposed rules would be subject to public comment.


Text and original photos copyrighted 2010-2020 by Cultural Heritage Lawyer Rick St. Hilaire, a blog commenting on matters of cultural property law, art law, art crime, cultural heritage policy, antiquities trafficking, looted, antiquities, stolen relics, smuggled antiquities, illicit antiquities, museum risk management, and archaeology. Any unauthorized reproduction or retransmission without the express written consent of CHL is strictly prohibited. The materials presented on this site are for informational purposes only and do not constitute legal advice. Retain a lawyer to receive legal help. The provision of this information to the reader, moreover, in no way constitutes an attorney-client relationship. Blog url:
culturalheritagelawyer.blogspot.com.