Wednesday, May 30, 2018

The Illicit Art and Antiquities Trafficking Prevention Act

A bill to extend the U.S. Bank Secrecy Act to regulate the art trade is now  before the US Congress’ House Financial Services Committee.

Peter Tompa describes the implications of HR 5886, the Illicit Art and Antiquities Trafficking Prevention Act, here:

According to Congressman Luke Messer, its Indiana Republican sponsor, HR 5886 is intended to “reduce international money laundering and crack down on terrorist organizations like ISIS.”

According to Tompa,

"Passage of HR 5886 would add dealers in antique coins, art and antiquities, even small businesses selling $50,000 per year, to the Bank Secrecy Act, 31 USC § 5312. Currently, the Bank Secrecy Act applies to banks, financial institutions, credit card institutions, casinos, and dealers in precious metals. The regulations are not specified in the bill, but release from Congressman Messer suggests that they will be similar to those applied to the category of dealers in precious metals, stones and jewels (31 CFR 1027.100).

If so, similar regulations would require detailed reporting to the Department of the Treasury Financial Crimes Enforcement Network (FinCEN). The detailed inventory, customer identification, and audit requirements would place a significant cost and time burden on small art businesses.

In other regulated industries, FinCen has required reporting of currency exchanges totaling as little as $1,000, Suspicious Activity Reports for amounts as low as $2,000, and has a $10,000 Currency Transaction Threshold. FinCEN also has the authority to lower this threshold."

Tompa goes on to point out that:

"There are an estimated 5,000 firms that deal in coins in the United States, mostly small businesses or sole proprietorships with sales under $1 million per year.

Placing regulatory requirements on business that already use regulated institutions for banking seems like regulatory overkill, especially given the high cost of compliance for small businesses (estimates range from $2,000-5,000 per year) ..."

He goes on to observe that

"Most of all, the ancient and antique art industry worries that FinCen will demand provenance information that simply does not exist as part of its due diligence/chain of custody requirements. Dealers would like to have these records and be able to supply them; they often increase the value of an object. However, because many objects have been in circulation through private hands over decades or even centuries, such records rarely exist.

Although this fact is well known to anti-art trade activists, they are likely to be the first to demand that art dealers provide such non-existent records as part of the compliance process."

As the proprietor of a small business in antique coins, I can state that this proposed legislation in its present form would have a very serious adverse effect upon my business, Classical Coins. In fact, at this point it appears that if Classical Coins became subject to such onerous regulations, it would no longer be possible for me to continue to operate my business.

Antiquities collectors worldwide should be alarmed at the prospect that the U.S., comprising roughly 50% of the worldwide market for antiquities, may impose such onerous and destructive regulations upon the trade. It is very probable that if this does occur, there will be an immediate demand from the archaeology lobby for these regulations to also be imposed within the EU and the UK.