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in recent days, nevertheless, has threatened to veto the bill unless certain legal protections for Big Tech giants are repealed.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, 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.

Saturday, October 31, 2020

The Office of Foreign Assets Control has issued an Advisory calling for due diligence on the part of dealers, museums, and other high-end market participants to comply with U.S. sanctions regulations on blocked persons.


OFAC art market advisory

When the Office of Foreign Assets Control (OFAC) publishes an Advisory that warns a particular business sector to maintain compliance, that typically means the U.S. Treasury Department's enforcement agency is serious about targeting an identified national security risk. On Friday, OFAC broadcast an alert to "art galleries, museums, private art collectors, auction companies, agents, brokers, and other participants in the art market" when it issued its
Advisory and Guidance on Potential Sanctions Risks Arising from Dealings in High-Value Artwork.

The October 30 Advisory, while not legally binding, strongly indicates OFAC's enforcement posture and its likely response if an art market participant were to commit a sanctions violation. The issuance of the advisory suggests that the agency will take four factors into account when probing an offense, having given notice that
  1. there are "sanctions risks arising from dealings in high-value artwork associated with [blocked] persons ... including persons on OFAC’s List of Specially Designated Nationals and Blocked Persons (SDN List),

  2. "[h]igh-value artwork transactions may play a role in blocked persons accessing the U.S. market and financial system in violation of OFAC regulations,"

  3. "maintaining a risk-based compliance program to mitigate such risks" that applies "risk-based due diligence" is vital, and

  4. "the “Berman Amendment” to the International Emergency Economic Powers Act (IEEPA) and the Trading with the Enemy Act (TWEA) does not categorically exempt all dealings in artwork from OFAC regulation and enforcement. " In other words, just because the IEEPA safeguards Americans' rights to exchange "information or informational materials," including "artworks" under 50 U.S.C. § 1702(b)(3), does not mean that the transfer of art is excluded from sanctions enforcement. "[T]o the extent the artwork functions primarily as an investment asset or medium of exchange," OFAC will enforce the sanctions law, according to the advisory.
In sum, OFAC's Advisory recommends that a "U.S. person considering a transaction with a blocked person involving high-value artwork [$100,000+] should seek guidance or a license from OFAC."

Thursday, October 15, 2020

Man who arrived at JFK Airport and indicted for allegedly possessing illicit Egyptian artifacts had unfair jury panel, defense lawyer suggests.


Ancient Egyptian canopic jar lids seized by Homeland Security
Ancient Egyptian canopic jar lids are some
of the antiquities seized by Homeland Security.

"Loose sand or dirt came out of the suitcases as they were opened," and there was the smell of "wet earth," recited the arrest warrant affidavit filed in U.S. v. Eldarir, an antiquities smuggling case pending in a New York federal district court.

Now a veteran defense lawyer has challenged the criminal prosecution by suggesting that the COVID-19 outbreak interfered with the selection of a fair grand jury.

Homeland Security Investigations (HSI) arrested 
Ashraf Omar Eldarir of Brooklyn in February. The court released him on $60,000 bond and placed the case under seal, which has since been lifted.

A grand jury sitting in the Eastern District of New York (E.D.N.Y.) indicted Eldarir five months later 
on two counts of smuggling under 18 U.S.C. § 545, alleging:
On or about April 18,2019, within the Eastern District of New York and elsewhere, the defendant ASHRAF OMAR ELDARIR, also known as "Omar Eldarir," did knowingly, intentionally and fraudulently import and bring into the United States merchandise contrary to law, to wit: one ancient Egyptian polychrome relief [and] ... approximately 590 Egyptian artifacts and pieces thereof.
A grand jury indictment simply initiates a criminal case; it is not a finding of guilt. The defendant is presumed innocent unless the government proves guilt beyond a reasonable doubt.

In addition to criminal penalties, prosecutors seek criminal forfeiture of the cultural artifacts pursuant to 18 U.S.C. § 982, which include ancient Egyptian shabtis, gold artifacts, coins, panels, masks, and canopic jar lids in addition to Greco-Roman rings, stele, and a torso.

Attorney Marietou Diouf, who joined the U.S. Attorney's Office in 2020 and previously served 
as an E.D.N.Y. law clerk, leads the prosecution. She is pitted against experienced Assistant Federal Defender Kannan Sundaram, who has raised the specter of irregularities surrounding the grand jury's selection.

"The unusual circumstances of the indictment—the grand jury sat in Central Islip as opposed to Brooklyn, at a time when most members of the public in the Eastern District of New York were still under a stay-at-home order—may have compromised the defendant’s right to a grand jury selected from a fair cross section of the community," argued Attorney Sundaram in a letter to the court that asked to probe juror records. AUSA Diouf countered that the grand jury "was empaneled ... many months before the start of the pandemic—and has remained empaneled since then. And ... the Grand Jury was selected from a list of residents drawn from all five counties of the Eastern District of New York."

Wednesday, August 12, 2020

cultural property lawyer ethics opinion

Does a potential client want to commit an antiquities trafficking crime? The cultural property lawyer needs to find out.


One way cultural heritage traffickers cover their tracks, wash dirty money, and blanket themselves with business legitimacy is by hiring reputable professionals to manage seemingly lawful transactions, which is why accountants, freight forwarders, customs brokers, conservators, dealers, auctioneers, academics, art advisors, and appraisers may be solicited to handle looted and smuggled artifacts.

Because traffickers and cash launderers may also try to retain legal counsel to move contraband archaeological, ethnological, and religious objects into the antiquities market, a cautionary ethics opinion issued by the American Bar Association (ABA) should prompt cultural property lawyers and customs attorneys to ask probing questions.

"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," writes the ABA Standing Committee on Ethics and Professional Responsibility, which issued guidance in response to concerns about money laundering and counter-terrorism enforcement. Formal Opinion 491, published on April 29, instructs attorneys that "Model Rule 1.2(d) prohibits a lawyer from advising or assisting a client in a transaction or other non-litigation matter the lawyer 'knows' is criminal or fraudulent."

The opinion emphasizes that a lawyer cannot remain ignorant of a transaction, warning that it is "a lawyer’s obligation to inquire when faced with a client who may be seeking to use the lawyer’s services in a transaction to commit a crime or fraud." The ABA committee makes clear that "[f]ailure to make a reasonable inquiry is willful blindness punishable under the actual knowledge standard of the Rule."

Due diligence therefore is critical. 
When a potential client calls to ask, "Can you help me sell ancient art stored in an overseas freeport by setting up a U.S. import company, retaining a customs broker to handle the paperwork, creating a shell corporation to offer the objects for sale, and using the law firm's trust account to handle the financial transactions?," the lawyer's immediate response must be to ask scrutinizing questions before agreeing to represent the prospective client.


Photo credit: freeimages.com /Henk L  and Pat. 
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 intended for informational purposes only and should not be used as legal advice applicable to the reader’s specific situation. In addition, the provision of this information to the reader in no way constitutes an attorney-client relationship. Blog url: culturalheritagelawyer.blogspot.com.

Monday, August 3, 2020

Grand jury indictment from federal court in California claims importer falsely classified ancient archaeological artifact.


U.S. v. AlCharihi mosaic
Mosaic seized by FBI and HSI from Mohamad AlCharihi.
Skilled prosecutors keep cases simple. So when 
U.S. Department of Justice (DoJ) attorneys secured an indictment last month in an antiquities trafficking case, they focused on one statute only, Entry of Goods Falsely Classified, 18 U.S.C. 541.

The straightforward charge, handed up by a grand jury sitting in the Central District of California, alleges that 
Mohamad Yassin AlCharihi (a/k/a/ Mohamad al-Sharihi), on August 13, 2015,
knowingly claimed and caused to be claimed, that he was importing a shipment of a mosaic and other items valued at $2,199, when, in fact, defendant AlCharihi knowingly imported a mosaic that itself was valued at more than $2,199, and defendant AlCharihi knowingly misrepresented the quality of the mosaic, including what the mosaic depicted.
The indictment in U.S. v. AlCharihi (20-cr-00307) simply is an allegation based on probable cause. The defendant is presumed innocent, and prosecutors bear the burden to prove the defendant's guilt beyond a reasonable doubt.

The criminal investigation began approximately five years ago when the centuries old mosaic and other objects were imported into the U.S. A bill of lading, offered by AlCharihi in court papers, documented their ocean borne transport and their classification under Harmonized Tariff Schedule of the U.S. 6908.10 and 6802.91, codes that describe ceramic mosaic tiles and worked monumental or building stone. The
 bill of lading characterized the imports as "GARDEN ORNAMENTAL VASE" and "MOSAIC TABLE."

Thursday, March 5, 2020

Archaeological site at El Guayabo National Monument, Costa Rica
Cost Rica has requested a cultural heritage agreement with the United States. The Cultural Advisory Committee (CPAC) will meet on April 15, 2020 to consider this request and invites public comment.

Go to regulations.gov and type in docket DOS-2020-0011 to submit written remarks by April 1, 2020.

The public portion of the CPAC meeting--to be held on April 15 at 2:30 pm ET--will be viewable on Zoom. Attend by clicking here.

In December last year, Costa Rica made a formal request for U.S. import restrictions on at-risk archaeological material pursuant to the 1970 UNESCO Convention on the Means of Prohibiting and Preventing the Illicit Import, Export and Transfer of Ownership of Cultural Property. The terms of the Convention on Cultural Property Implementation Act (CPIA), the federal law that implements the 1970 UNESCO Convention in the United States, now require CPAC to consider the petition and supply the State Department with advice.

Photo credit: 
AndSalx95 Creative Commons
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 intended for informational purposes only and should not be used as legal advice applicable to the reader’s specific situation. In addition, the provision of this information to the reader in no way constitutes an attorney-client relationship. Blog url: https://culturalheritagelawyer.blogspot.com.

Monday, January 20, 2020

The Cultural Property Advisory Committee (CPAC) meets this week to discuss requests by Turkey and Tunisia for Memoranda of Understanding (MoU) with the United States to establish American import controls covering certain archaeological and ethnological materials in jeopardy of pillage.

The public portion of the meeting will be held Tuesday, January 21 at 1:30 pm ET. You can observe it live by watching online at https://eca-state.zoom.us/j/909159562.

The requests submitted by the Government of the Republic of Turkey and the Government of Tunisia invoke Article 9 of the 1970 UNESCO Convention on the Means of Prohibiting and Preventing the Illicit Import, Export and Transfer of Ownership of Cultural Property. The U.S. is a party to this agreement, which is implemented under federal law by the Convention on Cultural Property Implementation Act.

The country requests have attracted nearly 100 written public comments, which describe the extent of archaeological site looting in the two countries, articulate collector and dealer concerns that ancient coins will be counted as archaeological material subject to U.S. import controls, and ask the question of who owns cultural property.

CPAC, meanwhile, welcomes recently appointed chairman Attorney Stefan Passantino and new members Attorney Anthony Wisniewski and CHL author Attorney Rick St. Hilaire to the committee.

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 intended for informational purposes only and should not be used as legal advice applicable to the reader’s specific situation. In addition, the provision of this information to the reader in no way constitutes an attorney-client relationship. Blog url: https://culturalheritagelawyer.blogspot.com.