Extension to deadline for registration
A five month extension has been granted to the time period that newly regulated Art Market Participants have to register with HMRC for anti-money laundering purposes. The deadline for registration is now 10 June 2021, instead of 10 January 2021.
The change came into force on 6 October 2020 and the objection period expired on 24 October 2020, meaning the extension will now remain in effect.
If an Art Market Participant fails to register by 10 June 2021, it must not carry on the defined activities within the scope of the regulations, as set out below.
What is an Art Market Participant?
An Art Market Participant is defined as a firm or sole practitioner who either:
- 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 or more; or
- is the operator of a freeport and stores works of art in that freeport where the value for a person (or a series of linked persons) is €10,000 or more.
This will catch many working directly within the art market, such as high value dealers and auction houses, and potentially other parties where they are acting as Art Market Participants, such as agents, intermediaries and some artists.
Anti-money laundering obligations and COVID-19
The extension to the registration requirement will be a relief to those Art Market Participants who are already finding it difficult to adapt to the current climate.
However, it is important to note that existing anti-money laundering obligations came into force on 10 January 2020. These require Art Market Participants to carry out due diligence on all customers in transactions or a series of linked transactions valued over €10,000, irrespective of their registered status, among other duties.
Non-compliance with these obligations may result in conviction, financial penalties, a custodial sentence and potential reputational damage. See a summary of the obligations and penalties applicable to Art Market Participants in our previous article here.
Of course, navigating these issues in light of the COVID-19 pandemic adds a further layer of complexity for those businesses accustomed to established ways of concluding deals and fostering relationships in person, whether it be in the auction room or at an exhibition or art fair. Those businesses may find it difficult to put the necessary infrastructures in place to comply with the rules, especially where those rules apply to the 'new normal' of online art sales.
Guidelines have been published by the British Art Market Federation (BAMF) and approved by HM Treasury on 24 January 2020, which can be accessed here. The Responsible Art Market Initiative (RAM) have also published guidelines on combatting money laundering and terrorist financing, available here.
For further detail, the relevant legislation is Parts 1 to 3 of The Money Laundering and Terrorist Financing (Amendment) (EU Exit) Regulations 2020, which amends the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.
Economic crime levy
An economic crime levy to fund the Government's new action to tackle money laundering is currently being considered. This was proposed in the March 2020 Budget. The latest consultation ended on 14 October 2020 and further details can be found here.
In summary, the levy aims to raise approximately £100 million per year from entities regulated for anti-money laundering purposes, which is most likely to catch Art Market Participants. The Government is currently analysing the feedback from the consultation before further announcements are made.
Further requirements for trusts
There will be further anti-money laundering targeted changes, focused on enhanced powers for direct access to information and increased transparency around beneficial ownership information. These include:
- the widening of the scope of trusts required to register, to include all UK express trusts, including those with no tax consequences;
- when entering into a new business relationship with a trust that is required to register under the above requirements, obliged entities will be required to collect proof of registration (10 March 2022); and
- there will be a duty to inform the Commissioner of any discrepancies in trust information (10 March 2022).
The above requirements will be relevant to the beneficial owners of art collections and other types of cultural property assets that are held in trust structures. It is also important for trustees to be aware of their registration requirements and for businesses in the art sector who transact with trustees to collect proof of registration, when required.
For advice in tackling these issues and to understand how it will affect your business, trust or for other art related matters, please contact Amanda Gray or Daniel Foley.