The British Art Market Federation has released updated guidelines about anti-money laundering requirements for participants in the UK Art Market (AMP) and how they can be implemented. Approved by Her Majesty’s Treasury, the notice is designed to provide a detailed explanation of the new requirements set out in the European Union Directive Fifth Anti-Money Laundering Directive (5AMLD), which entered into force in all Member States on January 10, 2020.
Although the advice offered by the British Art Market Federation is not mandatory for implementing CHAs, deviations from the guidelines should be documented with the rationale for doing so. According to the document, “SAPs may need to stand ready to justify departures to HMRC and the courts”.
5AMLD and the art trade
5AMLD introduced changes that brought AMPs within the scope of the Money Laundering, Terrorist Financing and Transfer of Funds (MLR) Regulations 2017. Under the rules, MPAs must implement the same anti-money laundering and anti-terrorist financing measures (AML/CFT measures) applicable to banks, real estate agents, notaries and other financial institutions.
In addition to further clarifying specific terminology, the guidelines confirm that under 5AMLD, CHAs must do the following:
- Register with HMRC – applicable to SAPs that facilitate sales where the value of a transaction, or series of linked transactions, is €10,000 (£8,600) or more
- Complete a written AML risk assessment
- Maintain a written prescribed range of policies, controls and procedures
- Perform Customer Due Diligence (CDD) measures before entering into a transaction
- Appoint an appointed officer
- Train staff appropriately
- Submit Suspicious Activity Reports (SARs) to authorities
- Keep proper records of CDDs and transactions
The Money Laundering Regulations 2017 apply and define CHAs as traders or ‘intermediaries’ in the sale or purchase of works of art valued at €10,000 (£8,600) or more. In the updated guidelines, the previously undefined term “intermediary” is clarified as “someone who, in a professional capacity, actively transacts in the sale or purchase of works of art on behalf of ‘a seller or a buyer under whose authority he acts’. Through this definition, the guidelines confirm that an intermediary can refer to art dealers, agents, auction houses, art galleries and online sales platforms that carry out a relevant activity. by selling to UK customers.
The guidelines also confirm that anyone who is not actively involved in the purchase or sale of an artwork, such as framers and shippers, is not an intermediary.
AMP Risk Assessment Guide
Two days before the publication of these guidelines by the British Art Market Federation, HMRC has issued guidance on understanding money laundering risks in the art sector and how MPAs should act against these risks following a money laundering risk assessment.
Some of the identified critical risks that all SAPs should be aware of include:
- Anonymity: Anonymous transactions are advantageous for those looking to launder money as they can hide their involvement and source of funds
- Distance Selling : Transactions conducted online, over the phone or through an intermediary decrease the effectiveness of identification and increase vulnerability to money laundering and terrorist financing
- Unusual selling or buying activity: Anything that is not in line with common practice for the type of business concerned is a key risk indicator
- High-risk jurisdictions: The purpose and nature of any transactions with companies from high-risk jurisdictions should be carefully considered
Key points to remember
Compliance staff should ensure that they read HMRC’s risk assessment guidelines in conjunction with the PGA Tips and other relevant documents, such as the 2020 National Risk Assessment and the guidelines produced by the Financial Action Task Force (FATF).
Anti-Money Laundering Regulations in the Art and Antiques Markets
Read the comprehensive guide to regulatory approaches to anti-money laundering in art and antiques markets around the world.
Originally posted August 5, 2022, updated August 5, 2022