It means law enforcement officials can take possession of any item worth over £1000 if the owner is suspected of unlawful conduct, before needing to obtain a court order.
In theory this could mean that if police or other authorities (like customs officials or Serious Fraud Officers) believe an artwork consigned to a dealer or an auction is 'recoverable property', they can seize the artwork on the premises, forcing their withdrawal from sale.
The new laws allow officers to hold such items initially for up to six hours, after which they need approval from a senior officer to keep the item detained for a further 42 hours. Following this period, the seizure would need to be authorised by a Magistrates Court.
What is the background?
The text of the Criminal Finances Act was agreed by both Houses of Parliament earlier this year and received Royal Assent at the end of April. It amends the Proceeds of Crime Act 2002 and is aimed at tackling organised crime, corporate offences, tax evasion, drug trafficking and even terrorist activity. However, a number of legal commentators have said that the legislation was passed hurriedly before the snap General Election in May and contains flaws which could lead to legal challenges (see below).
What are the key details?
For the art and antiques industry, the headline change is the ability of law enforcement officials to now seize ‘mobile’ items – including artworks, antiques, jewellery and watches – if they suspect them to be proceeds of unlawful conduct. The provisions had previously been limited to cash. The new laws allow authorities to hold items for 48 hours before needing an order from a Magistrates Court.
Senior Associate at London law firm Boodle Hatfield Rudy Capildeo said: “I suspect the majority of these seizures will occur in ports of entry and domestically, potentially affecting and delaying the movement of art and antiques in, out and through the UK.”
What are the potential legal challenges?
The presumption by authorities of objects being acquired by ill-gotten means could lead to challenges over peoples' right to peaceful enjoyment of their property as prescribed under the Human Rights Act.
Problems could also arise due to the definition of qualifying items. For example gold rings set with imitation diamonds may not qualify as ‘seizable’ and officers would need to determine between precious and non-precious materials. If mistakes are made, this could provide grounds for challenges.
Capildeo said: “Given these provisions have created more complexity, there will inevitably be legal challenges as undefined terms are established and understood, and enforcement officers get used to their new powers.”
What else is changing?
Two further areas affected by the changes in legislation relate to ‘Unexplained Wealth Orders’ (UWOs) and compliance with tax evasion rules.
Authorities can now apply for a UWO from a court if they suspect someone has been involved in serious crime anywhere in the world. If dealers or auctioneers have conducted business with such people, in theory these orders could compel them to provide information about how objects were acquired, how payments were met and what due diligence was performed. During the passage of the Criminal Finances Bill through Parliament, the value of the property which may be the subject of a UWO was reduced from £100,000 to £50,000
With regard to tax evasion, the Act will place additional compliance burdens on dealers and auctioneers to prevent themselves from being used to facilitate UK or foreign tax evasion. While new guidance about the procedures organisations can put in place has yet to be published, companies that do not comply under the new regime in theory will be at risk of unlimited fines as well as other legal and regulatory sanctions.
Capildeo told ATG that he strongly advised firms to plan ahead with regard to contracts and ‘Know Your Client’ duties, keeping paper trails of telephone calls and emails, whistleblowing policies and robust education and training programmes for staff.