Money Laundering in the UK Art Market: Key Risks, AML Rules
Money laundering is a serious problem in almost all industries, but in the art market, it has become more prevalent in recent years. The UK art market is particularly susceptible to money laundering due to its high value, cross-border trading, and a preference for privacy. The FATF report highlights the risks associated with money laundering in the art market, and how to tackle them.
Key AML Challenges in the Art Market
One of the major challenges is the desire for privacy and discretion in the art market. Regularity frameworks do not require AMPs to undertake due diligence on their customers, making it easier for criminals to convert illicit cash into art and resell to launder money. Even in jurisdictions where due diligence is required, reporting suspicious transactions by AMPs is low due to a lack of understanding of AML risks within the art market.
Another challenge is the difficulty in investigating art market money laundering. Agencies tend to focus on recovering stolen and looted art, but after recovery, they may not examine the financial aspects of the offence. The specialist knowledge required to value and identify art also makes enforcement difficult. Sales are often cross-border, leading to difficult tracing and identification issues.
AML Rules for the UK Art Market
Since 2022, AMPs in the UK who trade in or act as intermediaries in the sale or purchase of art worth €10,000 or more are required to take additional steps to prevent money laundering. The six most important obligations on AMPs are:
- Registration with HM Revenue & Customs (HMRC)
- Customer due diligence
- Risk assessment
- Record keeping
- Staff training
- Reporting
Customer Due Diligence
AMPs must undertake customer due diligence that allows the AMP to form a reasonable belief that they know the true identity of each customer and the purpose and intended nature of each transaction. Due diligence undertaken should be recorded, along with transaction records.
Risk Assessment
AMPs must assess and document the money laundering risk associated with each customer and transaction to identify and understand each customer’s background and potential motives for using the art market for money laundering.
Record Keeping
AMPs must maintain records of all transactions (including customer due diligence) for five years after the transaction completes. The records must include details of the buyer and seller, the identity of the object, and the date and price of the transaction.
Staff Training
AMPs must provide regular training to their employees to ensure that they understand AML and counter-terrorism financing risks and can identify suspicious transactions.
Reporting
If AMPs have any suspicions of money laundering, they must report them to the National Crime Agency (NCA).
Related Facts
- 50% of fine art sold is purchased by anonymous buyers
- In 2022, money laundering via the art market was estimated at $3.6 billion
- 70% of money laundering investigations come from outside the UK
Key Takeaway
Money laundering in the art market has become a significant issue in recent years. It is essential to have robust AML rules to prevent the use of the art market for money laundering. The UK has taken significant steps to combat this, but there is still work to be done, particularly in raising awareness of the risks and improving reporting.
Conclusion
The global art market is valued at billions of dollars, making it a prime target for money launderers. The UK has taken significant steps towards AML regulation to protect the art market from money laundering, but there are still areas of improvement. AMPs should continue to expand their understanding of AML risks to ensure that the UK art market maintains its reputation for transparency and ethical trading.
