The law, known as The Money Laundering and Terrorist Financing (Amendment) Regulations 2019, takes effect on Friday, January 10.
Better known by its EU shorthand of '5MLD', the law applies to auction houses, dealers or anyone trading in (or acting as an intermediary in the trade of) works of art that sell for a price above the €10,000 threshold.
UK companies trading in art, or 'Art Market Participants’ as they are termed in the legislation, will have an increased burden of due diligence checks on buyers.
Freya Simms, chief executive of LAPADA, described the new regulations as "a major change for the art market".
In advance of this however, the government has confirmed exactly which types of art are covered by the new law.
HM Treasury was persuaded by the British Art Market Federation (BAMF), with support from trade associations BADA, LAPADA, SOFAA and SLAD, to adopt the same definition of 'works of art' as in current VAT legislation.
The result is that works covered by the new law exclude many categories of antiques.
The ‘works of art’ covered by 5MLD, confirmed on December 20 in parliament, will be:
- paintings, drawings, collages executed by hand;
- limited edition engravings, lithographs and prints;
- original sculpture or statuary;
- limited edition sculpture casts;
- limited edition tapestries;
- signed limited edition ceramics;
- signed limited edition enamels on copper (excluding jewellery);
- signed limited edition photographs.
Mark Dodgson, who as secretary-general of BADA has had input into BAMF’s negotiations with HMRC, said the confirmed definition "does mean, for example, that sales of antique furniture, porcelain and clocks will not trigger the new rules.
“Although furniture dealers [for example] will not need to comply in respect of their furniture, if they were to sell a work of art for €10,000 or more then they will of course come within scope and would need to carry out due diligence on the buyer of that work of art."
Simms praised BAMF for leading the lobbying effort.
"BAMF, under chairman Anthony Browne’s leadership, worked tirelessly to unite all facets of the trade, from auctioneers to the dealer-led trade associations, with one voice to lobby HM Treasury," she said.
'Get to know the new rules'
Despite the confines of HMRC's list, trade bodies are urging all their members to familiarise themselves with 5MLD and to register with HMRC.
"We urge all LAPADA members who may deal in works of art at any time to familiarise themselves with the regulations and comply with its requirements as necessary," Simms said.
Dealer trade bodies have collaborated on a dealer-specific AML toolkit available to members of BADA, LAPADA and SLAD.
As part of 5MLD, art market firms will need to register with HMRC, risk assess their business and put policies and procedures in place ready for the regulation.
This includes verifying identities of buyers when they acquire items costing €10,000 or more.
Read more about the new anti-money laundering rules here.