The new Money Laundering and Terrorist Finance Amendments Regulations 2019 (“The Regulations”) comes into effect from 10 January 2020 and will directly impact the art sector.
It’s a surprising move on the part of the UK Government but, many would argue, overdue given the art sector has been long regarded as an ideal playground for money laundering activities.
WHO DOES THIS AFFECT?
Essentially, most people or organisations that deal in art – including, but not limited to:
- Art dealers;
- Auction houses;
- Any firm or sole trader.
SO, WHAT’S NEW?
The European Union’s Fifth Money Laundering Directive (“5AMLD”) has now been implement in the form The Regulations and targets, amongst other sectors, “art market participants”.
So, from 10 January 2020, the UK art market will be designated as a “regulated” market for compliance purposes.
WHAT DOES THIS MEAN?
In short, there will be a major overhaul in practices within the art market.
Art market “participants”, which include owners and senior members, will now need to undertake proper checks on customers and take a “risk-based approach” to compliance. Previously, this only extended to those identified as “high value dealers”, but it now applies across the board.
Art market participants who are establishing a business relationship or involved in a transaction (or linked series of transactions) worth €10,000 or more must now complete a process of “Client Due Diligence” (“CDD”) before business dealings or handling monies. These are similar checks that are carried out by banks, law firms etc, and includes the obtaining of documents such as photographic ID and proof of address.
Of note is that the €10,000 threshold is not limited to payment type – it applies to any payments in cash, cheque, bank transfer or any other payment methods.
Importantly, there is also a registration requirement: art participants will now need to register with HM Revenue & Customs (“HMRC”), the UK’s Supervising Authority, within one year.
Further requirements include the need to appoint a Money Laundering Compliance Officer (“MLRO”) to supervise compliance, report suspicious activities, review staff compliance training and so forth.
There is therefore a requirement to commit significant financial resources and time to ensuring compliance, and with the threat of potentially severe consequences for failures to comply not least to one’s reputation.
Failure to comply can lead to fines or a prosecution against institutions, their directors and senior management – and so it is essential for any person or business to take immediate steps to ensure they do not fall foul!
There is currently little in the way of industry guidance available, but The British Art Market Federation (“BAMF”) will be issuing guidance shortly – so watch this space.
HOW CAN WE HELP?
Establishing a compliance system to meet the obligations imposed by The Regulations may be daunting, so any affected person or entity is best advised to seek expert advice sooner rather than later – as with anything else, prevention is better than a cure.
If you would like to discuss the implementation of an effective compliance programme or have been made subject of a regulatory/criminal investigation, we offer expert advice, assistance and representation.
Should you have any queries with regard to this article, please do not hesitate to contact us via email: firstname.lastname@example.org, or telephone: +44(0)203 972 8469.
Abbas Nawrozzadeh is a Senior Solicitor specialising in Regulatory Law and White-Collar Crime at Eldwick Law.
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