Case foreshadows mandatory BSA obligations for antiques dealers under AML law

Exhibit A to the amended confiscation complaint: the dream tablet

Amid the invasion of Iraq and subsequent civil unrest, thousands of cultural artifacts were stolen from the National Museum of Iraq. Among them: Gilgamesh’s Tablet of Dreams (the “Tablet of Dreams”), a clay tablet at least 3,000 years old, on which is inscribed some of the oldest works of narrative poetry in the world, the Epic of Gilgamesh.

The Dream Tablet was illegally shipped to the United States in 2003, and Hobby Lobby purchased it in 2014 for $ 1.67 million. Now he’s going back to Iraq. By a Ministry of Justice of July 27, 2021 (“DOJ”) Press release, the Eastern District of New York ordered Hobby Lobby to forgo the Dream Tablet because its import violated the United States’ ban on importing Iraqi archaeological and ethnological materials.

While not a pure money laundering case, this confiscation action involves the intersection of antiques and crafts and anti-money laundering concerns (“ AML “), a topic we cover frequently, including in a recent guest article on potential AML regulations for the antiques and art market. Of course, the 2021 Anti-Money Laundering Law (“AML Law”) partially imposes the obligations of the Banking Secrecy Law (“BSA”) on antique dealers by defining a “person engaged in the antiques trade. , including an adviser, consultant, or any other person who engages as a business in the solicitation or sale of antiques “as a” financial institution “covered by the BSA. The Dream Tablet case illustrates the issues that antique dealers will face under a mandatory BSA / AML regime, including the filing of Suspicious Activity Reports (“SAR”).

Gilgamesh’s dream tablet

The dream tablet has undergone a fascinating journey. According to the DOJ amended complaint, in 2001, an American antique dealer (the “Antique Dealer”) saw numerous clay tablets “on the floor of an apartment in London, England”. The antique dealer visited the apartment again in 2003, accompanied by an expert on cuneiform, the writing system used in ancient Mesopotamia. Deciding that the tablets were valuable, the antique dealer bought them for around $ 50,000 and shipped them to the United States. Contrary to US law, the sender allegedly failed to correctly declare the tablets upon arrival in the United States.

The antique dealer then sold the dream tablet along with an alleged bogus “letter of provenance” – a document commemorating the chain of custody of antiquity. Rather than indicating that the Dream Tablet arrived from London in 2003, the alleged fake letter of provenance indicated that the antique dealer purchased the Dream Tablet in 1981 in San Francisco.

The Dream Tablet was finally sold in 2013 to a major international auction house (the “Auction House”). When the auction house asked about the provenance of the dream tablet, the antique dealer reportedly said the provenance “was not verifiable and would not withstand scrutiny at an auction. public auction “. Nonetheless, the auction house sold the Dream Tablet for $ 1.67 million in a private sale to Hobby Lobby, which intended to donate it to the Museum of the Bible in Washington, DC.

Some details remain obscure. After the Museum obtained the dream tablet, it conducted additional due diligence as to its provenance and reportedly learned conflicting information about the origins of the dream tablet. While how the DOJ learned of the Dream Tablet’s suspicious past is not publicly available, this action is part of a larger DOJ investigation into the thousands of potentially looted Iraqi artifacts that came into the possession of Hobby Lobby. In 2011, the United States Customs and Border Patrol seized a number of pills, resulting in a similar confiscation action by DOJ, United States of America v. About four hundred and fifty ancient cuneiform tablets and about three thousand ancient clay bubbles. DOJ used confiscation to return over 5,500 artifacts allegedly looted in Iraq and fined Hobby Lobby $ 3 million.

As for the Dream Tablet, Hobby Lobby reached a settlement agreement with the DOJ on July 15, 2021, and it is expected to be repatriated to Iraq.

Hobby Lobby sought a separate relief. In early 2021, she filed a crowd of complaints against the auction house, including breach of warranty of title, breach of implied and express warranty, and fraud. This case remains pending in the Eastern District of New York.

The AML law

It’s almost impossible to predict if this deal would have been any different had the antique dealer and auction house been subject to the BSA when they crossed paths with the Dream Tablet. The major auction houses have for years implemented their own voluntary anti-money laundering policies and procedures. Likewise, the Responsible Art Market (“RAM”), an industry-led non-profit organization whose purpose is to “educate art companies about the risks faced by the art industry”, publishes AML guidelines for industry. These guidelines explain the importance of risk assessments, know-your-customer (“KYC”) policies, and provenance research. However, the AML Act now subjects antique dealers to BSA by law and not by choice. The regulations that the Financial Crimes Information Network (“FinCEN”) is to enact under the AML Act will likely impose KYC obligations and an obligation to file SARs to report suspicious transactions to FinCEN. Anti-money laundering programs used to meet these obligations and detect suspicious activity should be risk-based; that is, the depth and sophistication of the programs should be commensurate with the risk posed by the business and individual clients.

In the context of selling ancient Iraqi artifacts, an AML program should consider the following: particularly strict rules restrict the importation of Iraqi artifacts into the United States after 1990; the significant potential penalty for violating these restrictions (forfeiture); and the importance of investigating and verifying the provenance of an artefact. Assuming the government’s claims are true, a fully functioning AML program may have alerted to red flags such as the antique dealer first seeing the dream tablet not carefully kept behind. glass, but on the floor of a building, or the fact that the antique dealer told the auction house that the provenance would not be accepted if the dream tablet was sold at an auction. public auction. As always, the success of any AML program depends on the people involved.

Confiscation

This case also recalls that civil confiscation continues to be an essential tool in the arsenal of the Ministry of Justice to fight against crime related to antiques and art. According to the press release from the Department of Justice, “Outsmarting the trade in contraband goods by seizing and confiscating an ancient artefact shows the department’s commitment to using all available tools, including confiscation, to ensure justice.” . The complaint amended here was based on relatively esoteric laws – but which may become more common: the DOJ requested confiscation “pursuant to 19 USC § 1595 (c) (1) (A), as stolen Iraqi property that has been introduced or attempted to be introduced into the United States contrary to 18 USC §§ 545 and 2314; and pursuant to 19 USC § 2609 as designated archaeological or ethnological material or cultural property exported from Iraq contrary to 19 USC § 2606.

The imposition of mandatory BSA obligations, as well as the threat of confiscation, can place antique dealers in precarious positions. Presumably, they will now monitor transactions indicating potentially illegal activity. Such activity can be detected at any stage of the process. And any suspicious activity should be reported to FinCEN. What happens when an antique dealer learns he or she owned or sold a coin – or currently holds a coin – that had previously been smuggled into the United States, contrary to federal law? If the anti-money laundering law requires the antiques dealer to self-declare in a SAR, the end result may be the confiscation of the antiquity. Regardless of any regulatory sanction under the BSA, the specter of such a business loss should be a strong motivator for AML compliance.


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