ANTI-MONEY LAUNDERING COUNTRY GUIDE: UNITED STATES OF AMERICA

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1 Author: Nicholas M. O'Donnell, Attorney at Law, Partner, Sullivan & Worcester LLP, Boston Law as at: December 2017 Part 1 AML regime overview Aspect 1. What is the applicable AML legislation? Overview The Bank Secrecy Act (BSA), 31 USC 5311 et seq. establishes program, recordkeeping and reporting for national banks, federal savings associations, federal branches and agencies of foreign banks. The USA PATRIOT Act; PUBLIC LAW OCT. 26, 2001, 314 helps law enforcement identify, disrupt, and prevent terrorist acts and money laundering activities by encouraging further cooperation among law enforcement, regulators, and financial institutions to share information regarding those suspected of being involved in terrorism or money laundering. Implemented through 31 CFR and 31 CFR , and 31 CFR It permits financial institutions, upon providing notice to the United States Department of the Treasury, to share information with one another in order to identify and report to the federal government activities that may involve money laundering or terrorist activity. The Office of Foreign Assets Control (OFAC) administers and enforces economic and trade sanctions based on US foreign policy and national security goals against targeted foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy or economy of the United States. OFAC acts under Presidential national emergency powers, as well as authority granted by specific legislation, to impose controls on transactions and freeze assets under US jurisdiction. Many of the sanctions are based on United Nations and other international mandates, are multilateral in scope, and involve close cooperation with allied governments. 2. Which institutions / persons must carry out AML measures? Apart from banks, the Bank Secrecy Act and the USA Patriot Act apply in relevant part to (N) a dealer in precious metals, stones, or jewels; (O) a pawnbroker; (P) a loan or finance company. 31 U.S.C. 5312(N)-(P). OFAC covers anyone intending to engage in certain transactions with designated countries and individuals identified for OFAC sanctions. Exceptions in the form of licenses are available only upon approved applications. 3. What due diligence apply? OFAC s Sanctions Programs and Country Information lists active sanctions programs currently in place. Familiarizing oneself 1

2 with this list or consulting it before any contemplated transaction is an essential part of due diligence. 4. Do the AML rules identify high risk categories of customers / business partners / transactions? The USA Patriot Act As noted above OFAC lists prohibited locations and counterparties. Any customer from such a location inherently poses a higher risk 5. What record keeping apply? 6. What reporting apply? OFAC carries a five-year record retention policy. Under the auspices of the U.S. Department of the Treasury Financial Crimes Enforcement Network (FinCEN) and the Internal Revenue Service, any person in a trade or business who receives more than $10,000 in cash in a single transaction or related transactions must complete a Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business. 7. Where can I report suspicions of money laundering? Section 314 of the USA Patriot Act permits a financial institution to report transactions suspected of being involved in money laundering to the FinCEN (under a safe harbour provision) Which aspects of the AML regime are particularly relevant for Art Businesses? The cash reporting requirement is without question the most frequently implicated. Recent concerns about Middle-Eastern antiquities and possible related terrorist financing are of paramount concern in any trade

3 involving those objects. 9. Where can I find more information and assistance on AML? OFAC s website has numerous resources. It is available at 3

4 Part 2 AML regime Legal / ethical overview Requirement Auction house when acting as financial Art dealer when acting as financial Art dealer or auction house when not acting as financial Art fairs Free ports Buyers other than dealers (museums, private collectors, etc.) Logistics and insurance Establish client s identity Establish identity of the beneficial owner Establish the origin of funds used in a transaction Establish the provenance of the artwork Keep records 4

5 Train staff Decline transactions / Report grounded suspicions Colour codes Red legal requirement Green ethical requirement 5