However, closer analysis shows the findings are not what they seem.
Published by HM Treasury and the Home Office, the report indicates that the risk level is attributed to the ability to conceal the beneficial owners and final destination of art.
The publication acknowledges that legislation was implemented only in January 2020, resulting in a lack of evidence or intelligence compared to other sectors.
The corresponding knowledge gap means it is far harder to gauge whether proposed controls and counter-crime measures are effective – thereby creating higher risk.
The report notes that the United Nations Office on Drugs and Crime claims that £2.3bn of the global art market could be linked to money laundering or other financial crime annually, but adds that the authorities are “unable to assess the full extent of money laundering through the art market in the UK”.
Dealers, auction houses and trade associations are rightly concerned about how burdensome compliance may prove, especially if they find themselves responsible for supplying information on buyers and sellers to whom they do not readily have access.
Some encouraging news is that HMRC, as regulator for Art Market Participants, has spent many months reviewing the regulations in consultation with various industry stakeholders. Hopefully this concerted effort will enable the Government to effectively and realistically interpret the law, resulting in a compliance regime that is effective and simultaneously conducive to trading.
Funding concerns
One of the main barriers to effective crime prevention policies relating to the art market has been lack of funding for oversight and enforcement. Recognising this, the government has proposed a £100m Economic Crime Levy on businesses that are obliged under Money Laundering Regulations.
This has alarmed the UK’s art market trade associations who are lobbying against it, as they fear the levy will inflict unacceptable extra costs on businesses that already face registration fees and other compliance costs associated with the new legislation.
We believe that there is no need for panic. Bearing in mind that the AML regulations apply only to individual or linked transactions equivalent to €10,000 or more, far fewer businesses are likely to be affected than many fear.
Moreover, the consultation on the levy recognises the difference in burden depending on size of business, and has therefore proposed that small businesses be exempt from paying it.
Might such a levy even be a benefit to art market businesses? It’s feasible.
According to the consultation paper, the majority of levy funds would come from other sectors (such as banking), while bringing benefits to help protect the art market from crime and easing the anti money laundering compliance process all the while – such as improvements to the submission of Suspicious Activity Reports (SARs) and improving the reliability of data from Companies House. In short, this could make it easier and faster to fulfil compliance requirements.
There is no doubt that the art market is changing under our feet. In the US, new legislation means that antiquities dealers will soon have to comply with AML procedures and a survey of the art market will be undertaken to determine the relevance of AML/CTF legislation. These are both part of the National Defence Authorization Act (NDAA) 2021.
Inevitable change
Having personally taken a decision in 2018 to not try to stop the unavoidable but to represent and support the industry in the face of change, I hope that this analysis helps to make sense of recent and ongoing industry developments, in the midst of much wider change.
Better yet if National Risk Assessments of the future provide useful insight based on operational and investigational evidence into how the market might be targeted by criminals, and that the crime levy, should it proceed, not hit the majority of small businesses yet generally improve efficiency for compliance burdens in the modern landscape.
Susan J Mumford
CEO and co-founder
ArtAML
