PanamaTimes

Friday, Mar 29, 2024

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.
Newsletter

Related Articles

PanamaTimes
0:00
0:00
Close
Apple warns against drying iPhones with rice
In a recent High Court hearing, the U.S. argued that Julian Assange endangered lives by releasing classified information.
Global Law Enforcement Dismantles Lockbit Ransomware Operation
Russian opposition leader Alexey Navalny has died at the Arctic prison colony
The President of Argentina Javier Mile does not fly private, he flies commercial, with the citizens he represents. And they LOVE him for it.
Bitcoin Reaches $50,000 for First Time in Over Two Years
Belo Horizonte: Brazil's Rising Carnival Hotspot for 2024
In El Salvador, the 'Trump of Latin America' stuns the world with a speech slamming woke policing after winning a landslide election
Tucker’s interview with Putin is over 50M views on X within the first 5 hours.
Finnish Airline, Finnair, is voluntarily weighing passengers to better estimate flight cargo weight
President Nayib Bukele has proudly announced El Salvador's remarkable achievement of becoming the safest nation in the Western Hemisphere.
Former Chilean President Sebastian Piñera Dies in Helicopter Crash
This farmer seems to understand science a bit more than the event organizer, Klaus Schwab.
Facebook turns 20: From Mark Zuckerberg's dormitory to a $1trn company
The Coolest Dictator in the World" on the Path to Victory in El Salvador
Macron, France and fake news
Indian-Origin Man 'King' Arrested For Smuggling $16 Million Drugs Into US
Can someone teach Americans that not every person with slanted eyes is Chinese?
Europe's Farmers Feeding the People, Protesting Against Politicians Who Do Nothing for Their Country and Serve Only Themselves at Taxpayers' Expense
Paris Restaurant That Inspired 'Ratatouille' Loses $1.6 Million Worth Of Wine
Brazilian Police Investigate Bolsonaro's Son for Alleged Illegal Spying
Police in Brazil Raid Residence of Bolsonaro Associate Over Allegations of Illegal Spying
Border Dispute Escalates as Texas Governor Vows Increased Razor Wire
OpenAI Enhances ChatGPT-4 Model, Potentially Addressing AI "Laziness" Issue
The NSA finally acknowledges spying on Americans by acquiring sensitive data
Report Reveals Toxic Telegram Group Generating X-Rated AI-Generated Fake Images of Taylor Swift
US Border Patrol States 'No Plans' to Remove Razor Wire Installed in Texas
Bitcoin Experiences Approximately 20% Decline in Value
Klaus Schwab recently appointed himself as the Earth's "trustee of the future."
DeSantis Drops Out, Endorses Trump.
Nikki Haley said former President Trump is "just not at the same level" of mental fitness as he was while president in 2016.
Residents of a southern Mexican town set the government palace on fire in response to the police killing of a young man
Samsung Launches AI-Driven Galaxy S24, Ushering in New Smartphone Era
Judge Questions SEC's Regulatory Overreach in Coinbase Lawsuit
The Ecuador prosecutor who was investigating the television studio attack, has been assassinated.
Is artificial intelligence the solution to cyber security threats?
Vivek Ramaswamy suspends his US election campaign and endorses Trump.
Viral Satire: A Staged Satirical Clip Mistaken as Real Footage from the 2024 World Economic Forum in Davos
The AI Revolution in the Workforce: CEOs at Davos Predict Major Job Cuts in 2024
Ecuador Reports 178 Hostages in Prison Gang Standoff
The Startling Cuban Espionage Case That Has Rattled the US Government
Two Armed Men in Ecuador, Dressed as Batman and The Joker Storm the Streets.
Armed Gang Raids Ecuadorian TV Station Following State of Emergency Declaration
Anti-Democratic Canada: Journalist Arrested for Questioning Canadian Finance Minister on Support of Terrorist Group
Ecuador's 'Most-Wanted' Criminal Vanishes from Prison
Mexican Cartel Supplied Wi-Fi to Locals Under Threat of Fatal Consequences for Non-Compliance
Border Surge Leads to Over 11,000 Migrants Waiting in Northern Mexico
Outsider Candidates Triumph in Latin American Elections
As Argentina Goes to the Polls, Will the Proposal to Replace the Peso with the Dollar Secure Votes?
Fatal Shark Attack Claims Life of Boston Woman Paddleboarding Near Bahamas Resort, According to Police
×