How New Anti-Money Laundering Laws Will Affect Art Collectors

Collectors are now expected to ensure that they acquire art legally and ethically. Most collectors are either individuals orart market players(AMP), legally defined as a reseller who buys on behalf of his company or a customer, and has processed one or more related transactions with a value greater than €10,000 (approximately $11,900).
Therefore, if a collector intends to sell works of art from his collection for a value of €10,000 or more, he will be subject to substantial new regulations. Those who remain on the buying side of art market transactions will still need to take additional steps, but will not legally need to undertake due diligence. There was also reports loopholes available to dealers who do not wish to comply with the AML, but their use entails significant risks.

“While it is good practice for buyers to do their due diligence on the work of art and its seller before buying, in their capacity as customers, buyers are not required to carry out checks anti-money laundering on their vendors,” Jasani said. “When an AMP buyer buys to resell, the buyer must perform anti-money laundering checks on the end buyer.” So, if a Paris-based dealer buys a €50,000 painting at auction on behalf of an Italian collector, they will need to do an AML due diligence on the collector before finalizing the sale.

Additional steps required of the non-AMP collector include providing personal identification documents and proof of address, and identifying the beneficial owners of companies, trusts, special purpose vehicles and organizations at the AMP if they buy through such a structure. While complying, collectors should always be careful not to transfer this information electronically without encryption – compliance need not become an exposure to fraud or identity theft. Additionally, the EU General Data Protection Regulation (GDPR) of 2018 ensures a minimum level of privacy protection for AMPs involved in Europe and the UK.

Along with this, AMP is required to perform a minimum level of due diligence research on collectors who buy from them to ensure that they do not raise any red flags. Therefore, collectors should expect to receive more questions from their dealers, advisors and auction house contacts.

According to Tamara Bell, specialist in art and luxury assets law at Charles Russell Speechlys, red flags include: “hot the jurisdictions involved in the transaction (for example, funds from Syria or Zimbabwe); the buyer being a “politically exposed person” (for example, a politician or a member of the board of directors of a public oil company), and therefore more likely to be involved in corruption; or the buyer (or seller) who has already been involved in AML investigations.

Susan J Mumford, the founder of ArtAML, an art market compliance platform, said collectors should embrace the new legal regime and its benefits. “The reality is that the AML regime is not going away, and from what I’m hearing the UK is likely to remain in harmony with the EU as the scope changes over time,” he said. she declared. “My recommendation to individuals and institutions is to take a leaf from my book: accept that AML is increasingly a reality of participation in the modern art market.” She added, “That mindset will position you ahead of the game.”