At the end of June, Congress took a big step towards passing anti-money laundering regulations that will profoundly affect the art and antiques market. The bipartisan Establishing New Authorities for Business Laundering and Enabling Security Risks Act (the “ENABLERS Act”) has been approved for inclusion in the annual National Defense Authorization Act , which provides for the budget of the Ministry of Defence. Incorporating the ENABLERS Act into the National Defense Authorization Act, Congress will likely enact it later this year as part of its Defense Authorization Act approval.
The creation of the ENABLERS Act is rooted in the Anti-Money Laundering Act 2020 (the “AMLA”) which came into force on January 1, 2021. The AMLA provides massive updates to the 52 year old Bank Secrecy Act. years and is the biggest overhaul of money laundering regulations since the Patriot Act. It greatly expands the scope of bank secrecy law by applying to many more types of businesses, people and intermediaries in hopes of combating money laundering. For the first time in the United States, the list of parties subject to these regulations includes art and antiques dealers.
In November 2021, Paula Trommel, Compliance and Sanctions Consultant for Christie’s and Deputy Director of Corinth Consulting in London, joined me to talk about AMLA and provide our forecast on the impact of this new law on the markets of the art and antiques. But since AMLA’s implementation, Congress has provided little guidance on the exact regulations to impose, leaving significant uncertainty among those involved in the art and antiques markets. While the ENABLERS Act helps clear up some of the fog, there are still more questions than answers.
If the ENABLERS law is passed, any person or company engaged in the trade and sale of works of art, antiques or collectibles – including dealers, advisers, consultants, custodians, galleries, auction houses and museums – will be considered “financial institutions” and must comply with certain parts of the Bank Secrecy Act. This list of interested parties in the art and antiques markets is incredibly longer than the one originally proposed in ALMA. Not only international auction houses like Sotheby’s and Christie’s will now be subject to bank secrecy law, but also smaller galleries which may have only one or two employees.
The ENABLERS Act will effectively require all art, antiques and collectibles dealers, advisers, consultants, custodians, galleries, auction houses and museums to comply with the four requirements of due diligence described in more detail in Section 5318 of the United States Code: (1) report suspicious transactions, (2) establish an anti-money laundering program, (3) establish policies, procedures and due diligence checks, and (4) identify and verify account holders (i.e. individual buyers and sellers). If the ENABLERS Act is passed, these compliance requirements will come into effect on or after June 24, 2024, allowing people some time to prepare.
While these specifics shed light on reporting requirements intended to combat money laundering in art, antiques and collectibles transactions, there are still critical unresolved issues. Like the AMLA, the ENABLERS Act does not define the monetary value of art, antiques, or collectibles transactions that will be subject to disclosure to the federal government, as well as what constitutes “l ‘art, antiques or collector’s item’. Frustratingly, these vital financial safeguards are not only unclear, but also so far unimplemented. That said, we remain hopeful that progress will continue and we will soon have strong and well-defined regulations in place to ensure proper transparency in the marketplace.