In July, the U.S. Senate introduced the Art Market Integrity Act (AMIA), legislation that would require art dealers and auction houses to comply with anti-money laundering and counterterrorism financing regulations under the Bank Secrecy Act (BSA). The BSA requires financial institutions, such as banks, money services businesses, and casinos, to take steps to prevent, detect and report money laundering activity. But, while comprehensive, the BSA does not extend to the art market. The proposed AMIA would change that by amending the BSA to include in the definition of “financial institution” a “person engaged in the trade in works of art, including a dealer, advisor, consultant, custodian, gallery, auction house, museum, collector, or any other person who engages as a business as an intermediary in the sale of works of art.”
The art market, a multi-billion-dollar industry in the United States and the largest of its kind globally, is one of the last major markets not required to meet anti-money laundering standards. While Congress extended the BSA to antiquities in 2021, implementing regulations have yet to be promulgated. Thus, currently, neither art nor antiquities are subject to any such controls. As a result, terrorist financiers, drug cartels, foreign adversaries and other bad actors have exploited these loopholes to funnel money through art deals and evade sanctions. The art market remains vulnerable to money laundering for a number of reasons, including its culture of privacy and discretion that obscures the ultimate seller or purchaser; the frequent use of intermediaries, offshore accounts and shell companies to conceal beneficial ownership; the portability of art across borders; the difficulty in tracking cash-based transactions; and storage of art in free trade zones or ports. The proposed legislation is currently under consideration by Congress but has already drawn endorsements from various organizations and garnered bipartisan support.
HEAR Act of 2025 Would Extend “Actual Discovery” Standard and Reduce Other Available Procedural Defenses
In May, the U.S. Senate introduced the Holocaust Expropriated Art Act of 2025, which would extend provisions of the Holocaust Expropriated Art Act (HEAR Act) of 2016 while also significantly expanding the protections afforded claimants under the Act currently in place. The HEAR Act of 2016 established a uniform federal statute of limitations for Nazi stolen art claims: six years from the time of “actual discovery” of the facts and circumstances necessary to bring a claim. Before the HEAR Act of 2016, the “constructive knowledge” standard under most state law statutes of limitations had created a procedural barrier that often served to prevent courts from reaching the merits of a claim. The HEAR Act is set to expire at the end of 2026. The new legislation seeks to eliminate the expiration date and thereby continue the application of the “actual discovery” standard in Holocaust art cases.
In addition to extending the statute of limitations standard, the new legislation includes several noteworthy provisions aimed at reducing procedural defenses that have, to date, hampered claimants. First, the legislation would override Supreme Court precedent concerning foreign sovereign immunity by expanding the expropriation exception under the Foreign Sovereign Immunities Act (FSIA) to allow claims against foreign governments regardless of the nationality or citizenship of the alleged victim, notwithstanding the precedent in Federal Republic of Germany v. Phillipp. Second, the legislation would eliminate the application of the Act of State Doctrine to cases brought under the HEAR Act. As such, the legislation is an explicit rejection of the determination in Von Saher v. Norton Simon Museum of Art that acts of foreign sovereigns within their own jurisdictions are deemed valid and the sale of Nazi stolen art by the Dutch government therefore could not be challenged in a U.S. court. Third, the HEAR Act of 2025 would eliminate other potential defenses such as laches and forum non conveniens, which were not addressed in the HEAR Act of 2016. The elimination of laches would be a significant change for Holocaust art cases where, not infrequently, evidence is degraded or lost due to the passage of time. Finally, the amendment would also allow for retroactive application, meaning that any pending lawsuits would benefit from it. Collectively, the proposed additions to the statute would dramatically bolster the ability of Holocaust survivors and their heirs to reclaim art stolen from their relatives during World War II.
EU Regulation Imposes Substantial New Requirements for Importation of Non-EU Cultural Property
In June, EU Regulation 2019/880, which aims to combat illicit
trafficking of cultural property and related terrorist financing,
went into full effect. The regulation includes a general
prohibition on the import or introduction (any physical entry into
the EU) of unlawfully exported cultural goods from non-EU
countries. Importers must now provide documentation showing lawful
export from the “country of interest,” which is either
the country of origin or the country in which the object was
continuously held for more than five years (if the country of
origin cannot be established or the object left before April 24,
1972). Acceptable proof includes an export license, sales invoices,
customs records, insurance papers, expert appraisals, and transport
documentation.
Regulatory compliance requirements vary according to different
categories of cultural goods. Those described in Part B (such as
archaeological objects over 250 years old or architectural
fragments removed from their original context) require an import
license. The importer submits an application that includes the
following: country of interest, object description, provenance
history, customs value, high-quality photographs, distinguishing
features, personal or corporate information of importer, and a
legal declaration affirming the information is truthful and that
the object was exported in accordance with the laws of the country
of interest. Cultural goods listed in Part C (generally objects
more than 200 years old and valued above €18,000) require an
importer statement that the goods were lawfully exported, a lighter
compliance burden than the import license. Where EU competent
authorities—Customs, Ministry of Culture or the government
body responsible for vetting applications—suspect that
cultural goods were unlawfully exported, they may order seizure or
potentially confiscation. One notable exception applies to museum
loans: cultural goods temporarily imported by educational,
scientific or research institutions or by museums for the purpose
of conservation and/or exhibition do not require an import license
or importer statement.
While the regulation has applied since 2019, the obligation to
obtain an import license or submit an importer statement went into
effect in June when the centralized electronic system (ICG system)
for the storage and exchange of information between EU authorities
became operational. Already, critics have noted numerous challenges
posed by the new requirements. For many antiquities, provenance
records are incomplete or non-existent, particularly for objects
exported decades ago from countries without formal export regimes.
Given that importers bear full liability for proving lawful export
and face criminal penalties for false statements, objects with
incomplete provenance records may pose too great a risk to the
importer. Even if an importer holds a valid license or submits a
compliant statement, the object may still be seized if the country
of origin challenges the original export. Finally, many cultural
goods do not fit neatly into a single category making
classification less than straightforward. While the full effect of
the regulation remains to be seen, importers in the United States
will need to familiarize themselves with the new
requirements.
New Authentication Lawsuit Challenges Foundation and Gallery's Disavowal of Alleged Sam Gilliam Artwork
In July, Drax Fine Art, an LLC that was formed to house and
manage a private art collection, filed a lawsuit in the New York
Supreme Court challenging attempts by the Sam Gilliam Foundation
and David Kordansky gallery to disavow what Drax Fine Art claims to
be a genuine drape painting by the late artist. Drax Fine Art
describes the piece at issue as an untitled work from 1972 that the
Carl Solway Gallery in Cincinnati purchased directly from Gilliam
in 1989 after hosting four solo shows of the artists work over the
previous two decades. According to Drax Fine Art, the piece
remained in the possession of the Carl Solway Gallery until it was
acquired by the LLC. When Drax Fine Art recently attempted to sell
the piece at auction, the Sam Gilliam Foundation and David
Kordansky gallery blocked the sale by taking the position that
restoration efforts had irreparably damaged the drape painting.
This echoes the position taken by the Calder Foundation in the case
described in an
earlier newsletter, that damage to a glass and wire mobile
previously authenticated by the foundation rendered the work
“no longer in a state that reflects the intentions of
Alexander Calder.” As with the Calder case, Drax Fine Art
asserts that the foundation and gallery sued here are attempting to
manipulate the market for the artist's works.
In a
joint statement to ARTnews, the Gilliam
Foundation and David Kordansky Gallery have also asserted, however,
that “[t]here have been cases going back to the 1970s where
people have taken remnants, often polypropylene that was on the
floor of the studio that served as drop cloths, and attempted to
sell them as authentic works,” the gallery and the foundation
said. “The piece in question is unsigned and undated, which
does not conform to Gilliam's practice. There are also
serious issues of composition and scale for a drape work from this
period.” Thus, whether restoration work did or did not cause
damage to the piece may not be determinative in the present case,
as in the Calder case. Nevertheless, the lawsuit underscores once
again the high risk of litigation associated with refusals to
authenticate or disavowals of authenticity given the effect on
market value. Drax Fine Art is seeking $6 million dollars in
damages, more than $3 million more than Gilliam's auction
record of $2.43 million set this past May.
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