Among the changes of this latest legal requirement is the obligation for ‘Art Market Participants’ (AMPs) – any auction house, dealer or anyone trading in or acting as an intermediary in the trade of works of art – to verify identities and conduct appropriate due diligence checks if they expect to transact at values of €10,000 or more.
It also covers any series of lower-value ‘linked transactions’ that can add up to €10,000 or more, irrespective of the method of payment.
Previously in the UK, such checks were necessary only for cash transactions of €10,000 or more.
If it is expected that a client will spend more than €10,000 in a purchase from your company, then you must register with HMRC for the anti-money laundering (AML) scheme and put a series of measures in place (see box below).
The British Art Market Federation (BAMF) is currently working alongside HMRC drafting guidance for the industry which will be published next year. This guidance will give information on what construes linked transactions and whether at auction the hammer price, or hammer price plus fees, will be used when determining the €10,000 level. HMRC will use the Bank of England’s monthly average exchange rate to convert the euro figure to sterling.
HMRC is currently implementing an IT system to register AMPs. It is expected that during this registration period over the coming year it will take a pragmatic and reasonable approach to criminal proceedings relating to the new directive.
HMRC will be carrying out “compliance interventions” to AMPs based on risk and there will be educational support and guidance to help AMPs meet their obligations.
HMRC will give further information after the December 12 General Election. Details of the registration process will be made available in due course.
Art law consultant Tom Christopherson has been working closely with HMRC, SOFAA, BAMF and thesaleroom.com on the how the art market can implement the requirements. SOFAA held a meeting on the topic in September to brief its members.
SOFAA chairman Helen Carless said: “Guidelines are unlikely to be in place before January and therefore the government has agreed a 12-month registration period. SOFAA is liaising closely with online bidding platform providers to ensure their members’ interests are covered.”
Petra Warrington, senior associate at Hunters Law, explains there is no universal answer to compliance under the directive’s obligations but members of the trade must take a “risk-based approach” to anti-money laundering measures that is “appropriate to the size and nature of their business”.
She adds: “For example, those that deal in high-risk categories such as archaeological and cultural artefacts or transact largely online and never meet their clients face to face will have a higher risk profile and need to routinely apply more rigorous anti-money laundering measures.
“The first step is to assess the risk of money laundering to your business and establish clear policies and procedures to address this. Educating all members of staff and establishing client due diligence and record-keeping procedures will be key to compliance.”
Requirements that must be in place at auction houses, art galleries and dealerships that sell items for above the €10,000 threshold:
■ Put in place an AML policy and risk assessment tailored to your business, including written polices, controls and procedures to ensure customer due diligence is performed on those spending more than €10,000 and enhanced due diligence is performed in relation to high-risk transactions
■ Establish a record-keeping system as you will need to hold client and transaction documentation (eg proof of ID)
■ Appoint an Anti-Money Laundering Reporting Officer and a deputy
■ Staff must be AML trained and a written training record kept
■ Be aware of when a suspicious activity report to the National Crime Agency is required and how to make one
How thesaleroom.com will implement elements of Fifth Anti-Money Laundering Directive
Auction marketplace thesaleroom.com, owned by Antiques Trade Gazette’s parent company Auction Technology Group, plans to implement new systems to comply with the rules. These changes will be in place by summer 2020.
Auction Technology Group’s Richard Lewis said the changes to the system include:
■ auctioneers can apply a spend limit (€10,000)
■ to remove the spend limit the bidder uploads their photo ID and thesaleroom.com runs an AML check. If they pass the AML check, the spend limit is removed
■ the bidder only has to do this process once. Once they have uploaded their photo ID and passed the AML check, to remove the spend limit the bidder is given the option of sharing their photo ID and AML check with auctioneers with whom they register
■ auctioneers will be able to override the process
■ documents to be stored in a GDPR-compliant manner (this will be subject to thesaleroom.com retention policy)
For more information, see ATG's guide to Money Laundering Regulations