Amber Alerts for Art Storage

Amber Alerts for Art Storage

Written by Rena Neville, Head of FCS Compliance – Art Division

Are you an art market participant (AMP) storing works of art for the short or long term?  If so, your obligations to proactively monitor and report suspicious activity have become much clearer since the UK’s National Economic Crime Centre (NECC), part of the National Crime Agency, issued its Amber Alert in February 2024*.

The alert warns the art market that it should develop ways to ‘identify within [your] business any change in client status and suspicious activity relating to financial sanctions evasion, money laundering, cultural property trafficking, or other criminality.’(emphasis added)

Failure to follow the standards set in the alert put the AMP at risk of violating – to quote the alert –   ‘financial sanctions evasion, money laundering, cultural property trafficking, or other criminality.’

Specifically, the alert explains that an AMP’s failure to regularly conduct due diligence may ‘indicate an attempt to circumvent regulations’.  The alert then goes on to suggest measures that the AMP should consider implementing.  These include:

• Daily checking of:
  • Sanctions, stolen art registers and other publicly available lists. The advice is clear – if an AMP is storing a work of art for a client, they are advised to check daily for any update about their customers.

• Understanding the reasons:
  • for transfers of property to a close family member or associate, as this may indicate an effort to evade impending or current sanctions and
  • the role of intermediaries in transactions, to ascertain if the intermediary is hiding something of concern**.

The Amber Alert is addressed at storage facilities but is in effect much broader than this.  It encompasses auction houses, dealers and galleries who store work either for short term (such as pre-sale) or long term.

It also outlines the risks of interacting with parties offering specialist services related to storage, such as shipping and transportation, insurance, legal, accountancy and banking.  The UK highlights the risk that criminals may hide behind the services of lawyers, or trust company service providers, to evade the law.

The upshot of this is that AMPs should be particularly cautious of these types of professional service providers when they are acting on behalf of the true owners of the art that the AMP is storing.

If an AMP believes there is a reasonable basis for suspicion of money laundering, they should file a Suspicious Activity Report (SAR) in the usual way via the National Crime Agency’s (NCA) portal.

The NCA suggests that for this type of storage-related SAR, the AMP should include the characters “XXJMLXX” in the body of the SAR as well as the reference 0735-NECC in the relevant field of the NCA SAR Portal.

If an AMP were to discover information that indicates an actual or attempted breach of sanctions or a frozen asset order, the AMP should report, as usual, to the Office of Financial Sanctions Implementation. Their email address OFSI@hmtreasury.gov.uk.

The stated goal of the government in issuing the Amber Alert is both to promote awareness and to ‘bring about preventative action’.  The alert unequivocally states that the art market is being exploited.  It includes direct statements and clear recommendations which it is in the art market’s interest to take seriously and apply.

^{*NCA Amber Alert: Financial Sanctions Evasion, Money Laundering & Cultural Property Trafficking Through the Art Storage Sector (January 2024, Ref. 0735-NECC) https://nationalcrimeagency.gov.uk/who-we-are/publications/692-0735-necc-amber-alert-sanctions-evasion-money-laundering-in-the-art-sec/file}

^{**We encourage you to study and understand the risks referred to as “Key Indicators and Useful Questions” set forth in the Amber Alert on pages 6, 7 and 8.}

^{Written: April 2024}