[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 [www.gpo.gov]
[FR Doc No: 2021-20731]


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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.

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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: http://www.regulations.gov. 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 https://www.fincen.gov/contact.

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.
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    \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).
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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\
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    \3\ 31 U.S.C. 5311(1).
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    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\
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    \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).
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    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\
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    \8\ 31 CFR 1010.230.
    \9\ 31 U.S.C. 5318(l).
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    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\
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    \10\ 31 U.S.C. 5312(a)(2), (c)(1).
    \11\ AML Act Section 6110(a)(2).
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    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\
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    \12\ AML Act Section 6110(b)(2).
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    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\
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    \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.
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    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.
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    \14\ See FIN-2021-NTC2, FinCEN Informs Financial Institutions of 
Efforts Related to Trade in Antiquities and Art, March 9, 2021.
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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

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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