AML and Sanctions update – Extension of Reporting Obligations from 14th May 2025

Art Market Participants (AMPs) will be aware of their legal obligations to report knowledge or suspicions of money laundering to the National Crime Agency (NCA). From 14 th May 2025, AMPs will also be required to file a report with the Office of Financial Sanctions Implementation (OFSI) if, in the course of business, they come to know or have reasonable cause to suspect that a person –

1. is a designated (sanctioned) person or in other words, a person or entity included in OFSI’s list of sanctioned persons or entities; or
2. has committed breaches of UK sanctions regulations.

The reporting obligation will therefore apply where in the course of

• trading in or acting as an intermediary in the sale or purchase of works of art (whether in a single or a series of linked transactions) valued at or above €10,000 euros; or
• storing works of art where the value of the works of art amount to €10000 euros or more,

an AMP knows or suspects they are engaging directly or indirectly with a sanctioned person or someone who has committed breaches of UK sanctions regulations such as facilitating a transaction on behalf of a undisclosed person or entity who is sanctioned. For the reporting obligation to be triggered, it is not necessary for a transaction to have taken place.

In addition to AMPs, this new reporting obligation is being extended, for the first time, to high value dealers (HVDs) who receive payments in cash of €10,000 euros or more when they deal in goods. Note though, AMPs and HVDs are not being singled out for this – sanctions reporting obligations have applied to other regulated businesses including financial institutions, accountants, law firms, casinos etc. for some years.

OFSI has indicated to key stakeholders that further engagement with the art sector will take place before May 2025 and this may lead to greater clarity on the requirements. For now, AMPs may wish to note the following –

1. Current AML due diligence procedures should suffice for the purposes of establishing whether someone is a sanctioned person as you should already be routinely screening persons and entities with whom you transact against the consolidated UK sanctions lists. As a reminder, this can be done by either using the following free link provided by OFSI – https://sanctionssearchapp.ofsi.hmtreasury.gov.uk/ or with the aid of one of the commercial ad hoc screening tools available on the market. You may also have a subscription to a commercial identity verification tool which incorporates a reliable sanctions screening feature.
   
2. Sanctioned persons and entities tend to be extremely ‘bad actors’ such as dictators and government officials in dictator regimes, terrorists, proliferation financiers etc. From experience, AMPs should know that a positive sanctions match is a rare occurrence. However, if and when the reporting requirement is triggered –
   ‎‎ ‎
   • reports must filed ‘as soon as practicable’
   • the Compliance Reporting Form which should be used can be accessed here https://assets.publishing.service.gov.uk/media/64647ba3d3231e000c32daa9/Compliance_Reporting_Form.odt Upon completion, the Form will need to be emailed to OFSI – ofsi@hmtreasury.gov.uk
     
3. Once you identify a sanctioned person for reporting purposes, there will be an immediate obligation to ‘freeze’, i.e. stop any transfers of assets, including artworks and funds that you may have in your possession.
   
4. There are very serious penalties for breaching sanctions reporting obligations ranging from fines to imprisonment.

The key here is not to panic. Sanctions reporting should be seen as a broadening of existing due diligence and reporting obligations. The obligation to report should be managed by your MLRO/Nominated Officer and will require Policy updates and increased awareness, rather than major reconstructive changes to existing programmes.

Should you have any questions in the mean time, please contact me on +44 7896 205533