Time is running out: all “art market participants” must register with the UK’s HMRC for anti-money laundering surveillance by Thursday 10 June. Those who fail to do so face civil or criminal penalties under the 5th European Union Money Laundering Directive (5MLD), designed to combat financial crime and the financing of terrorism.
The UK art market is subject to other requirements of the 5th Money Laundering Directive, such as performing risk assessments and due diligence on buyers and sellers to verify their identity, since on January 10, 2020. Details of these obligations are explained here. If a participant in the art market deals with funds that he knows or suspects to be the proceeds of a crime, he risks being prosecuted for a money laundering offense under the 2002 law. on the proceeds of crime.
Art Market Participants (AMP) are defined as a business or individual (such as a dealer, advisor, or auction house) who negotiates or acts as an intermediary in the sale or purchase works of art with a transaction value (or series of related transactions) of € 10,000 (£ 8,600) or more. The term also applies to those who operate a free port used to store works of art whose value to one person (or a series of related persons) is € 10,000 (£ 8,600) or more.
It was decided last month that the new regulations do not apply to artists who sell their own work directly to their clients.
After lobbying by a group of professional groups including the British Art Market Federation (BAMF), the directive adopts the same definition of a work of art as current VAT legislation and, as such, excludes certain antiques such as antique furniture, porcelain and clocks.
However, the following are considered “works of art”:
- all paintings, drawings, collages executed by hand
- unique or limited edition engravings, lithographs or other engravings
- any original sculpture or statuary
- limited edition sculpture casts
- handmade, unique or limited edition tapestries
- handmade ceramics, signed unique or limited edition
- handcrafted enamels on copper, signed unique or in limited edition (excluding jewelry)
- signed limited edition photographs (in prints less than 30 for the same exhibition)
You can register as a CHA here and an explanation of the charges can be found here. The registration fee is £ 300 for each local (e.g. auction house, free port or gallery), plus a non-refundable test fee of £ 150 per person (this does not apply to all AMP, only one money services business or one trust or corporate service provider) and £ 40 (per person) approval fee for high value resellers. The annual renewal fee is then £ 300 per room.
Small businesses (turnover of less than £ 5,000 per year) can claim a refund of £ 120 of the £ 300 registration fee.
The British Art Market Federation has published guidelines on 5MLD which can be downloaded here.
“The art market has caught the attention of anti-money laundering regulators for a number of reasons,” said Laura Ford, litigation and regulatory partner at DLA Piper. “The high value of the property in question attracts criminals seeking to launder money and legitimize criminal funds or finance illegal activities. The art world is also attractive to criminals due to its distribution in multiple international markets and the common use of intermediaries and offshore accounts. This is facilitated by a general culture of secrecy which means that the buyer and the seller are often unknown to each other. ”
She adds: “These factors combine to create what the Basel Institute on Governance, a global non-profit center focused on combating financial crimes, calls ‘an ideal playground for money laundering’.