Yesterday, members of the Art Law & More team attended The Art Business Conference. One of the key topics discussed was the recent application of the anti-money laundering regulations to the art world, and how the market is navigating the issues that those regulations have introduced.
The panel included a diverse range of experts from Corinth Consulting, Art Money and BADA. Key takeaways are below:
Registration with HMRC is not all there is to it
- Everybody who needs to register with HMRC for money laundering supervision (i.e. all art market participants "AMPs") now should have done so. However, as well as registering with HMRC, people should have also already complied with other requirements such as completing a risk assessment and carrying out staff training.
The risk assessment is a really key document. Having one in place that is only 3 lines long and very vague is not enough. The assessment, and policies in place, should be bespoke.
Know Your Client - Asking for your client's passport is, in itself, unlikely to be enough
- Unless you are also asking for source of funds you are unlikely, in most cases, to be making thorough enough enquiries. While these questions are awkward to ask clients, if you carry out a comprehensive process as standard, for everybody, then you will not be faced with an awkward decision to make.
- Since Zoom is now commonplace, it has never been easier to meet your client 'face to face' to check they are who they say they are. This should make the process slightly more straightforward since clients are now unlikely to be surprised at the suggestion of a video call.
- It is very important to document your thought processes showing the enquiries you have made of your client, and that you have had a closer look when you need to. HMRC will expect a robust and well thought out process.
- Partnering with a tech provider should be seriously considered. This will enable you to check individuals against a database. The software will highlight if an individual is, for example, on a sanctions list. However - this is only one part of the story. A 'hit' on a sanctions list does not necessarily mean you can't work with that individual - you should then carry out your own enquiries as to what further information you need to consider (and you should clearly document yourself considering that).
Calls for change
- The limit of EUR10,000 per transaction (or per series of linked transactions) is felt by some to be too low. Small businesses that fall within the scope of the regulations may only transact at that level once or twice a year. There are calls for the limit to be increased.
- There is disparity internationally. For example, the definition of 'art' is similar in the UK and Germany, but very different in Italy (which focuses on old masters, not contemporary art). This can lead to confusion about what is required where, and so specialist advice should be sought.
- Dealers are now being faced with the requirement of providing the details of their buyers to auction houses. The large auction houses are able to put in place procedures that mean the information will stay with their legal / compliance teams (and not passed on elsewhere in the auction house), but this may not be possible in smaller auction houses. This issue has been raised with the Treasury.