High Risk Jurisdictions: What HMRC’s Latest Guidance Means for Art Market Participants

HMRC expanded the scope of what Art Market Participants (AMPs) should consider as High Risk Jurisdictions in a relatively low-profile update to its website in September 2025. Published under the guidance Understanding money laundering risks and taking action, the update provides important direction for HMRC-supervised art market businesses on how country risk should be assessed under the UK’s anti-money laundering regulations. AMPs disregard their supervisor’s advice at their peril.

FATF High Risk Jurisdictions and HMRC’s Expanded Guidance

Previously, the focus for identifying high-risk jurisdictions centred on the Financial Action Task Force’s (FATF) Black and Grey Lists. The FATF Black List is relatively stable, with the same three countries — North Korea, Myanmar and Iran — regularly included. The FATF Grey List currently includes 20 countries, with four jurisdictions being added to the list in 2025: Laos, Nepal, Bolivia and the Virgin Islands (UK) and eight jurisdictions removed: the Philippines, Croatia, Mali, Tanzania, Burkina Faso, Mozambique, Nigeria and South Africa. These lists change three times a year, making ongoing monitoring a challenge. A new FATF list is expected by the end of February.

In addition to the FATF lists, HMRC identifies further criteria that Art Market Participants should consider when determining whether a country presents a high risk. These include levels of bribery and corruption, tax evasion, capital flight, conflict zones and organised crime activity (collectively referred to as “corruption risks”).

Beyond the 23 Grey List and three Black List countries, there are dozens of jurisdictions that score poorly on recognised corruption indices, which we refer to as “corrupt countries”.

Neighbouring Countries and Cross-Border Money Laundering Risk

HMRC also warns AMPs to consider countries adjacent to FATF-listed jurisdictions and corrupt countries. Specifically, AMPs are reminded that money laundering and terrorist financing often involves the movement of funds across borders. As a result, risk assessments should extend beyond the named jurisdictions to neighbouring countries.

Applying a Risk-Based Approach and Enhanced Due Diligence

Despite the common belief that customer due diligence is sufficient, HMRC’s recent guidance highlights the most critical aspect of compliance with the UK money laundering regulations: applying human judgement within a risk-based approach.

Where a high-risk jurisdiction is present in a transaction, Enhanced Due Diligence (EDD) is required. At a minimum, this means establishing a client’s source of wealth using independently verifiable sources. It may also involve additional steps, such as having identity documents certified by someone who has met the client in person, asking further questions about the transaction, and gaining a clearer understanding of its purpose and nature.

To uncover red flags connected to high-risk jurisdictions — as with all red flags — a key component is what we refer to as your “Human AML Skill”. While technology can generate reports and conduct searches, only you can assess what the client is saying, how they respond to questions, and the broader context of the relationship.

If a client discusses high-risk jurisdictions or avoids questions about where they live, work or conduct business, these should be treated as human red flags. Discussing concerns with your Nominated Officer as early as possible allows them to be explored without unnecessarily delaying a transaction.

In practice, this means paying close attention to where your customers live, work and operate. Where FATF Black or Grey List countries, low-scoring corruption jurisdictions, or neighbouring countries are involved, Enhanced Due Diligence should be applied and, in most cases, reported to your Nominated Officer (also known as the Money Laundering Reporting Officer) in line with your AML policy.

If you are unsure how to interpret HMRC’s guidance or apply a proportionate risk-based approach in complex transactions, FCS Compliance (Financial Crime Services) supports Art Market Participants with practical AML advice, policy reviews and ongoing compliance support tailored to HMRC-supervised businesses.

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