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The US Treasury Department Issues anti-money laundering (AML) study for the art market, aiming to overcome the money laundering risks.
On Jan. 1, 2021, Congress passed the Anti-Money Laundering Act of 2020 (AMLA) which widened the definition of “financial institution” to enforce anti-money laundering (AML) requirements on the person. “engaged in the trade of antiquities, including an advisor, a consultant, or any other person who engages as a business in the solicitation or the sale of antiquities.”
The AMLA also directed the Secretary of the Treasury, in collaboration with the FBI, the Attorney General, and Homeland Security Investigations, to publish a study to uncover the potential money laundering risks circulating in the art industry.
On Feb. 4, 2022, the Treasury Department also published its findings on the money laundering risks associated with high-value art and recommended regulatory along with non-regulatory practices to address these risks. The study also found that the high dollar values of single transactions, ease of transportability of works of art, the long-standing culture of privacy in the market, and the use of artwork as an investment asset could make the art market ripe for money laundering. Cash purchases, lack of transparency into private transactions, the subjectivity of prices, and the use of shell companies further spiked susceptibility to money laundering.
The Treasury Department noted three common money laundering schemes likely to affect the high-value art market: (1) offering and accepting art as payment to integrate illicit proceeds into the financial system; (2) buying art with illicit proceeds, holding it for extended periods of time and later selling it for a profit; and (3) using art as collateral for loans to disguise the original source of the funds.
However, to address money laundering risks in the conventional and digital art markets, the Treasury Department suggested numerous regulatory and non-regulatory actions for art industry entities and government agencies, including:
- Market entities could develop information-sharing programs to increase transparency for buyers and enable the government to access information in money laundering investigations.
- Government law enforcement bodies could increase their focus on financial criminal activities involving high-value art in guidance and training to better understand how to verify and investigate bogus transactions.
- Fincen could also seek more detailed information from institutional market entities to stop criminals from money laundering through the art market and impose strict AML measures on selected art market participants.