EU’s 5th Anti-Money Laundering Directive

ex Newsletter IADAA, January 2020

Combatting Money Laundering in the Art Trade: Changes for Europe and the UK

Institute of Art & Law: January 10:

With the government in ‘purdah’ during the run-up to the UK General Election, businesses found themselves facing the prospect of imminent enforcement of far-reaching new anti-money laundering legislation without knowing exactly how that law would be applied. The legislation follows on from the EU’s 5th Anti-Money Laundering Directive – applicable to all EU Member States – and is unlikely to be the last such measure.

This article examines how HMRC (Customs), who will be overseeing compliance and enforcement, have been rushing to fill the knowledge gap as enforcement arrived on January 10.
The art market, and in particular the antiquities market, are key targets of the new legislation, largely because they are viewed as vulnerable areas for criminal exploitation and the funding of terrorism. The UK is a particular target because it has the second largest art market in the world after the United States, which is examining its own anti-money laundering proposals currently.
HMRC has announced that guidance will be forthcoming, but that has yet to be published. This should cover registering, due diligence in everything from staff training to record-keeping that complies with GDPR, risk assessment and reporting suspicious activity. Two aspects that have given particular cause for concern are the definitions of ‘works of art’ and ‘intermediary’ under the regulations; the latter seemingly extends to anyone who may benefit financially as a result of a transaction, including storage facilities and shippers, for example.

This article gives several links to useful information for all EU businesses, while the Antiques Trade Gazette article (see second link below) adds some detail, which points to the range of items covered by the legislation being much more limited under UK law than expected. This would create an anomaly because goods excluded under such a proposal are still included for due diligence purposes under other laws, such as the Proceeds of Crime Act.
In the meantime a number of firms are working on digital solutions for collectors and dealers in a bid to avoid disruption, especially at events such as international fairs.