Will US Congress finally pass anti-money laundering legislation?

Arkady Rotenberg (right) and his brother Boris, who were named in the Senate report, are close allies of Vladmir Putin (left) Sasha Mordovets/Getty Images

A recent report by a US Senate Subcommittee declared that the international art market is “the largest, legal unregulated industry in the United States”. And as Congress returns today after its August recess, there could be renewed pressure to pass anti-money laundering legislation that has languished over the past year.

The bipartisan report, published in July, determined that within months of the US imposing sanctions on the Russian construction billionaire brothers Arkady and Boris Rotenberg in 2014, the duo illegally spent more than $18m on art in the US. Their purchases, made through shell companies, included at least $6.8m on nine works at Sothebys New Yorks Impressionist and Modern art day sale and another $7.5m paid for René Magrittes 1961 painting Chest, bought through a private US dealer.

These purchases, the report claims, were facilitated by the secretive nature of the art trade, which allowed the oligarchs—said to be in Russian president Vladimir Putins inner circle—to skirt the governments financial restrictions. This led the subcommittee to make a series of proclamations about the prevalence of money laundering in the art market and the need for increased regulation.

More regulation, however, would require more study, experts say. The Senate report relied on the “go-to trope that the art world is full of shady dealings”, says Nicholas ODonnell, an attorney at Sullivan & Worcester. “There are shady actors in every industry. The Rotenberg case is anecdotal evidence.”

Furthermore, anti-money laundering legislation would not have kept the Rotenbergs or their various companies from spending money. “The real issue outlined in the Senates study is not money laundering per se but evasion of sanctions,” explains Peter Tompa, the director of the Global Heritage Alliance and of counsel at Bailey & Ehrenberg.

The real issue is not money laundering per se but evasion of sanctions Peter Tompa, Global Heritage Alliance

Yet groups that have long advocated for increased regulation of the art and antiquities trade (namely by applying Bank Secrecy Act (BSA) ordinances on auction houses and dealers) saw the report as confirmation of a need for more stringent rules, such as the European Unions Fifth Directive, in the US—even if all cash transactions over $10,000 must already clear Financial Crimes Enforcement Network (FinCen) checks in all US banks.

“Bad actors are exploiting the $28.3bn art market—with serious consequences for the United States and our national security,” wrote Deborah Lehr, the chairman and co-founder of the Washington, DC-based Antiquities Coalition in an opinion piece for The Hill. “The [report] and its troubling revelations make clear that a push may be needed, lest some continue to hide behind voluntary guidelines to avoid their professional responsibilities. WeRead More – Source

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