Previously the art market sector was exempt from some of the stricter Anti-money laundering regulations that some professional services are governed by.
However, as of the start of this year (January 10 2020) new rules that took effect, officially called “The Money Laundering and Terrorist Finance Amendments Regulations 2019,” are implementing the EU’s Fifth Money Laundering Directive in the UK, which mean that auction houses, art galleries and dealerships must conduct stricter due diligence on buyers who purchase from them works of art above a threshold of €10,000 and will make the UK art market one of the sectors that is officially regulated for anti-money laundering and counter-terrorist financing compliance.
The updated regulation also requires Art Market Participants (AMPs) – anyone trading in or acting as an intermediary in the trade of works of art that sell for above the threshold – to register (and a pay a fee) with HMRC.
In our previous article we provided an Anti Money Laundering Strategy Guidance for businesses now falling under the new rules, which aimed to assist businesses and their owners in identifying the action they must take to ensure the business and its staff comply with the regulations.
In this article we look at AMPs and some of the particular aspects that affect them.
Works of art definition
Under this updated regulation, ‘works of art’ are still defined under the current VAT legislation, which excludes items including antique furniture, books, clocks or porcelain.
This will mean that those selling items not classified as ‘works of art’ under this definition will not need to register with HMRC as AMPs – a process which involves paying a fee of £300 per premises plus a £40 fee per responsible person within the business who deals with
This means those not engaged in the selling of items classified as ‘works of art’ under this definition will not need to register with HMRC as AMPs – a process that involves a fee of £300 per premises plus £40 per responsible person within the business (an appointed Anti-Money Laundering Reporting Officer) – see below
But existing laws (e.g. the existing money laundering regulations for ‘High Value Dealers’ and the Proceeds of Crime Act regime) still require due diligence for transactions across a wide range of goods – well beyond the narrow definition of works of art.
Art Market Participants (AMPs) selling works of art over the threshold are advised to prioritise risk-assessing their business and putting policies and procedures in place to comply.
The HMRC has stated that businesses falling within this sector have a year to register as AMPs and said “While firms are expected to be compliant with the new requirements from January 10, HMRC will take into account the short lead-in time businesses have been given to implement all the new requirements in assessing the response to any non-compliance. Each case will be assessed on its own merits.”
However, those that fail to complete the registration during the year of 2020 will mean that an AMP cannot trade in works of art above the threshold after January 1, 2021 (until it registers).
To comply with The Money Laundering and Terrorist Financing (Amendment) Regulations 2019 Art Market Participants (AMPs) must:
■ Put in place an anti-money laundering policy and risk assessment tailored to your business, including written polices, controls and procedures to ensure customer due diligence is performed on those involved in transactions of €10,000 or more plus enhanced due diligence for high-risk transactions
■ Establish a record-keeping system as you will need to hold client and transaction documentation (e.g. proof of ID such as a passport)
■ Appoint an Anti-Money Laundering Reporting Officer (and a deputy if relevant)
■ Staff must be AML trained and a written training record kept
■ Be aware of how and when to make a suspicious activity report to the National Crime Agency
However, it is not so easy to identify what a business must do to comply with the regulations on an ongoing basis as the requirements are set out throughout the regulations. It is therefore necessary to understand and interpret the full regulations to enable your business to comply with the regulations. Unfortunately, it is the application of ALL the requirements where a number of businesses fall short and despite taking steps to comply with some of the regulations, failure to apply all of them, amounts as a breach which exposes the business and its staff to risk.
Anti-Money Laundering Services for AMPs
We work with AMPs to secure their authorisation or those who already have it to ensure they have effective AML policies and procedures in place to meet their regulatory requirements on an ongoing basis.
Details of the services we provide are contained in our services page which you can review to obtain detailed information on how we work with dealers in the art and antiques sector.