The UK art market is one of the biggest fine art markets in the world, behind only to China and the US, attracting high value items from around the globe.
UK art market participants (AMPs) are subject to a regulatory AML protocol specifically designed for the fine art industry, as well as regulations and separate AML requirements. In the US, art market AML laws are not yet in force. However, regulations are pending, and US AMPs seeking to sell their work in the UK are subject to local regulations.
In addition to the AML reporting and recording obligations, UK AMPs will soon be subjected to sanctions regulations. Sanctions compliance is a separate and parallel obligation to the AML regulations. It applies regardless of whether a transaction meets the €10,000 AML threshold and is entirely outside the AML framework. Art businesses will be required to report immediately to the Office of Financial Sanctions Implementation (OFSI) if they know or suspect that a customer or other transaction participant is subject to sanctions. This obligation extends to situations where a buyer or seller is added to the sanctions list after a transaction has already begun, and will include freezing assets when deemed necessary.
In the US, sales of high value art works are already subject to Treasury Sanctions Regulations. The Office of Foreign Assets Control (OFAC) applies International Emergency Economic Powers Act (IEEPA) and Trading With the Enemy ACT (TWEA) to transactions involving art works in which a blocked person or their facilitators, including a person on the Specially Designated Nationals (SDN) List has an interest, to the extent the artwork functions primarily as an investment asset or medium of exchange. OFAC may impose civil penalties for sanctions violations based on strict liability, meaning that a person may be held civilly liable even if they did not know or have reason to know they were engaging in prohibited conduct.
The UK art market has been subject to government anti-money laundering requirements since 2020. Prior to Brexit, the UK was a party to the EU’s Fifth Money Laundering Directive (5 MLD). Subsequent regulations and guidance exist under the Proceeds of Crime Act (2002) and the Money Laundering Regulations (2017) which placed every dealer auction house and intermediary handling art transaction of £10,000* under the supervisory jurisdiction of His Majesty’s Revenue and Customs (HMRC).
The current UK AML regulations follow the generally accepted AML requirements, similar to those included in the US Bank Secrecy Act which regulate financial institutions (not yet applicable to the art market in the US). They regulations include: registration, customer identification – including beneficial owner identification, transaction transparency, increased verification under defined risk categories, creation of internal AML guidelines, record keeping and reporting of suspicious transactions.
Enforcement of UK AML regulations has increased since coming into effect. For example, between January and September 2024, nearly 50 UK art businesses were fined for late registration or insufficient AML procedures.
In both the US and the UK sanctions compliance is a separate and parallel obligation to AML compliance. Art Sales Vault includes a sanction search along with AML compliance in its transaction risk analysis.
Civil sanctions breaches are generally assessed on a strict liability basis. Enforcement authorities do not need to prove that the seller knew it was dealing with a sanctioned person — only that the breach occurred. Absent or inadequate screening may be an aggravating factor. A full and documented screening as provided by Art Sales Vault could be insurance against a violation, or at the very least a mitigating factor in the enforcement framework.
*Under the new UK regs the 10,000 benchmark has been changed to Euros.