U.S. Senator John Fetterman Proposes Legislation to Extend Anti-Money Laundering Regulations to the American Art Market
The art market has become a significant focus for anti-money laundering (AML) regulations, as concerns about its vulnerability to illicit financial flows continue to grow. International frameworks, such as those from the Financial Action Task Force (FATF), have been instrumental in promoting AML standards for art market participants.
Key international expectations include customer due diligence, record-keeping, reporting suspicious activity, and risk assessment. Art businesses must identify and verify the identities of buyers and sellers, maintain detailed records of transactions, and report unusual or suspicious transactions to financial intelligence units. Firms should also establish and maintain risk-based compliance programs tailored to their exposure.
In the United States, the Anti-Money Laundering Act of 2020 (AMLA 2020) brought antiquities dealers under the Bank Secrecy Act (BSA) framework, aligning them with financial institutions. The Act requires customer identification and record-keeping, provenance research, suspicious activity reporting, and cash transaction reporting. The Financial Crimes Enforcement Network (FinCEN) oversees compliance, and enforcement is shared with other agencies like the Office of the Comptroller of the Currency (OCC) and the Department of Justice (DOJ).
The Art Market Integrity Act, proposed by Senators John Fetterman, Chuck Grassley, Sheldon Whitehouse, Bill Cassidy, Andy Kim, and David McCormick, aims to further align the U.S. art market with international best practices. The bill would mandate comprehensive AML programs, enhanced due diligence, transparency in ownership, and reporting and cooperation obligations.
The bill would apply to art advisors, consultants, custodians, galleries, museums, collectors, and intermediaries in the sale of works of art. However, it exempts artists themselves and businesses with under $50,000 in annual art transactions. Additionally, it does not cover applied art such as product design, fashion design, architectural design, or interior design; or mass-produced decorative art, including ceramics, textiles, or carpets.
The bill has received endorsements from several organizations, including the Antiquities Coalition, Transparency International U.S., and the National Border Patrol Council. The bill's lead author, Senator John Fetterman, stated that art should not be used for money laundering or funding terrorists. If passed, the Art Market Integrity Act would align the U.S. with international standards already adopted by the United Kingdom, European Union, and Switzerland, preventing America from becoming a safe haven for illicit activities.
The bill's passage would build on the AMLA 2020, further strengthening the U.S. art market's AML protections. This evolution reflects a global trend toward greater oversight, higher compliance costs, but improved market integrity and investor confidence. However, some experts, like Erin Thompson, a professor of art crime, have expressed skepticism about the bill's success due to the art market's history of resisting regulation.
In the past, high-profile cases such as the ability of Russian construction billionaires Arkady and Boris Rotenberg to purchase $18 million in art despite US sanctions in 2014, have highlighted the art market's susceptibility to money laundering and sanctions evasion. More recently, art collector Nazem Ahmad was charged with evading US sanctions and funding Hezbollah through art and diamond deals in 2023. The Art Market Integrity Act aims to address these gaps and improve market transparency, making it harder for criminals to exploit the opacity and high-value nature of art transactions.
- The art market, with its high-value transactions, has become a significant focus for anti-money laundering (AML) regulations.
- Art businesses, such as galleries and museums, are required to identify and verify the identities of buyers and sellers.
- The Art Market Integrity Act in the United States aims to further align the art market with international best practices by mandating comprehensive AML programs.
- The bill would apply to art advisors, consultants, custodians, collectors, and intermediaries, but exempts artists and businesses with under $50,000 in annual art transactions.
- The bill has received endorsements from organizations like the Antiquities Coalition and Transparency International U.S., with Senator John Fetterman stating that art should not be used for money laundering.
- The passage of the Art Market Integrity Act would align the U.S. with international standards already adopted by countries like the United Kingdom, European Union, and Switzerland.
- The bill's success is not without skepticism, as some experts believe the art market has a history of resisting regulation, as seen in cases like the Rotenberg brothers purchasing art despite US sanctions in 2014.
- The Art Market Integrity Act aims to address these gaps and improve market transparency, making it harder for criminals to exploit the opacity of art transactions.
