Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

Are the UK's anti-money laundering rules for the art market being adhered to?

Are the UK's anti-money laundering rules for the art market being adhered to?

It may come as a surprise to learn that more than 18 months have now passed since the UK’s new anti-money laundering (AML) rules came into force.
Time flies when you’re having fun, or so they say. It may come as a surprise to learn that more than 18 months have now passed since the UK’s new anti-money laundering (AML) rules came into force. The regulations imposed significant new AML-related obligations on art-market participants (a term which includes those who trade in, or act as an intermediary in, the sale and purchase of works of art with a value of 10,000 euros or more). At the time the new laws came into force, there was some uncertainty over how exactly these obligations should be met, and the true extent of the money laundering risks presented by the UK art market. A year and a half on, have these questions been cleared up – and how are art businesses faring?

In June 2021 the government published a new AML risk assessment specifically for art-market participants to assist them in identifying the key risk indicators in their businesses. This guidance provides some helpful clarity in terms of how some of the new AML laws should be applied and how the government currently assesses the risks of money laundering in the UK art market. Art-market participants would be wise to read the short document in full. (Interior designers may be surprised to read that they too may be regulated for AML.)

This guidance follows on from the UK National Risk Assessment of Money Laundering and Terrorist Financing of December 2020 in which the risk posed by art-market participants was assessed for the first time and was found to be ‘high’. The same conclusion was also reached in the latest guidance, which claims that it is ‘too early’ for the government to fully assess the impact of the implementation of the new AML laws for the art market. Indeed, the guidance states that ‘the use of illicit funds to buy, then sell high value goods is one of the oldest, and most common elements in money laundering and terrorist financing methodologies’.

As dealers will no doubt know by now, broadly speaking the new AML laws oblige art-market participants to conduct what is referred to as ‘customer due diligence’, put in place related systems and controls (including a business risk assessment and AML policy), and to train their staff to comply with their AML legal and regulatory responsibilities. By properly carrying out these obligations dealers can both reduce the risk of their business inadvertently becoming involved with money laundering (with the consequent legal and reputational risks) and reduce the risk of becoming liable for the criminal offence of ‘failing to disclose’ money laundering.

In the recent guidance, the government highlights another potential reality for anyone inadvertently getting involved with money laundering. The guidance states: ‘It is vital that [art-market participants] understand and meet their obligations […] to protect themselves, their families and their communities from the dangers of infiltration by criminals. Any weakness in the controls the business uses may be exploited by criminals who will seek to use, coerce or control the [art-market participant] to move more of their illicit money.’ In other words, if you are unfortunate enough to inadvertently be involved in a money laundering transaction you could find yourself pressurised into an ongoing relationship with criminals from which it is difficult and dangerous to extract yourself.

Art dealers implementing AML controls for the first time might understandably attempt to reduce the complexity of the legislation into a box-ticking exercise. However, a more holistic approach to AML controls is required for proper implementation. As a lawyer, I encourage my clients to try to understand (conceptually) what money laundering is, to learn to recognise the red flags and to think about the potential risks their business may be subject to. Only then can they properly determine how to perform appropriate customer due diligence in each circumstance. In my view, understanding how to conduct a risk assessment is the key, not only to implementing the law properly, but also to making the process more user-friendly.

Many dealers have invested in subscriptions to databases which, to a greater or lesser degree, can assist with customer due diligence procedures in terms of verification and checks. Some, such as Arcarta, operate an online platform which collects buyers’ documentation as part of the payment process. Others, such as World-Check, Experian and Acuris, conduct broad searches of databases. It is important to remember that, irrespective of such outsourcing, the responsibilities for conducting appropriate checks remain with the art-market participants. They must collect the necessary information and verification documentation and keep it in their own records for the requisite period (typically five years). They also need to understand each transaction and identify each client in order to conduct risk assessments and to potentially perform ongoing customer due diligence, and to spot linked transactions. Therefore, complete delegation is not an option.

Art dealers should be clear at the outset of any agreement with an outsourced provider as to the scope of the checks they will undertake. For example, are they checking for politically exposed persons and sanctioned individuals? If so, against which lists, and how often will those lists be updated? It would also be wise to ensure that all necessary data protection considerations have been addressed when subscribing to an outsourced provider of customer due diligence services.
AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
Munich Airport Reopens After Second Drone Shutdown
Pro Europe and Anti-War Babiš Poised to Return to Power After Czech Parliamentary Vote
Sean ‘Diddy’ Combs Sentenced to Fifty Months in Prison Following Prostitution Conviction
Altman Says GPT-5 Already Outpaces Him, Warns AI Could Automate 40% of Work
Russian Research Vessel 'Yantar' Tracked Mapping Europe’s Subsea Cables, Raising Security Alarms
Global Cruise Industry Posts Dramatic Comeback with 34.6 Million Passengers in 2024
U.S. Demands Brussels Scrutinize Digital Rules to Prevent Bias Against American Tech
Private Equity’s Fundraising Surge Triggers Concern of European Market Shake-Out
Tokyo’s Jimbōchō Named World’s Coolest Neighbourhood for 2025
European Officials Fear Trump May Shift Blame for Ukraine War onto EU
The Personality Rights Challenge in India’s AI Era
Italy Considers Freezing Retirement Age at 67 to Avert Scheduled Hike
Italian City to Impose Tax on Visiting Dogs Starting in 2026
Study Finds No Safe Level of Alcohol for Dementia Risk
Trump Says Ukraine Can Fully Restore Borders with NATO Backing
Europe Signals Stronger Support for Taiwan at Major Taipei Defence Show
Germany Weighs Excluding France from Key European Fighter Jet Programme
Cyberattack Disrupts Check-in and Boarding Systems at Major European Airports
Björn Borg Breaks Silence: Memoir Reveals Addiction, Shame and Cancer Battle
When Extremism Hijacks Idealism: How the Baader-Meinhof Gang Emerged and Fell
JWST Data Brings TRAPPIST-1e Closer to Earth-Like Habitability
Trump Orders $100,000 Fee on H-1B Visas and Launches ‘Gold Card’ Immigration Pathway
France’s Looming Budget Crisis and Political Fracture Raise Fears of Becoming Europe’s “Sick Man”
Three Russian MiG-31 Jets Breach Estonian Airspace in ‘Unprecedentedly Brazen’ NATO Incident
European manufacturers against ban on polluting cars: "The industry may collapse"
Turkish car manufacturer Togg Enters German Market with 5-Star Electric Sedan and SUV to Challenge European EV Brands
Christian Brueckner Released from German Prison after Serving Unrelated Sentence
World’s Longest Direct Flight China Eastern to Launch 29-Hour Shanghai–Buenos Aires Direct Flight via Auckland in December
New OpenAI Study Finds Majority of ChatGPT Use Is Personal, Not Professional
The conservative right spreads westward: a huge achievement for 'Alternative for Germany' in local elections
Pope Leo Warns of Societal Crisis Over Mega-CEO Pay, Citing Tesla’s Proposed Trillion-Dollar Package
Poland Green-Lights NATO Deployment in Response to Major Russian Drone Incursion
U.S. and China Agree on Framework to Shift TikTok to American Ownership
Le Pen Tightens the Pressure on Macron as France Edges Toward Political Breakdown
Czech Republic signs €1.34 billion contract for Leopard 2A8 main battle tanks with delivery from 2028
Penske Media Sues Google Over “AI Overviews,” Claiming It Uses Journalism Without Consent and Destroys Traffic
Indian Student Engineers Propose “Project REBIRTH” to Protect Aircraft from Crashes Using AI, Airbags and Smart Materials
One in Three Europeans Now Uses TikTok, According to the Chinese Tech Giant
Could AI Nursing Robots Help Healthcare Staffing Shortages?
NATO Deploys ‘Eastern Sentry’ After Russian Drones Violate Polish Airspace
The New Life of Novak Djokovic
German police raid AfD lawmaker’s offices in inquiry over Chinese payments
Volkswagen launches aggressive strategy to fend off Chinese challenge in Europe’s EV market
France Erupts in Mass ‘Block Everything’ Protests on New PM’s First Day
Poland Shoots Down Russian Drones in Airspace Violation During Ukraine Attack
Apple Introduces Ultra-Thin iPhone Air, Enhanced 17 Series and New Health-Focused Wearables
Macron Appoints Sébastien Lecornu as Prime Minister Amid Budget Crisis and Political Turmoil
Vatican hosts first Catholic LGBTQ pilgrimage
Apple Unveils iPhone 17 Series, iPhone Air, Apple Watch 11 and More at 'Awe Dropping' Event
France joins Eurozone’s ‘periphery’ as turmoil deepens, say investors
×