Proposed Rule2021-20731
Anti-Money Laundering Regulations for Dealers in Antiquities
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
September 24, 2021
Issuing agencies
Treasury DepartmentFinancial Crimes Enforcement Network
Abstract
FinCEN is issuing this advance notice of proposed rulemaking (ANPRM) to solicit public comment on the implementation of Section 6110 of the Anti-Money Laundering Act of 2020 (the AML Act). AML Act Section 6110 amends the Bank Secrecy Act (BSA) to include in the definition of "financial institution" a "person engaged in the trade of antiquities, including an advisor, consultant, or any other person who engages as a business in the solicitation or the sale of antiquities, subject to regulations prescribed by the Secretary [of the Treasury]." The AML Act requires the Secretary of the Treasury (the Secretary) to issue proposed rules to carry out that amendment not later than 360 days after enactment of the AML Act. This ANPRM seeks initial public comment on questions that will assist FinCEN in preparing the proposed rules.
Full Text
<html>
<head>
<title>Federal Register, Volume 86 Issue 183 (Friday, September 24, 2021)</title>
</head>
<body><pre>
[Federal Register Volume 86, Number 183 (Friday, September 24, 2021)]
[Proposed Rules]
[Pages 53021-53024]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-20731]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Financial Crimes Enforcement Network
31 CFR Chapter X
RIN 1506-AB50
Anti-Money Laundering Regulations for Dealers in Antiquities
AGENCY: Financial Crimes Enforcement Network (FinCEN), Treasury.
ACTION: Advance notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: FinCEN is issuing this advance notice of proposed rulemaking
(ANPRM) to solicit public comment on the implementation of Section 6110
of the Anti-Money Laundering Act of 2020 (the AML Act). AML Act Section
6110 amends the Bank Secrecy Act (BSA) to include in the definition of
``financial institution'' a ``person engaged in the trade of
antiquities, including an advisor, consultant, or any other person who
engages as a business in the solicitation or the sale of antiquities,
subject to regulations prescribed by the Secretary [of the Treasury].''
The AML Act requires the Secretary of the Treasury (the Secretary) to
issue proposed rules to carry out that amendment not later than 360
days after enactment of the AML Act. This ANPRM seeks initial public
comment on questions that will assist FinCEN in preparing the proposed
rules.
DATES: Written comments are welcome, and must be received on or before
October 25, 2021.
ADDRESSES: Comments may be submitted, identified by Regulatory
Identification Number (RIN) 1506-AB50 by any of the following methods:
Federal E-rulemaking Portal: <a href="http://www.regulations.gov">http://www.regulations.gov</a>. Follow the
instructions for submitting comments. Include RIN 1506-AB50 in the
submission. Refer to Docket Number FINCEN-2021-0006.
Mail: Financial Crimes Enforcement Network, Policy Division, P.O.
Box 39, Vienna, VA 22183. Include 1506-AB50 in the body of the text.
Refer to Docket Number FINCEN-2021-0006.
Please submit comments by one method only.
FOR FURTHER INFORMATION CONTACT:
FinCEN: The FinCEN Regulatory Support Section at 1-800-767-2825 or
electronically at <a href="https://www.fincen.gov/contact">https://www.fincen.gov/contact</a>.
SUPPLEMENTARY INFORMATION:
I. Scope of the ANPRM
This ANPRM seeks comment on various issues to assist FinCEN in
preparing proposed rules to implement Section 6110(a)(1) of the AML
Act.\1\ AML Act Section 6110(a)(1) amends the BSA by adding to the
BSA's definition of ``financial institution'' ``a person engaged in the
trade of antiquities, including an advisor, consultant, or any other
person who engages as a business in the solicitation or the sale of
antiquities, subject to regulations prescribed by the Secretary.'' \2\
Section 6110(b)(1) requires the Secretary to issue proposed rules not
later than 360 days after enactment of the AML Act to carry out that
amendment.
---------------------------------------------------------------------------
\1\ The AML Act was enacted as Division F, Section 6001-6511, of
the William M. (Mac) Thornberry National Defense Authorization Act
for Fiscal Year 2021, Public Law 116-283, 134 Stat 3388 (2021).
\2\ The BSA is codified at 12 U.S.C. 1829b, 12 U.S.C. 1951-1959
and 31 U.S.C. 5311-5314, 5316-5336. Implementing regulations are
codified at 31 CFR Chapter X. Section 6110(a)(1) of the AML Act
amends 31 U.S.C. 5312(a)(2).
---------------------------------------------------------------------------
II. Background
A. The BSA
Enacted in 1970 and amended most recently by the AML Act, the BSA
aids in the prevention of money laundering, terrorism financing, and
other illicit financial activity. The purposes of the BSA include,
among other things, ``requir[ing] certain reports or records that are
highly useful in--(A) criminal, tax, or regulatory investigations, risk
assessments, or proceedings; or (B) intelligence or counterintelligence
activities, including analysis, to protect against terrorism.'' \3\
---------------------------------------------------------------------------
\3\ 31 U.S.C. 5311(1).
---------------------------------------------------------------------------
Congress has authorized the Secretary to administer the BSA. The
Secretary has delegated to the Director of FinCEN the authority to
implement, administer, and enforce compliance with the BSA and
associated regulations.\4\ Pursuant to this authority, FinCEN is
authorized to impose anti-money laundering (AML) and countering the
financing of terrorism (CFT) program requirements for financial
institutions. Specifically, to guard against money laundering and the
financing of terrorism through financial institutions, the BSA requires
financial institutions to establish AML/CFT programs that, at a
minimum, include: (1) The development of internal
[[Page 53022]]
policies, procedures, and controls; (2) the designation of a compliance
officer; (3) an ongoing employee training program; and (4) an
independent audit function to test programs.\5\ The BSA further
requires that, when prescribing minimum standards for AML/CFT programs,
the Secretary shall prescribe regulations that ``consider the extent to
which the requirements imposed under [the AML program requirement] are
commensurate with the size, location, and activities of the financial
institutions to which such regulations apply.'' \6\ The Secretary shall
additionally take into account certain factors, such as: (1) Financial
institutions are spending private compliance funds for a public and
private benefit, including protecting the United States financial
system from illicit finance risks; (2) the extension of financial
services to the underbanked and the facilitation of financial
transactions, including remittances, coming from the United States and
abroad in ways that simultaneously prevent criminal persons from
abusing formal or informal financial services networks are key policy
goals of the United States; and (3) effective AML/CFT programs
safeguard national security and generate significant public benefits by
preventing the flow of illicit funds in the financial system and by
assisting law enforcement and national security agencies with the
identification and prosecution of persons attempting to launder money
and undertake other illicit activity through the financial system.\7\
---------------------------------------------------------------------------
\4\ Treasury Order 180-01 (Jan. 14, 2020).
\5\ 31 U.S.C. 5318(h).
\6\ USA Patriot Act, Public Law 107-56, 352(c), 115 Stat. 272,
322 (2001) (codified at 31 U.S.C. 5318 note).
\7\ 31 U.S.C. 5318(h)(2)(B).
---------------------------------------------------------------------------
For certain categories of financial institutions, FinCEN has
included explicit requirements to conduct customer due diligence and to
identify and verify the identity of beneficial owners of legal entity
customers, subject to certain exclusions and conditions.\8\ In
addition, the Secretary is required to prescribe regulations that
require financial institutions to establish procedures for account
opening that, at a minimum, include: (1) Verifying the identity of any
person seeking to open an account, to the extent reasonable and
practicable; (2) maintaining records of the information used to verify
the person's identity, including name, address, and other identifying
information; and (3) consulting lists of known or suspected terrorists
or terrorist organizations provided to the financial institution by any
government agency to determine whether the person seeking to open an
account appears on any such list.\9\
---------------------------------------------------------------------------
\8\ 31 CFR 1010.230.
\9\ 31 U.S.C. 5318(l).
---------------------------------------------------------------------------
In addition, under 31 U.S.C. 5318(g)(1), the Secretary is
authorized to require financial institutions to report any suspicious
transaction relevant to a possible violation of law or regulation. The
Secretary is further authorized under 31 U.S.C. 5313 to require
domestic financial institutions to report transactions of United States
coins, currency, or other monetary instruments the Secretary
prescribes, in an amount or circumstances the Secretary prescribes by
regulation.
B. Application of the BSA To Trade in Antiquities
The BSA defines ``financial institution'' to include specific
categories of institutions.\10\ Section 6110(a)(1) of the AML Act
amends 31 U.S.C. 5312(a)(2) to include as a type of financial
institution ``a person engaged in the trade of antiquities, including
an advisor, consultant, or any other person who engages as a business
in the solicitation or the sale of antiquities, subject to regulations
prescribed by the Secretary.'' Section 6110(b)(1) directs the Secretary
to issue proposed rules implementing this amendment not later than 360
days after enactment of the AML Act, i.e., by December 27, 2021. This
amendment to the BSA's definition of ``financial institution'' takes
effect on the effective date of the final rules issued by the Secretary
pursuant to Section 6110(b)(1).\11\
---------------------------------------------------------------------------
\10\ 31 U.S.C. 5312(a)(2), (c)(1).
\11\ AML Act Section 6110(a)(2).
---------------------------------------------------------------------------
Before issuing a proposed rule, the Secretary (acting through the
Director of FinCEN), in coordination with the Federal Bureau of
Investigation (FBI), the Attorney General, and Homeland Security
Investigations (HSI), is required to consider:
(A) The appropriate scope for the rulemaking, including determining
which persons should be subject to the rulemaking, by size, type of
business, domestic or international geographical locations, or
otherwise;
(B) the degree to which the regulations should focus on high-value
trade in antiquities, and on the need to identify the actual purchasers
of such antiquities, in addition to the agents or intermediaries acting
for or on behalf of such purchasers;
(C) the need, if any, to identify persons who are dealers,
advisors, consultants, or any other persons who engage as a business in
the trade in antiquities;
(D) whether thresholds should apply in determining which persons to
regulate;
(E) whether certain exemptions should apply to the regulations; and
(F) any other matter the Secretary determines is appropriate.\12\
---------------------------------------------------------------------------
\12\ AML Act Section 6110(b)(2).
---------------------------------------------------------------------------
FinCEN has engaged with the FBI, the Department of Justice, HSI,
and other agencies in considering these matters during the development
of this ANPRM, and welcomes any additional comments from the law
enforcement community on these specific matters or any other aspect of
the ANRPM.
C. The Potential for Money Laundering, Terrorist Financing, and Other
Illicit Financial Activity Through Trade in Antiquities
Certain characteristics of the trade in antiquities may be
exploited by money launderers and terrorist financiers to evade
detection by law enforcement. These characteristics include client
confidentiality; varying practices across the industry in, and
challenges associated with, accurately documenting provenance; the use
of intermediaries; and unregulated customer due diligence practices. In
addition, the potentially small size, ease of transport, and
subjectivity of prices of antiquities, among other things, provide an
opportunity to use these items to transport value across borders
without reporting to authorities or detection by customs agents or law
enforcement agencies. Illicit actors may exploit these or other
features of the antiquities trade to launder funds through the U.S.
financial system.
Terrorist organizations, transnational criminal networks, and other
malign actors may also seek to exploit antiquities to transfer value to
acquire new sources of funds, evade detection, and launder proceeds
from their illicit activities. Some terrorist groups have generated
revenue from permitting or facilitating the illegal extraction or
trafficking of antiquities in territories where they operate.\13\
---------------------------------------------------------------------------
\13\ See, e.g., U.S. House of Representatives, Committee on
Financial Services, Task Force to Investigate Terrorist Financing,
Stopping Terror Finance: Securing the U.S. Financial Sector,
December 20, 2016, at 10-12.
---------------------------------------------------------------------------
On March 9, 2021, FinCEN issued a Notice informing financial
institutions about Section 6110(a) of the AML Act and explaining that
financial institutions with existing BSA obligations, including the
reporting of suspicious activity, should be aware that illicit activity
associated with the
[[Page 53023]]
trade in antiquities and art may involve their institutions.\14\ In the
Notice, FinCEN explained that crimes relating to antiquities and art
may include looting or theft, the illicit excavation of archaeological
items, smuggling, and the sale of stolen or counterfeit objects. They
may also include money laundering and sanctions violations, and have
been linked to transnational criminal networks, international
terrorism, and the persecution of individuals or groups on cultural
grounds.
---------------------------------------------------------------------------
\14\ See FIN-2021-NTC2, FinCEN Informs Financial Institutions of
Efforts Related to Trade in Antiquities and Art, March 9, 2021.
---------------------------------------------------------------------------
III. Issues for Comment
FinCEN seeks comment from members of the antiquities industry, law
enforcement, civil society groups, and the broader public regarding the
potential for money laundering, financing of terrorism, and other
illicit financial activity in the antiquities industry; the existence
of any safeguards in the industry to guard against this potential; the
effect that compliance with BSA requirements could have on the
antiquities industry; what additional steps may be necessary to protect
the industry from abuse by money launderers and other malign actors;
and which actors within the antiquities trade should be subject to BSA
requirements.
FinCEN invites comments on all aspects of this ANPRM, and
specifically seeks comments on the questions listed below. Commenters
should reference specific question numbers to facilitate FinCEN's
review of comments.
A. The Antiquities Market
1. Please identify and describe the roles, responsibilities, and
activities of persons engaged in the trade in antiquities, including,
but not limited to, advisors, consultants, dealers, agents,
intermediaries, or any other person who engages as a business in the
solicitation or the sale of antiquities. Are there commonly understood
definitions of particular roles within the industry? Who would be
considered within or outside such definitions?
2. How are transactions related to the trade in antiquities
typically financed and facilitated? What are the typical sources and
types of funds used to facilitate the purchase of items in the
antiquities market? How common are leveraged or financed purchases in
the antiquities market? How common are cash transactions in the trade
in antiquities?
3. Can the antiquities market be broken down to show the percentage
of transactions that fall in a given monetary range (e.g., 50% of all
transactions fall below $X-value)? If so, please provide a breakdown of
those ranges.
4. What, if any, information does a buyer typically learn about the
seller, cosigner, or intermediary involved in the sale of antiquities?
When a seller, cosigner, or intermediary offers an item for sale, why
might a person involved in the antiquities trade withhold the name of
the seller, consigner, or intermediary from the buyer? What, if any,
business purpose does this serve? Should the buyer have the right to
learn this information to determine whether the provenance of an item
is legitimate? Why or why not?
5. How do foreign-based participants in the antiquities market
operate in the United States? Do they operate directly as advisors,
consultants, dealers, agents, intermediaries, or others? Or do they
work with domestic advisors, consultants, dealers, agents,
intermediaries, or others?
6. When advisors, consultants, dealers, agents, intermediaries, or
others receive payment from overseas accounts, what steps do they take,
if any, to determine whether the payment comes from a legitimate
source?
7. What are the money laundering, terrorist financing, sanctions,
or other illicit financial activities risks associated with the trade
in antiquities? What is the industry experience with money laundering,
terrorist financing, and other illicit financial activity? Which parts
of the market are most vulnerable to these risks? In which geographical
locations do those vulnerabilities tend to take place? Are there
certain types of persons engaged in the trade in antiquities whose
activities present lower money laundering, terrorist financing, and
other illicit financing risks and for whom the application of BSA
requirements is less critical? Are there certain types of persons
engaged in the trade in antiquities whose activities present greater
money laundering, terrorist financing, and other illicit financing
risks and for whom the application of BSA requirements is more
critical?
8. Which participants involved in the trade in antiquities are in
positions in which they can effectively identify and guard against
money laundering, the financing of terrorism, and other illicit
financing risks in connection with the transactions they conduct? For
example, do these participants have access to information regarding the
nature and purpose of the transactions at issue and the participants'
involvement in completion of the transactions?
9. What, if any, safeguards does the industry currently have in
place to protect against business loss and fraud? For example, how, if
at all, do market participants currently identify and verify the
identity of the buyer, seller, or ultimate beneficial owner of an
antiquity to guard against money laundering, terrorist financing, or
other illicit financial activity? To what extent do market participants
conduct due diligence on agents and other intermediaries involved in
purchases and sales of antiquities? To what extent do safeguards vary
depending on the size, nature of the transactions, and whether the
transaction involves foreign jurisdictions? To what extent are the
safeguards voluntary or required by contractual arrangements, trade
associations, or other forms of industry self-regulation? Could these
safeguards be leveraged and modified to detect and prevent money
laundering, terrorist financing, and other illicit financial
activities, or to better detect and prevent such activities?
B. Regulation of the Industry
10. How should ``antiquities'' be defined for the purposes of
FinCEN's regulations? Should jurisdictional or territorial
considerations be taken into account when determining how antiquities
should be defined (e.g., foreign cultural heritage laws)?
11. How is an antiquity distinct from a work of art?
12. How should ``trade of antiquities'' be defined for the purposes
of FinCEN's regulations? Should FinCEN distinguish between the
commercial, for-profit trade of antiquities and non-commercial, not-
for-profit activity? If so, how?
13. Are there any other terms that FinCEN should consider
addressing and defining as part of a rulemaking on the trade in
antiquities? If so, what are those terms, why should they be addressed,
and how should they be defined?
14. Should FinCEN establish a monetary threshold for activities
involving trade in antiquities that would subject persons involved in
such activities above that threshold to FinCEN's regulations, but
exempt persons whose activities fall below that threshold? What is an
appropriate dollar value for such a threshold and should it be set as
an annual or per-transaction threshold? Should there be a different
threshold--including potentially a zero-dollar threshold--for legal
entities as opposed to natural persons?
15. Should there be any other exemptions for categories or types of
[[Page 53024]]
persons engaged in the trade of antiquities beyond the consideration of
a monetary threshold?
16. Which aspects of the current regulatory framework applicable to
financial institutions should apply to persons engaged in the trade in
antiquities?
a. Should FinCEN consider extending all or only some elements of
AML/CFT program requirements now applicable to financial institutions
to the trade in antiquities, including: (i) A system of internal
controls to ensure ongoing compliance, (ii) independent testing for
compliance to be conducted by internal financial institution personnel
or by an outside party, (iii) designation of an individual or
individuals responsible for coordinating and monitoring day-to-day
compliance, or (iv) training for appropriate personnel?
b. How could know-your-customer requirements, such as customer due
diligence or customer identification programs, apply in the transaction
process in the trade in antiquities? What would be the effect on
industry of imposing customer verification and identification
requirements on sellers, purchasers, and others involved in the trade
in antiquities? How would the application of know-your-customer
requirements to this industry assist in preventing money laundering,
terrorist financing, and other illicit financial activity?
c. What, if any, difficulties are associated with requiring the
disclosure of or otherwise obtaining beneficial ownership information
for legal entities engaged in the trade of antiquities, including
foreign legal entities that may be outside the scope of current or
future U.S. beneficial ownership reporting requirements?
d. What should be the requirements for filing SARs related to
antiquities? What should FinCEN consider in implementing any
requirements for filing SARs related to antiquities?
e. How many natural persons and legal entities might be affected by
FinCEN's application of BSA requirements to persons engaged in the
trade in antiquities, and what is the estimated hourly and annual
burden, if any, for each such person, for each of the obligations
described above? How could FinCEN minimize the burdens associated with
these obligations, if any, through its decisions about the form or
content of the rule while still ensuring the appropriate management and
mitigation of AML/CFT risk?
B. Regulatory Planning and Review
This ANPRM is a significant regulatory action under Executive Order
12866 and has been reviewed by the Office of Management and Budget.
C. Conclusion
With this ANPRM, FinCEN seeks input on the questions set forth
above. FinCEN welcomes comments on all aspects of the ANPRM, and all
interested parties are encouraged to provide their views.
Dated: September 20, 2021.
Himamauli Das,
Acting Director, Financial Crimes Enforcement Network.
[FR Doc. 2021-20731 Filed 9-23-21; 8:45 am]
BILLING CODE 4810-02-P
</pre></body>
</html>Indexed from Federal Register on September 24, 2021.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.