Saturday, December 5, 2020

Antiquities Trafficking Bathed in Sunshine: Disclosures of Shell Company Owners and Suspicious Financial Transactions May Be on the Horizon if the NDAA Becomes Law

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in recent days, nevertheless, has threatened to veto the bill unless certain legal protections for Big Tech giants are repealed.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