The June 10 deadline for Art Market Participants (AMPs) to register with HMRC for money laundering supervision is fast approaching.
I am grateful to all AMPs who have registered so far, making sure they are in time for the deadline.
For everyone else, please don’t be caught out by the late registration penalties that will apply afterwards. We’re here to help you and we want to make sure you get things right from the very start.
Money laundering is not a victimless crime. Criminals use laundered cash to fund serious organised crime, from drug importation to child sexual exploitation and the misery of human trafficking.
The Money Laundering Regulations (MLRs) comprise a range of comprehensive and robust requirements designed to prevent businesses unwittingly being used by criminals to launder money or for the financing of terrorism, both within the UK and abroad.
We want to help AMPs meet their legal obligations, which came into force in January 2020.
The key to complying is to make these requirements an intrinsic part of the operation of the business.
HMRC has guidance and webinars available online (see links below right) and provides periodic alerts.
These alerts are sent by email so please make sure we have the correct email address for your business. You can log into your online account and check we have the correct address.
Five top tips from HMRC to avoid the most common errors HMRC finds when it carries out compliance visits
1. Risk Assessment
A firm’s risk assessment is the very foundation on which compliance with the MLRs is built. The risk assessment is bespoke to your business. It will change and develop, reflecting changes to your business model and how those changes impact on the money laundering and terrorist financing risks. There is no such thing as an off-the-shelf risk assessment, you have to assess the risks for your business.
2. Policies, controls and procedures
Once the risk assessment has been compiled, and the business is satisfied the risk assessment is comprehensive and robust, there must be appropriate policies, controls and procedures (PCPs) in place. Those PCPs need to “mitigate and manage effectively the risks … identified” and they need to be “regularly review[ed] and update[d]” (Regulation 19). Naturally, if the PCPs are drawn up to manage the risks identified in the risk assessment, the PCPs may well need to be adapted to reflect any ongoing changes to your picture of risk. The regulations are very specific on how your PCPs should address risk and keep addressing it on an ongoing basis.
3. Customer due diligence
The MLRs specify when customer due diligence should be applied, with Regulation 27 detailing the general requirements as well as the specific requirements on AMPs. Once a business has made decisions on when to apply due diligence, Regulation 28 details precisely how this should be done. Knowing the identity of your customer is critical and therefore it is not surprising that customer due diligence is a cornerstone of the MLRs. Almost all post-inspection penalties we issue contain a sanction relating to a failure to comply properly with the customer due diligence requirements. You can read more about our penalties on the gov.uk website
4. Timing of verification and record keeping
In addition to the MLRs specifying what actions need to be undertaken and how, the requirements are quite specific on the timing of customer due diligence verifications. Not surprisingly an audit trail needs to be created to demonstrate that the MLRs have been complied with. Businesses need to understand what the record keeping requirements are and comply with them.
5. Enhanced due diligence
Knowing when enhanced due diligence (EDD) needs to be applied is essential. Links need to be made between your risk assessment, your PCPs and through to any resulting EDD requirements. While most people would expect to apply EDD in the more obvious circumstances e.g. when transacting with a Politically Exposed Person (PEP) or encountering a highly unusual transaction, the MLRs are very specific on the full range of EDD requirements. For example, do you expect to have “any business relationship with a person established in a high-risk third country”? How will you know if you are dealing not just with a PEP, but with “a family member or known close associate of a PEP”?
An AMP (Art Market Participant) means a firm or sole practitioner that:
■ by way of business trades in, or acts as an intermediary in the sale or purchase of, works of art and the value of the transaction, or a series of linked transactions, amounts to 10,000 euros or more; or
■ is the operator of a freeport when it, or any other firm or sole practitioner, by way of business stores works of art in the freeport and the value of the works of art so stored for a person, or a series of linked persons, amounts to 10,000 euros or more.
A work of art is defined in the Value Added Tax Act 1994 section 21(6) to (6B) for the purpose of section 21(5)(a) of that Act.
View the legislation here: legislation.gov.uk/uksi/2017/692/contents
View HMRC’s webinars here: gov.uk/guidance/help-and-support-for-anti-money-laundering
Alan Patrick, strategy lead for Art Market Participants, HMRC