Ask The Expert: UK Art Market – BAMF Updates AML Guidance

Ask The Expert: UK Art Market – BAMF Updates AML Guidance (approved by Her Majesty’s Treasury)
Rena Neville – Lead AML Consultant, FCS Compliance Art Division
Paula Trommel – Senior AML Consultant, FCS Compliance Art Division

Rena Photo Paula Image

UK Art Market – BAMF Updates AML Guidance (approved by Her Majesty’s Treasury)

On 30 June 2022, the British Art Market Federation issued updated “Guidance on Anti Money Laundering for UK Art Market Participants, approved by HM Treasury”. It is impossible to discuss all the changes to this 110-page document here, but highlighted below are some of the amendments to the original HMT-approved BAMF Guidance from January 2020 . Fortunately for many AMPs, the Guidance has arrived in time for the annual review of their Policy and Risk Assessments, and in advance of annual refresher training.

One of the key changes (and more complex changes) is the definition of “customer” which impacts what KYC/ CDD needs to done on which person/ entity in a transaction chain. Another post will be devoted exclusively to this topic in the coming days. As for highlights of other updates, they are discussed below.

The updated Guidance includes a further explanation of what constitutes “an intermediary”. The update is helpful in resolving the common problem of distinguishing between someone who is merely an “introducer” (who may earn a fee but may not be actively involved in a transaction) vs an intermediary. Intermediaries are themselves subject to compliance with the UK ML Regulations, whereas introducers are not. Specifically, under the UK ML Regulations one of the express criteria for becoming an “art market participant” is when an individual or entity:

  • (i) by way of business trades in, or acts as an intermediary in the sale or purchase of, works of art and the value of the transaction, or a series of linked transactions, amounts to 10,000 euros or more;

In the new Guidance, an intermediary “would be someone who, by way of business, actively transacts in the sale or purchase of works of art on behalf of a seller or buyer under whose authority they act”. The guidance further explains that an intermediary may “receive a financial value which directly relates to their active participation in the transaction”. The guidance further explains that framers and shippers who merely provide contact information are not intermediaries.

The Guidance also explicitly includes online platforms as intermediaries “if they are conducting relevant activity in the UK and receive commission in relation to transactions (sales or purchases of works of art) taking place on their platform.” (emphasis added) This is a serious consideration for UK AMPs participating on a non-UK online sales platform if that platform qualifies as an AMP, but is not registered as an AMP. Why is this a concern? Because if a non-UK online platform does qualify as an AMP, but is not registered and does not meet the UK AML standard, there is a risk to the UK AMP. It is important to remember that under HMRC’s June 2021 Guidance, AMPs are required to ascertain whether fellow AMPs are registered and if not, the AMP should not transact with the unregistered AMP, and should consider filing a Suspicious Activity Report and notifying HMRC.

A very much appreciated addition to the Guidance is an explanation of how “overseas” or non-UK AMPs may register. Before registering with HMRC, an overseas AMP that comes to the UK to sell works of art must first register for VAT as a non-established taxable person (NETP). With their NETP number, the overseas gallery is able to register as an AMP on the HMRC website. Prior to the updated Guidance, the path was not clear on how overseas galleries might complete their registration with HMRC. The reiteration of the duty to register and the information on how overseas AMPs may register is good news for UK AMPs. There is no excuse now for overseas AMPs who attend UK art fairs not being registered and otherwise compliant with the UK AML regulatory obligations. This change very much helps put UK and non-UK AMPs attending UK fairs on a level playing field.

As expected, the guidance excludes artists from the scope of the ML regulations. The exclusion applies whether an artist’s works are sold: directly by the artist; through a business the artist owns; or through the artist’s estate.

These are only a few of the changes in the updated guidance. The definition of “customer” that triggers the CDD obligations will be addressed in an upcoming post, as given its importance, it warrants further discussion. However, for a high-level review of the AMP ML obligations, the “Overview” section of the Guidance provides a good starting point. In addition to the duties discussed above, the Overview lists other requirements of the ML Regulations, including:

  • conducting a written risk assessment of the business;
  • having written policies, controls and procedures;
  • adopting a risk-based approach to detect and prevent money laundering on a “day to day, customer by customer basis”;
  • appointing a qualified nominated officer;
  • conducting appropriate training;
  • specific senior management responsibilities; and
  • the obligations to carry out CDD, to report suspicions; and to keep records.

Stay tuned for further updates.

  • [1]   Para 13, HMT BAMF 31 June 2022 Guidance. (emphasis added)
    [1]   Para 18, HMT BAMF 31 June 2022 Guidance. (emphasis added).
    [1]  Para 17, HMT BAMF 31 June 2022
    [1]   Para 15, HMT BAMF 31 June 2022 Guidance
    [1]   See HMRC June 2021 Guidance where HMRC makes clear the AMP’s obligation to ascertain whether fellow AMPs are registeredclick here.