In a surprise move just before the Christmas and New Year break, The Money Laundering and Terrorist Finance Amendments Regulations 2019 (Regulations) were passed by the UK Government. They are due to take effect on 10 January 2020. Galleries and other art sector intermediaries who do business in the UK must take note of this regulatory overhaul that is likely to transform the market.
The Regulations implement the EU’s 5th Money Laundering Directive and target art market participants (amongst other sectors). From the effective date, the UK art market becomes ‘regulated’ for anti-money laundering (AML) and counter-terrorist financing compliance. This means art market participants (of any size) who participate in a transaction (single or linked) worth €10,000 EUR or more (currently around £8,500 GBP or $11,000 USD) must conduct the same ‘know your client’ (KYC) and due diligence checks long used by UK banks, accountants and lawyers before taking on such business and/or handling client money.
The HM Revenue & Customs (HMRC) becomes the UK supervising authority and regulated art participants (as well as their owners, officers and senior managers) will need to register with HMRC within a year. Additional AML compliance requirements such as appointing a Money Laundering Compliance Officer (MLRO) to supervise compliance and report suspicious activity, adoption of AML policies and documenting that appropriate checks that have been carried out as well as educating and training relevant staff on AML responsibilities, will also take effect.
Although a Government Consultation Paper was issued in April 2019 inviting views from the UK art sector, expected official guidance at the end of 2019 did not materialise and the Regulations now go straight into effect. With similar rules due to come into effect in other parts of the EU and failure to comply potentially leading to fines or prosecution in more serious cases, it’s vital that those affected take immediate steps to act.
Here is a short summary providing further information on the Regulations.