This page covers:
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Why is money laundering relevant to ALL art market participants (art galleries / dealers / artists)?
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The concealment of the origins of illegally obtained money, typically by means of transfers involving foreign banks or legitimate businesses. |
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GLOSSARY - in relation to the Art Market
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The challenge for artists , art organisations and art market participants is to understand
To be aware and alert, you need to understand how it happens - hence the brief explanation below. I'll be updating this page on a regular basis to indicate how money laundering processes
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ARTIST ALERT: For example, the well known email scam is undoubtedly related to money laundering as well as theft. (e.g. "the husband notices his wife has been admiring your art and wants to buy his wife something for her birthday/Christmas/whatever" See the dedicated page on this website How to spot art scams, fake art and fraud which identifies characteristics you need to be aware of |
In the internet and electronic banking age, laundering money can be done online through legitimate websites like eBay. There are common scams on eBay that suggest laundering money
How Common Money Laundering Techniques Work on eBay
Stage 1: PLACEMENT
These are the various ways money laundering occurs. Artists and art organisations need to be aware so that they are not taken advantage of.
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Stage 2: LAYERING
STAGE 3: Integration The final stage is getting the money out so it can be used without attracting attention from law enforcement or the tax authorities. In this regard, criminals are often content to pay payroll and other taxes to make the “washing” more legitimate and are often happy with a 50% “shrinkage” in the wash.
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An Art Market Participant is:
a firm or sole practitioner who |
An Art Market Participant is NOT:
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Billions of dollars of art changes hands every year with little or no public scrutiny. Buyers typically have no idea where the work they are purchasing is coming from. Sellers are similarly in the dark about where a work is going. And none of the purchasing requires the filing of paperwork that would allow regulators to easily track art sales or profits, a distinct difference from the way the government can review the transfer of other substantial assets, like stocks or real estate. |
A number of other industry sectors, such as banking, have long been the subject of an anti-money laundering regulatory framework. |
Within the global art market, money laundering typically occurs:
IN
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COMMENTARY:
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Governments around the world have recently become more aware of the scope and volume of money laundering within the art market - and it's HUGE!
As a result they and have moved to
Below, I'm highlighting what's happening in the UK and USA but new arrangements will eventually roll out internationally. Also you need to be aware that as regulatory action is catching up with the money laundering via art galleries and auctions (i.e. Art Market Participants), the money laundering is shifting. Typically it's now very much associated with NFTs and Instagram - and they're dealing in smaller sums to avoid attracting attention. In the meantime, artists on Instagram are becoming inundated with requests to use the artwork for an NFT. |
The Financial Action Task Force (FATF), (also known by its French name, Groupe d'action financière) is an intergovernmental organisation
On their website they highly those countries where more care is required due to their deficiencies in their regimes to counter money laundering, terrorist financing, and proliferation financing. These are the Jurisdictions under Increased Monitoring - October 2021 |
The Money Laundering Regulations specify that businesses must have a process in place to identify and report suspicious activity. |
You’ll be protected from penalties and prosecution if you can show you have followed HMRC’s Money Laundering Regulations guidance. HMRC can take various measures from warning letters to criminal prosecution if your business does not comply with the regulations. |
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UNITED KINGDOM - ART MARKET SPECIFIC
The Money Laundering and Terrorist Financing (Amendment) Regulations 2019 came into force in the UK on 10th January 2020. Money laundering supervision for art market participants (HMRC February 2020 / Updated October 2022) provides detailed guidance about what art market participants (AMP) MUST DO
Auction houses, art galleries and dealerships MUST (i.e. not optional) conduct stricter due diligence on transactions above a threshold of €10,000 (about £8,500) with respect to one transaction or series of linked transactions by
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REFERENCE: Art Market Specific UK Regulations & Guidance
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At the heart of the new Regulations is a requirement that art market participants must identify the physical person who they are dealing with in any transaction or, when dealing with a corporate body or a trust, the person or persons who control that entity. In other words, “Who are you really dealing with?” This is known as customer due diligence (CDD).
Under the Money Laundering Regulations an art market participant now needs to register.
An 'art market participant' means a firm or sole practitioner who is either:
It's entirely unclear what status art societies which hold exhibitions and sell art have |
Art Market Participants |
AMP REGISTRATION
HMRC is the supervisory authority for Art Market Participants.
CUSTOMER DUE DILIGENCE AMPS are now required to check the identification of:
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AMP SYSTEMS & REPORTING REQUIREMENTS
The guidance helps art market participants meet their mandatory obligations for money laundering supervision, including
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UNITED STATES OF AMERICA
Issues identified by a Senate SubCommittee (which focused on a a case study documenting how certain Russian oligarchs appear to have used transactions involving high-value art to evade sanctions imposed on them by the United States re the invasion of the Ukraine) included:
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REFERENCE: Government Guidance and Publications
COMMENTARY
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Art dealers can face fines and jail time if they don't report suspected money laundering transactions to authorities
The UK government introduced a new Anti-Money Laundering legislation on 10th January 2020 which requires auction houses, art galleries and dealerships to conduct stricter due diligence on buyers who purchase from them works of art above a threshold of €10,000 (about £8,500).
The challenge of understanding the new regulations and making sure everything you need to gets done has led to the development of new platforms which seek to aid those who must register and comply with all the legislation and provide training.
It's too early to say whether they're any good - but I'm recording them here as in principle, they provide a one-stop shop for all your AML needs |
REFERENCE (Descriptions are the company claims)
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