It’s a tricky thing, art. No – I don’t mean those arguments over whether an unmade bed or a black painted square is art, but the deliberations about when the art world is part of the AML community and when it isn’t. Before the advent of the Fifth Money Laundering Directive, an art auction house or similar would be subject to the AML requirements (at least in the UK and other jurisdictions with EU-derived AML regimes) only as part of the “high value dealer” category. And the definition of a high value dealer comes from the previous Directive, MLD4: “other persons trading in goods to the extent that payments are made or received in cash in an amount of €10,000 or more, whether the transaction is carried out in a single operation or in several operations which appear to be linked”. In short, the key characteristic was the acceptance of large amounts of cash – actual folding (or clinking) cash.
MLD5 moved the goalposts, and many involved in the trade in art found themselves ejected from their cosy home with the HVDs and lodged in a new category of their own, with the requirements of MLD5 now additionally applying to “persons trading or acting as intermediaries in the trade of works of art, including when this is carried out by art galleries and auction houses, where the value of the transaction or a series of linked transactions amounts to €10,000 or more; [and] persons storing, trading or acting as intermediaries in the trade of works of art when this is carried out by free ports, where the value of the transaction or a series of linked transactions amounts to €10,000 or more”. In other words, although the €10,000 threshold remains, the form of payment – cash or otherwise – is immaterial. So any art market participants who had managed to exclude themselves from the AML requirements by refusing to accept cash are now back in.
Perhaps understandably, there has been some confusion about who is included – overlaid by the inevitable reluctance to accept their fate. And some leeway has been permitted in these troubled times. But the art sector is now in the spotlight. On about 19 March 2021 the National Crime Agency issued one of its occasional “amber alerts”, the time to art dealers. I can’t unearth the actual document on the NCA website [if you can, please post the link in a comment – I’d love to find it], but a report on it in the Evening Standard quotes Graeme Biggar (DG of the NCA’s National Economic Crime Centre) as saying that although they have been encouraged to file more SARs, there has been an inadequate response from dealers, despite their sector being “a relatively high risk area for money laundering because it is a market used to operating with anonymity, where they use third parties, and where the source of the funds is often not clear”. He also comments that “HMRC will be looking a bit harder too at art dealers”. Let’s hope the art sector is finally getting the picture.