As of 14 May 2025, the Office of Financial Sanctions Implementation (OFSI) has widened the ambit of firms subject to sanctions reporting requirements. While firms already subject to financial sanctions reporting obligations included auditors, accountancy firms, legal firms, and providers of trust services, amongst others, the UK sanctions regime now includes a firm or sole practitioner carrying out letting agency work, insolvency practitioners, Art Market Participants ("AMPs") and High Value Dealers ("HVDs") as "relevant firms".
This article focuses on Art Market Participants, examining prior obligations in relation to money laundering, new mandatory reporting obligations under the sanctions regime, and the risks in the art market in relation to breaches of both these regimes.
Regulatory Landscape and Prior Obligations for Art Market Participants:
Prior to the recent introduction of sanctions reporting obligations, Art Market Participants had already been subject to several obligations under the UK's anti-money laundering regime, including under the Proceeds of Crime Act 2002. The Money Laundering Regulations 2017 brought AMPs into the ambit of the regime from 10 January 2020, mirroring the EU Fifth Money Laundering Directive (5MLD).
Under The Money Laundering Regulations 2017:
- High Value Dealers are defined at Regulation 14(1)(a) as "a firm or sole trader who by way of business trades in goods (including an auctioneer dealing in goods), when the trader makes or receives, in respect of any transaction, a payment or payments in cash of at least 10,000 euros in total, whether the transaction is executed in a single operation or in several operations which appear to be linked".
- Art Market Participants are defined at Regulation 14(1)(d) as
"a firm or sole practitioner who—
- by way of business trades in, or acts as an intermediary in the sale or purchase of, works of art and the value of the transaction, or a series of linked transactions, amounts to 10,000 euros or more; or
- is the operator of a freeport when it, or any other firm or sole practitioner, by way of business stores works of art in the freeport and the value of the works of art so stored for a person, or a series of linked persons, amounts to 10,000 Euros or more".
Pursuant to The Money Laundering Regulations 2017, AMPs have already been subject to the requirement to register with HMRC as an AMP, conduct Customer Due Diligence (CDD), maintain CDD records and carry out risk assessments for exposure to money laundering, among other measures.
In relation to money laundering offences, the art market remains a high-risk area, given the confidential and discrete nature of art sales. As a result, AMPs are at risk of dealing in stolen works of art or facilitating the purchase of art works through the proceeds of crime (such as terrorist financing, tax evasion, corruption, drug trafficking, and fraud, among others).
To date and as reported in the 2025 UBS Art Market Report, HMRC has thus far taken an active approach to enforcement of AML obligations under The Money Laundering Regulations 2017. Of 408 businesses fined in 2023 for lack of compliance with The Money Laundering Regulations 2017, 10 were art galleries.
Changes under The Sanctions (EU Exit) (Miscellaneous Amendments) (No. 2) Regulations 2024
As canvassed above, The Sanctions (EU Exit) (Miscellaneous Amendments) (No. 2) Regulations 2024 now define the following AMPs and HVDs as "relevant firms". The definitions of AMPs and HVDs largely follow those set out in The Money Laundering Regulations 2017:
- High Value Dealers are defined as "a firm or sole trader that by way of business trades in goods (including an auctioneer dealing in goods), when the firm or sole trader makes or receives, in respect of any transaction, a payment or payments in cash of at least 10,000 euros in total, whether the transaction is executed in a single operation or in several operations which appear to be linked."
- Art Market Participants are defined as: "a firm or sole practitioner that is registered or required to register with the Commissioners for His Majesty's Revenue and Customs as an art market participant under regulation 56(5) and (6) of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017".
There is a carve out, in that Regulation (3F) of The Sanctions (EU Exit) (Miscellaneous Amendments) (No. 2) Regulations 2024, as amended, excludes artists from the definition of an AMP. Artists are therefore not subject to the mandatory reporting requirements, whereas their representative gallery is, provided they fall within the definition of an AMP (namely, one required to register under The Money Laundering Regulations 2017 and a participant involved in the sale or purchase artwork with a value of 10,000 euros or more, or in the sale or purchase of artwork in a series of linked transactions amounting to 10,000 euros or more).
The reporting obligations now require HVDS and AMPs to:
- Inform OFSI, as soon as practicable, if they know or have reasonable cause to suspect that a person is "(i) a designated person or (ii) has committed breaches under the UK regulations".
- The OFSI report must include the relevant information on which the HVD or AMP has based their suspicion, and information that they hold about the person or designated person.
OFSI's Expanded Reach into the Art Market
While art sales globally have declined in recent years with aggregate value in 2024 reaching an estimated $57.5 billion, the 2025 UBS Art Market Report underlines the UK's continued strength as the second largest art market in the world, accounting for 18% of sales (or $10.4 billion). In view of the considerable value realised in the art market, it is not surprising that OFSI has taken a proactive approach by widening the ambit of sanctions reporting to include AMPs.
Some of the regulatory concerns are well-founded. OFSI's guidance on financial sanctions for High Value Dealers & Art Market Participants as published on 18 March 2025, suggests that the inclusion of AMPs and HVDs within the scope of the sanctions regime and reporting regulations arose due to concerns around underreporting of breaches and low awareness of sanctions obligations. OFSI indicate suspected breach reports within the Art market and High Value sector do not usually originate from HVDs and AMPs themselves, but from those within financial services or legal services (e.g. a banker or lawyer assisting with the sale of an artwork).
As set out in OFSI's guidance, the art market remains a high-risk area for concealment of a source of funds and relationships to a designated person or entity. The high value nature of art works together with the international and opaque nature of the art market renders it susceptible to exploitation by persons wishing to evade and/or circumvent sanctions. Sales are often conducted in a highly confidential manner, in which it is possible for a buyer of an artwork to remain anonymous. Further, the very high values realised in sales and the lack of regulation of the international art market mean that artworks can become vehicles to invest and convert funds from illicit sources, moving them throughout the world and/or into freeports, in a relatively unnoticeable and concealable way.
While AMPs will have experience of complying with their AML obligations, as set out above, reporting in relation to sanctions may carry distinct challenges. For example, where it is easier to recognise and carry out CDD where funds may be laundered from an illicit source, such as drug trafficking, there may be considerable difficulty in complying with sanctions reporting obligations where an AMP or HVD is unable to identify the true UBO, if they are controlled or owned by a designated person through a shell company with a complex structure.
While breach of both the Money Laundering regimes and Sanctions regimes remains a risk for AMPs and HVDs, OFSI recommends implementing effective compliance programmes, including the adoption of mechanisms and controls to mitigate sanctions risks and routine compliance audits by sanctions professionals. In the same way the AMPs and HVDs are expected to conduct CDD at the beginning of a new business relationship in compliance with The Money Laundering Regulations, OFSI also recommends undertaking routine checks of the UK Sanctions Lists and OFSI Consolidated List, in particular to ascertain relevant ownership and control structures.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
