Are You Aware of Your Personal Liability as a MRLO in the Art Market?

May 6, 2026
Posted by: Rena Neville
Category: Art Market, Blog

If you are the Nominated Officer, commonly referred to as the Money Laundering Reporting Officer (MLRO), for an Art Market Participant (AMP) such as a gallery, art advisor, intermediary or auction house, it is worth pausing to consider what that responsibility means in practice.

In the Art Market in particular, where HMRC have highlighted numerous risks, transactions can be complex and high-value, and the expectations on MLROs are high.

Missing or ignoring a red flag, or failing to question a transaction, may lead to more than regulatory scrutiny. It can result in personal liability, financial penalties and, in more serious cases, criminal consequences.

If you are unsure whether your controls would stand up to scrutiny, now is the time to find out.

What is an MLRO in the Art Market?

Under the Money Laundering Regulations 2017, Art Market Participants (AMPs), including galleries, art advisors, intermediaries and auction houses, must comply with UK AML regulations where one transacts by way of business in a single transaction or series of linked transactions for a total purchase price of a qualifying work of art in excess of €10,000.

At the centre of any AML programme sits the MLRO. The MLRO must have sufficient authority to act independently and to monitor and oversee the AML programme.

This is not simply an administrative role, as it carries risks of prosecution in at least three key areas.

First, the MLRO must be able to identify potentially suspicious activity and must ensure that staff are similarly capable. This is more challenging than it sounds, as the Art Market has been given extensive guidance by our regulator, HMRC, about risks and red flags in the Art Market. Some examples of the many red flags include: unusual transactions, unusual third-party payments or deliveries, complex transactions, and remote clients not met face to face. The MLRO is responsible for ensuring that such red flags are identified, understood and properly managed.

Another key responsibility for MLROs is deciding whether or not there is a reasonable basis to file a Suspicious Activity Report (SAR). If the MLRO fails to make a required SAR where they know, suspect or have reasonable grounds to Suspect Money Laundering or Terrorist Financing, they risk committing the “failure to disclose” offence under the Proceeds of Crime Act and the Terrorism Act. In practice, this requires judgement, particularly in situations where transactions are opaque, involve intermediaries or span multiple jurisdictions.

As recently as 2023, a nominated officer of a money services business was found personally and criminally liable, among other offences, for not making a SAR when they should have.

Core MLRO Responsibilities

In the Art Market, AML compliance cannot be reduced to checklists. Regulators expect MLROs to demonstrate oversight, independence, professional scepticism and the ability to challenge transactions that include red flags.

While responsibilities are set out in legislation, it is how they are applied in practice that matters.

Your responsibilities include:

Designing and maintaining the business’s AML programme, which includes its required annual written risk assessment and policies, controls and procedures.
Being the point of contact with external third parties, such as HMRC during an inspection, the police during an investigation, or the National Crime Agency for queries regarding SARs. Acting as the internal point of contact for communications from management and/or staff about red flags and potentially suspicious activity, and for communications to management about the AML programme.
Receiving internal disclosures and submitting SARs.
Maintaining accurate CDD and AML records, and ensuring that CDD records are stored separately and securely from routine transaction records.
Training staff and ensuring awareness of changes to the regulatory landscape, AML laws and, critically, potential red flags.
Overseeing outsourced AML functions.

Even where tasks are delegated, accountability remains with the MLRO. Regulators will expect you to understand how your AML framework operates day to day.

The Real Risk: Personal Liability for MLROs in the Art Market

The Art Market has long been recognised as vulnerable to Money Laundering. As a result, scrutiny is increasing and expectations on MLROs are higher.

It is a common misconception that liability sits only with the business. In reality, regulators will look closely at the actions and decisions of the MLRO.

If a transaction later becomes problematic, the question will be what the MLRO did and why.

Criminal exposure

Under UK law, failing to report knowledge or suspicion, or a reasonable basis for knowledge or suspicion, of Money Laundering risks criminal charges and potentially:

A prison sentence; and/or
Fines.

Criminal liability does not require proactive or deliberate acts of wrongdoing. It may also result from a failure to notice or act on a clear red flag, a failure to escalate it, or a failure to report to the National Crime Agency (NCA).

Key Risks for MLROs

To be protected, MLROs must at a minimum:

Document all internal Suspicious Activity Reports. This might include questions or concerns raised by staff about a client, transaction or work of art.
Avoid allowing a transaction to be concluded despite legitimate red flags without first obtaining a Defence Against Money Laundering Suspicious Activity Report.
Avoid persistent failure to ensure that staff are aware of and able to identify red flags.

The most common misunderstanding in regulatory compliance is that red flags only appear as a result of an online search. The reality is that red flags commonly arise in human interactions with clients. If the staff who interact with clients — from specialists to operations staff or administrative staff — do not understand what red flags are, or choose not to report them to the MLRO, this places the business and the MLRO at serious risk.

Immediate Actions: MLRO Checklist (Art Market)

To help protect yourself as an MLRO, it is useful to report regularly to senior management about the AML programme. Such reports might include:

The MLRO’s view as to the adequacy of the time, staff and resources the MLRO has at his or her disposal to run the AML programme.
Consideration of the adequacy of the form and content of the AML staff training programme.
Robust internal and external Suspicious Activity Report decision-making and record-keeping.

Other key areas for the MLRO include the adequacy of the Customer Due Diligence conducted.

If you are unsure whether your controls would withstand HMRC scrutiny, that is a good reason to review them.

Effective MLROs take steps to identify and address gaps before they become issues.

Some key actions include:

Documenting and updating your risk assessment annually.
Completing and documenting Customer Due Diligence before transactions are concluded.
Applying enhanced due diligence where required.
Documenting all reasoning and records used to make decisions in response to internal suspicious activity reports, including whether or not to file one with the National Crime Agency.

These steps demonstrate active and informed risk management.

30 / 60 / 90-Day Action Plan

A structured approach can help strengthen your AML framework:

30 days: Review your risk assessment, policies and transaction monitoring.
60 days: Strengthen due diligence processes and deliver targeted training.
90 days: Test controls and ensure readiness for HMRC Inspection.

Take the FCS MLRO Quiz now to assess your exposure and identify what needs fixing first.

About this author

Rena Neville

Head of FCS Compliance Art Division

Rena is a qualified lawyer and art market AML specialist. She enjoyed a 30-year career at Sotheby’s becoming their first Global Compliance Director, having previously served as their European General Counsel and Global Head of Litigation. She benefits from a unique combination of art world and international legal experience. Leading the FCS Compliance Art Division, Rena assists many Art Market Practitioners providing them with the practical information and tools they need to ensure they and their firms are meeting the legal AML compliance obligations.