Post matching 'money-launderingMoney Laundering'

When it comes to the mechanics of money laundering, most think of property being the primary vehicle by which international criminals turn their ill-gotten funds from illicit to legitimate. But, as much as genuine and honest art lovers and dealers would prefer it not to be true, their sector is now awash with money laundering. There is a solid reason why this is the case, as while property-related transactions are immutably recorded through history, the life journey of an artwork is often not. This, in turn, makes it incredibly easy for art to pass hands without even knowing who owns it.

Ideal playing ground for money laundering

According to Thomas Christ, a representative of the Basel Institute on Governance, a Swiss non-profit which has looked into this matter in some depth, “the art market is an ideal playing ground for money laundering.” Indeed, the Basel Institute is now at the forefront of helping dealers and auction houses to curb money laundering. One of the most renowned auction houses, Christie’s has now adopted new processes which require agents to divulge the name of the art owners they represent in order for a transaction to proceed.

This view is echoed by Deloitte, which believes that the art market is vulnerable to money laundering due in large part to its sheer scale and high values. They assess that the value of art and collectable assets held by ultra-high-net-worth individuals (UHNWIs) will grow to US $2.7t in 2026 (from what was US $1.6t in 2016). They also observe that terrorists readily exploit the art market to raise ‘hard cash’ by selling illegally gained antiquities (sometimes referred to as ‘blood antiquities’).

Free ports as an enabler of art-based money laundering

According to, now, PM, Boris Johnson, free ports will form part of the UK’s future customs strategy, but it is clear that the EU Parliament feels very different about such entities. Far from rushing towards a new world of free ports across the country, the EU believe they are nothing more than bastions of tax evasion and money laundering (despite having around 80 across the EU). Free ports (also called ‘free zones’) for those unfamiliar with the term are storage areas, typically located within the confines of existing ports, where high-value assets are stored on a semi-permanent basis. Luxembourg, Geneva, and Singapore all boast vast free port facilities providing highly secure, air-conditioned storage for the storage of fine wines, art, and vehicles. Some facilitate the storage of art and other valuable assets while protecting the name of the ultimate beneficial owner (UBO) (although this is not the case of the Luxembourg free port). Good stored at free ports are effectively deemed as being ‘in transit’, rather like a person at an airport between flights; this allows the owners of such items to avoid the payment of sales tax and being subject to customs duties.

How can art galleries protect themselves from unwittingly aiding money laundering?

The Fifth Anti-Money Laundering Directive (5AMLD), adopted by the European Parliament on 19 April 2018, has been designed to create a more hostile environment for those wishing to shelter criminals proceeds and assets through non-transparent structures. As such, art businesses in the UK must now act to implement processes and systems which enable the ongoing and systematic monitoring of the beneficial owner/s of artwork and ensure any proof of registration documents are kept up to date for corporate or trust owners.

Art businesses also need to show they have made robust efforts to understand and document the background and purpose of complex art transactions, and to determine if the nature of any business relationships involved appear suspicious.

Indeed, the obligations of art businesses under 5AMLD are now significantly more onerous than those under 4AMLD (the Fourth Anti-Money Laundering Directive); and we expect these only to increase with future iterations of the directive.

UK based art businesses can ensure they remain compliant with 5AMLD by:
• Putting in place a money laundering reporting officer (MLRO) whose role it is to manage any reports of potential money laundering within their business.
• Developing, updating and enforcing business-specific ‘anti-money laundering’ policies and procedures including for customer due diligence, record-keeping, and risk assessment.
• Training employees in policies, procedures and systems designed to prevent money-laundering, and ensure they know how to report suspicious activity.

It is also essential to make sure that your business embraces a culture of awareness and understanding when it comes to art and money laundering. This must include explaining the potential penalties for individuals and the company if money laundering is discovered. Under Section 330 of the Proceeds of Crime Act 2002 (POCA), if an individual employed by an obliged entity fails to disclose knowledge or suspicion of money laundering to an MLRO or the National Crime Agency, they may face five years’ imprisonment or an unlimited fine.

In summary

The UK is home to a vast array of honest and scrupulous art businesses, dealing with items of relatively modest value, to many hundreds of millions of pounds. Given the potential rewards for those wishing to launder money through our much-valued art sector, everyone must play their part in rejecting the interest of criminal ventures. Not only are the personal penalties too high to contemplate for anyone, but there is also much to be gained from protecting and upholding the reputation of the UK’s art sector. However, if you know or suspect you have been an unwitting party to money laundering involving art, it is imperative you seek legal guidance as soon as possible. By seeking the assistance of a Barrister specialising in defending those accused of money laundering, an effective and robust legal strategy can be drawn up which affords you the very best chance of a favourable outcome given your unique circumstances.

Tanveer Qureshi is a Legal 500 barrister, specialising in money laundering crime. If you require legal representation, please contact on 020 3870 3187.

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