This autumn, the London art market intends to resume its pre-pandemic glory with the return of in person fairs, such as Frieze London, Frieze Masters and the 1-54 Contemporary African Art Fair.
Although good news, there is a catch; for non-UK galleries and art advisors in particular.
Her Majesty’s Revenue and Customs (HMRC), the UK authority responsible for regulating the art market, requires dealers and galleries participating in art fairs in the country to comply with the stringent new Anti-Money Laundering (AML) regulations.
At a minimum, non-UK-based galleries and art advisors will have to register with HMRC as part of their compliance with the AML regulations.
Although the EU’s Fifth AML Directive affects all European art markets, including the UK post-Brexit, it is safe to say that the UK art market is now the most heavily regulated. Unlike most other EU countries, the UK requires art market participants (AMPs)—including those travelling from other countries—to register with HMRC. An AMP is anyone (including advisors) trading in works of art for a total purchase price in excess of €10,000 in a single or series of linked transactions.
However, registration is only the first step on this regulatory journey.
For the UK trade, registering may have been the easiest obligation to satisfy, as the other duties are more onerous. Specifically, a qualifying AMP must conduct a proper AML risk assessment of its clients and business. Based on the results of this assessment, the AMP is required to adopt adequate AML policies, controls and procedures, a main feature of which are the precise know your client (KYC) and customer due diligence (CDD) steps to be done for new clients as well as for certain existing clients. Equally as important, AMPs are required to keep records of their AML programme, especially the Risk Assessment, policies and KYC/CDD checks. The final two steps include first, the appointment of a Money Laundering Reporting Officer and, second, AML staff training.
Oddly, as of the time of writing, it is still not possible for all non-UK AMPs to register with HMRC purely for technical reasons.
However, this should not stop galleries from complying with the other AML obligations. Key documents and staff training should be put in place ahead of the fair. Once the AMP has arrived at the art fair in the UK, they are required to correctly apply KYC and CDD measures—in practical terms, this may involve asking a client, old or new, for ID documents on the fair floor. HMRC have the authority to conduct audits and spot checks (potentially at an art fair) as well as issue penalties and fines for non-compliance.
Anyone who has participated in a fair knows the months of planning that lead to the actual event. Although, AML might not seem like a top priority, it should be, given the risks of not only penalties and fees, but also of negative press in the event of being caught out.
It is possible to fulfil the obligations—such as conducting a risk assessment, creating policies, appointing a money laundering officer and training staff—in a matter of two weeks. Thorough planning will avoid last minute panic and, most importantly, will allow galleries to fully focus on the heart of the business: showing and selling great art.
Paula Trommel is deputy director of Corinth Consulting
Source link : https://www.theartnewspaper.com/comment/international-galleries-watch-out-you-need-to-comply-with-new-anti-money-laundering-laws-at-uk-fairs-this-autumn
