HM Treasury has approved the latest (6 February 2023) version of the British Art Market Federation's Guidance on Anti-Money Laundering for UK Art Market Participants.
The main changes are that the guidance now reflects some amendments to the law and (in the case of the fourth point below) a clarification of Art Market Participants' (AMPs) obligations to report inconsistencies in company information that come to their attention.
1. The first of the changes to the law is that artists, when acting in the capacity of selling their own works, have been removed from the scope of the AML regulations. An artist acting as an intermediary, such as when selling the works of other artists, is in scope of the regulations and would need to register as an Art Market Participant and follow the necessary customer due diligence procedures.
2. The second is to reflect the law change that adds the risk of "proliferation financing" to the existing risks of money laundering and terrorism finance, as a third criterion AMPs need to be on the lookout for when assessing the risk profile of their business and their customers. "Proliferation financing" is defined in the revised guidance as:
"the act of providing funds or financial services for use, in whole or in part, in the manufacture, acquisition, development, export, trans-shipment, brokering, transport, transfer, stockpiling of, or otherwise in connection with the possession or use of, chemical, biological, radiological or nuclear weapons, including the provision of funds or financial services in connection with the means of delivery of such weapons and other CBRN-related goods and technology, in contravention of a relevant financial sanctions obligation"
Members should draw their own conclusions as to whether the sale of artworks, particularly those valued around €10,000, is likely to be supporting proliferation financing.
3. The third change refers to the specific checks that have to be carried out by an AMP when the customer is an unlisted company, limited liability partnership (LLP) or registered trust (among other entities). From 1 April 2023 an AMP must obtain from the company itself:
"an excerpt of the register which contains full details of beneficial owners held on the register at the relevant time before the business relationship is established, or must establish from its inspection of the register that there is no such information held on the register at that time"
4. Finally, the fourth change to the Guidance is a longer explanation of an AMP's obligation to report to Companies House (for companies) and to HMRC (for registered trusts) any material discrepancies in the information they have received concerning beneficial owners of customers. Paragraph 5.94 of the BAMF Guidance now states:
"If an AMP finds a material discrepancy (either when carrying out CDD or in the course of ongoing monitoring) between information relating to the beneficial ownership of a customer which is a company, an unregistered company, a limited liability partnership or an eligible Scottish partnership (see paragraph 5.130), a trust (see paragraph 5.146), or an overseas entity, it must be reported to the Registrar of Companies (or to HMRC in the case of a trust). In reporting material discrepancies to the Registrar of Companies, AMPs should have regard to guidance issued by Companies House. A material discrepancy is one which may reasonably be considered to be linked to money laundering or terrorist financing, or to conceal details of the business of the customer, and which is in the form of:
• a difference in name;
• an incorrect entry for nature of control;
• an incorrect entry for date of birth;
• an incorrect entry for nationality;
• an incorrect entry for correspondence address;
• a missing entry for a person of significant control or a registrable beneficial owner;
• an incorrect entry for the date the individual became a registrable person.
You can download here the latest amended version of the HM Treasury-approved BAMF Guidance on Anti-Money Laundering for UK Art Market Participants (Feb 2023)
If I am a registered Art Market Participant (AMP) how could the above changes impact my business?
• It will be necessary for AMP members to make changes to their risk assessment document and policies and procedures document to reflect their assessment of the risk of transactions in their business being used for proliferation financing.
• AMPs looking into the beneficial ownership of their corporate, registered partnership or trust customers will need to obtain a copy of the beneficial owner register and the names of the beneficial owners on the register, if any. This refers to the register that is held by the company, partnership or trust at the registered office, not just the Companies House record of the register.
• AMP members and relevant staff carrying out checks on the beneficial ownership of a customer need to understand that they must report material inconsistencies (as defined above) between information they find at Companies House and other information they have obtained direct from the business concerned, in particular from the company register held by the company.
The BADA will be reviewing existing materials (such as the AML Toolkit) to see whether amendments need to be made and, if deemed necessary, will re-issue a revised material to the membership.
February 2023