Changes to the Money Laundering Regulations — what to review for art market participants

Previously, mandatory EDD applied broadly to high-risk third countries, covering both the FATF blacklist and grey list. From 30 June, mandatory EDD applies specifically where there is involvement with a FATF “Call for Action” country (the blacklist) — the highest-risk jurisdictions.

For the art market this is most relevant to cross-border sales, overseas buyers and consignors, and works held in freeports. Grey-list and other higher-risk countries are not off the table — they must still be weighed in your wider customer risk assessment, with EDD applied where the overall risk profile justifies it.

EDD is now required where a transaction is unusually complex or unusually large having regard to the nature of the transaction. The key word is unusual — complexity alone is not the trigger. The question is whether it is unusual for that type of work, client or structure.

In the art market this often means intermediaries or agents acting for undisclosed principals, layered or offshore ownership, third-party payments, unusual source-of-funds explanations, or works with thin or unclear provenance. Where these arise, verify who you are really dealing with and document the rationale for applying — or not applying — EDD.

The Regulations replace certain euro-denominated thresholds with sterling. For art market participants, the relevant customer due diligence trigger is now aligned to a £10,000 threshold for a transaction, or a series of linked transactions, in works of art.

This may change whether some sales fall within scope — particularly borderline values, or linked sales to the same client that add up. It is worth re-checking your current and recent transactions against the new figure.

The wider theme across all the changes is the continued importance of a properly evidenced risk-based approach. The amendments make the regime more proportionate, but that does not reduce the need for clear judgement, proper documentation and timely escalation.

Customer and transaction risk assessments should be fully completed and reasoned, and decisions to apply simplified, standard or enhanced due diligence — along with source-of-funds and provenance checks — should be justified. Any uncertainty should be escalated rather than left unresolved.