A Guide to Anti-Money Laundering for Crypto Firms

Updated Guidance on Anti-Money Laundering for UK Art Market Participants

Art Trade Latest News

The British Art Market Federation has issued updated guidance on anti-money laundering requirements for UK art market participants (AMPs) and how they can be implemented. Approved by HM Treasury, the advice is designed to provide a detailed explanation of the new requirements outlined in the European Union’s Fifth Anti Money Laundering Directive (5AMLD), which came into force across all member states on January 10, 2020. 

While the guidance offered by the British Art Market Federation is not mandatory for AMPs to implement, departures from the guidelines must be documented along with the rationale for doing so. According to the document, “AMPs may have to stand prepared to justify departures to HMRC and the courts.” 

5AMLD and the art trade

5AMLD introduced changes that brought AMPs into the scope of the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 (MLRs). Under the rules, AMPs must implement the same anti-money laundering and combatting the financing of terrorism (AML/CFT) measures that apply to banks, real estate agents, notaries, and other financial institutions. 

In addition to providing added clarity on specific terminology, the guidance confirms that under 5AMLD, AMPs must do the following:

  • Register with HMRC – applicable to AMPs that facilitate sales where the value of a transaction, or a series of linked transactions, amounts to €10,000 (£8,600) or more
  • Carry out a written AML risk assessment
  • Maintain a written prescribed range of policies, controls, and procedures  
  • Carry out customer due diligence (CDD) measures before a transaction is concluded 
  • Appoint a nominated officer  
  • Train staff appropriately  
  • Submit suspicious activity reports (SAR) to the authorities  
  • Keep appropriate records of CDD and transactions

Intermediaries 

The Money Laundering Regulations 2017 apply to and define AMPs 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, by way of business, actively transacts in the sale or purchase of works of art on behalf of a seller or buyer under whose authority they act.” Through this definition, the guidelines confirm that an intermediary can refer to art dealers, agents, auction houses, art galleries, and online sales platforms that conduct relevant activity by selling to UK customers.

The guidance also confirms that any person who does not actively participate in purchasing or selling a work of art, such as framers and shippers, is not an intermediary.

AMP risk assessment guidance

Two days before the British Art Market Federation issued this guidance, HMRC released guidance on understanding money laundering risks in the art sector and how AMPs should take action against these risks following a money-laundering risk assessment. 

Some of the critical risks identified that all AMPs should be aware of include:

  • Anonymity: Anonymous trades are advantageous to those seeking to launder money as they can hide their involvement and their source of funds 
  • Remote sales: Transactions made online, over the phone, or via an intermediary decreases effective identification and increases vulnerability to money laundering and terrorist financing 
    • Unusual sales or purchase activity: Anything that is not consistent with the standard practice for the type of business concerned is a key risk indicator
  • High-risk jurisdictions: The purpose and nature of any transaction with businesses from high-risk jurisdictions should be carefully considered

Key takeaways

Compliance staff should ensure they read HMRC’s risk assessment guidance in conjunction with the AMP guidance and other relevant documents, such as the National Risk Assessment 2020 and guidance produced by the Financial Action Task Force (FATF).

 

Anti-Money Laundering Regulation in the Art and Antiquities Markets

Read the complete guide on the regulatory approaches to anti-money laundering in the art and antiquities markets across the world.

Learn more

Originally published August 5, 2022, updated August 5, 2022

Disclaimer: This is for general information only. The information presented does not constitute legal advice. ComplyAdvantage accepts no responsibility for any information contained herein and disclaims and excludes any liability in respect of the contents or for action taken based on this information.

Copyright © 2022 IVXS UK Limited (trading as ComplyAdvantage).