Grossman LLP | U.S. Congressman Introduces Bill to Apply the Bank Secrecy Act to "Dealers in Art and Antiquities" 
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  • U.S. Congressman Introduces Bill to Apply the Bank Secrecy Act to "Dealers in Art and Antiquities" 
    In a recent post, we discussed the European Parliament’s adoption earlier this month of a new Directive that will have far-reaching effects on Europe’s art market.  Under this Directive, art dealers, galleries, and auction houses generally must verify the identities of their customers before entering into transactions worth €10,000 or more.  These well-intentioned new rules were designed to combat terrorism financing and money laundering, although they were met with fierce backlash by many in the art world who complained about their potential effects on the flow of business.   
    We predicted that the United States might soon follow the EU’s lead by implementing similar legislation.  Now, the U.S. Congress is officially headed down the same path.  Indiana Congressman Luke Messer has introduced a bill to apply the Bank Secrecy Act to dealers in art or antiquities.  Messer, a Republican from Indiana, is a member of the Financial Services Committee, which “has jurisdiction over monetary policy, international finance, international monetary organizations, and efforts to combat terrorist financing.”  Under the Act, which is enforced by the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN), banks and other financial institutions must file reports of cash transactions greater than $10,000, and report “suspicious activity” including “money laundering, tax evasion, [and] other criminal activities.” 
    Messer’s proposed bill, titled the “Illicit Art and Antiquities Trafficking Prevention Act,” would extend the provisions of the Bank Secrecy Act to art and antiquities dealers.  As artnet News describes, the new bill—if enacted—would bring about significant changes in the American art world.  Among other things, dealers would have to implement “new compliance programs and customer due diligence and monitoring systems” to conform to the Act’s requirements. 
    According to Artsy, the Art Dealers Association of America (ADAA) released a statement earlier this week criticizing the proposed legislation for many of the same reasons that its European counterparts criticized the E.U.’s new Directive.  According to the ADAA, the proposed bill “could impose an unnecessary and onerous regulatory burden on galleries—small businesses all across the country that do not have the infrastructures or resources required to undertake the reporting and attendant filings for something that has not presented itself as a major problem.” 
    The bill must still clear many hurdles in the legislative process before it actually becomes law, however.  Additionally, the current version of the bill does not actually define what an art dealer is, and resolving this fundamental question may pose a challenge for lawmakers given the many different types of dealers operating in today’s art market.  In any event, we will be tracking this proposal as it continues to develop.