Those in breach could face up to seven years in jail.
Statutory Instrument 2003 No.1519 UNITED NATIONS The Iraq (United Nations Sanctions) Order 2003 restricts the trade in such cultural goods because UN sanctions are still in force "as a continuation of efforts contributing to the maintenance of security and stability in Iraq", says the ministry of culture.
"Please note it is your responsibility to ensure that your activities do not breach these sanctions," it advises the industry through the British Art Market Federation. "If you wish to deal in Iraqi cultural property you are advised to look at the UKTI, BIS and HM Treasury websites. If there is any uncertainty you are advised to seek independent legal advice to ensure you do not breach sanctions. It is a criminal offence to breach these sanctions and carries a penalty of up to seven years imprisonment and/or a fine."
The warning was issued following a complaint from the Iraqi Embassy in London when a piece from a large statue of Saddam Hussein was offered by Hanson's auctioneers of Etwall, Derbyshire.
The destruction of the statue in central Baghdad was broadcast around the world by TV cameras in 2003 in what proved to be one of the most iconic moments of the fall of the dictator.
The piece was consigned by Jim Thorpe, a director of Trebletap, a company specialising in turning war memorabilia into works of art. His business partner, Nigel Ely, a former SAS soldier, had reportedly used a sledgehammer and chisel to remove the 2ft piece from the bronze statue when it was pulled down.
Mr Ely is said to have been issued with a notice under the Police and Criminal Evidence Act, telling him not to alter or dispose of the item until the investigation is completed. In the meantime, Mr Thorpe faced arrest and questioning under suspicion of having breached the UN sanctions.
It is thought that the sellers had hoped to make a substantial charitable donation from the proceeds, but, apart from the potential breach of sanctions regulations, the incident also raised the question as to who actually owned the piece. The Iraqi Embassy has requested its return.
Auctioneers and dealers are also regulated by the Dealing in Cultural Objects (Offences) Act 2003, which makes it an offence for any person to dishonestly deal in a cultural object that is tainted (within the meaning of the 2003 Act), knowing or believing that the object is tainted. The offence set out in the Act complements the UK's obligations under the 1970 UNESCO Convention on the Means of Prohibiting and Preventing the Illicit Import, Export and Transfer of Ownership of Cultural Property, which the UK ratified in 2002.
The Culture department is now working with the Met Police and BAMF to prevent any further potential breaches of the law.
