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The antiques trade, which regulators have long feared will provide fertile ground for money laundering and other illicit activities, will come under increased scrutiny under legislation passed by Congress on Friday when it overstepped President Trump’s veto.
The provisions strengthening control of the antiques market were contained in the sprawling National Defense Authorization Act, which Mr. Trump vetoed last week and which the House and Senate voted to overturn on Monday and Friday.
Regulators have long been concerned that the opacity of the antiques trade, where buyers and sellers are seldom identified, even with parties to a transaction, makes it an easy way to hide illicit money transfers. The new legislation empowers federal regulators to design measures that would remove transaction secrecy.
“We believe this type of legislation is long overdue,” said John Byrne, a lawyer with 30 years of experience in anti-money laundering rules. “This is an area where clearly organized crime, terrorists and oligarchs have used cultural artifacts to move illicit funds.”
Dealers resisted the move. But with the new legislation, Congress decided to expand the 1970 Bank Secrecy Act, which increased federal oversight of financial transactions, to include the trade in antiques.
The exact operation of the new law will be determined over the next year by the Financial Crimes Enforcement Network, an office of the Treasury Department, in consultation with the private sector, law enforcement and the public. Legal experts expect the new antiques regulations to be similar to others governing the precious metals and jewelry industries, where certain transactions are reported to authorities, who then determine if they are suspicious. The law also aims to end the use of shell companies to conceal the identity of buyers and sellers.
The promoters of the new measure described it as an essential reform.
“Over the past decade, we have worked with all industries and stakeholders to craft a bill that everyone is happy with,” said Representative Carolyn B. Maloney, a Democrat from New York City, who introduced the Business Transparency Law in 2019 and who then led that bill into the defense package. “We are at a point where we have built such support that it has become impossible to oppose the bill.
The Business Transparency Law has faced opposition from antique dealers, who balked at the requirement to disclose customer information and the added cost of complying with the law. The art industry fought similar legislation that would have extended the law on bank secrecy to the art market.
Federal disclosures show Christie’s auction house paid lobbyists over $ 100,000 in the past two years to influence the results of these measures. A spokesperson for the auction house, Erin McAndrew, said its compliance department already maintains anti-money laundering standards adopted by the European Union in 2018.
She said that “Christie’s welcomes the opportunity to work with US regulators on appropriate and enforceable guidelines” to combat money laundering in the art market.
Watchdogs have urged Congress to tighten regulations on the antiques trade for years. The looting of cultural heritage sites in countries like Syria and Iraq has resulted in a growing black market for Middle Eastern antiques. Law enforcement overseas seized hundreds of artefacts, which officials say date back to previous excavations by terrorist groups like Daesh.
“The bill will begin to fill a major loophole,” said Tess Davis, executive director of the Antiquities Coalition, a nonprofit organization that monitors the illicit trade in artifacts.
“The business model of a pawnshop is not much different from that of a Sotheby’s or a Christie’s,” she added. Yet pawn shops fall under the bank secrecy law, but auction houses do not. “Why should the rules be stricter for a mom-and-pop business that sells stereos in Milwaukee than a billion dollar auction house in Manhattan?”
But some dealers claim reports of black market transactions and money laundering are exaggerated. A dealer, Randall A. Hixenbaugh, president of a nonprofit called the American Council for the Preservation of Cultural Property, called the illicit trade statistics unfounded and opposed the new regulations.
“Virtually all high value transactions in the ancient art sector are handled by financial institutions and instruments already covered by bank secrecy law,” Hixenbaugh said. “Criminals looking to launder ill-gotten funds could hardly choose a commodity worse than antiques.”
Legislative staff who helped shape the new regulations said they were guided by what they learned from hearings from Congress and industry experts. Unesco warned in 2020 that the development of online sales platforms and social networks had facilitated the illicit sale of antiques and that existing regulations had failed to stem the black market.
The new legislation calls for a study on the role of art in money laundering and terrorist financing. (A recent Senate report previously described how at least two Russian oligarchs had exploited the opacity of the art world to circumvent US sanctions.) If the study finds a connection between the art market and the illicit activity, it could, after consideration by Congress, trigger the creation of rules similar to those currently affecting the antiques trade. Regulators have also signaled that the bank secrecy law could be extended to the art market.
“You have to know who is buying and who is selling,” Mr. Byrne said. “The argument that you don’t have to report suspicious activity because you’re in the private sector doesn’t work. The banks lost this argument 30 years ago.
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Two weeks later, in mid-December 2018, Mr. Trump and Mr. Erdogan spoke by phone. The president began by assuring Erdogan that the government and Halkbank were close to a resolution, and Erdogan expressed his gratitude, Bolton said.
In Turkey around the same time, Erdogan told reporters that Mr. Trump, in a previous conversation on Halkbank, assured him that Mr. Trump would “immediately task the ministers concerned” with dealing with the matter. the case.
Mr Bolton said in the interview that his concern, listening to those conversations, was that Turkey and Halkbank “now had a direct channel in the Oval Office – they weren’t going to negotiate in good faith” with prosecutors. “Why should they?”
Mr Trump asked Mr Bolton to speak to Mr Whitaker, the then acting attorney general, about the case – a decision Mr Bolton said he did not make, although he added that he didn’t know if anyone else in The White House did.
On December 14, the day of the telephone conversation between Mr. Erdogan and Mr. Trump, the Justice Department informed the Southern District that Mr. Mnuchin, Secretary of State Mike Pompeo and the Attorney General’s office would be more involved in the Halkbank case. , said an official from the Justice Ministry.
Manhattan prosecutors had just drafted a memo for Mr. Whitaker and Rod J. Rosenstein, the Deputy Attorney General, explaining why the Department of Justice should give them the power to lay criminal charges against the bank, two lawyers said. .
Mr Rosenstein was convinced the evidence was compelling, perhaps even more so than in other sanctions circumvention cases in which the United States had accused banks, lawyers familiar with the investigation said. The prosecutors’ note also noted that the measures accused by Halkbank were helping to support the Iranian economy, which was contrary to Mr. Trump’s foreign policy goal of increasing economic pressure on the country.