Clarissa Levi
- Art & Heritage Counsel
- Art & Luxury Law
New financial sanctions reporting obligations – What the art market needs to know
Office of Financial Sanctions Implementation (OFSI) expands the list of “relevant firms” subject to financial sanctions reporting requirements to include high value dealers and art market participants.
OFSI has issued updated guidance in its role in helping businesses comply with their obligations under the UK’s financial sanctions regime. The guidance is aimed against the facilitation of money laundering, terrorist financing and sanctions evasion through transactions in high value markets, including the art market. It clarifies common evasion practices, due diligence requirements, reporting obligations, compliance and penalties.
Anyone, or any business, involved in buying, moving, trading, transporting or storing high value goods or works of art in the UK must comply with the sanctions regime.
Why are new obligations on the art market needed?
The UK is a major global marketplace for high value goods including art and antiques, luxury cars and jewellery, and for alternative investments such as in wines and spirits. The art and luxury sectors are seen as being at high risk of exploitation for money laundering, perhaps because of the discretion historically afforded to art market transactions or the ease with which high value objects can be concealed and transported. Some, such as precious stones, are effectively untraceable.
Suspected breach reports have tended to be made to OFSI indirectly via the financial and legal services sectors, rather than coming directly from dealers or those participating in the art market. Reporting obligations are therefore now being specifically extended to those transacting in the art and luxury sectors to raise awareness of sanctions obligations in these markets as well as to provide the market knowledge to prevent breaches.
Common practices by those seeking to circumvent and evade financial sanctions include:
- movement of assets such as sales of luxury goods on behalf of someone who is subject to financial sanctions (a designated person), with funds moved across secrecy jurisdictions;
- unclear sources of payments or funds, such as intermediaries or shell companies buying or selling luxury goods, use of offshore accounts, or changes in payment arrangements;
- manipulation of prices of art and luxury goods, values for which can be highly subjective; and
- transacting in digital assets such as cryptocurrencies and NFTs to bypass financial security.
Who is affected?
Reporting obligations are placed on dealers in high value goods and art market participants, with a focus on those trading internationally with regions subject to trade restrictions.
The list of “relevant firms” subject to financial sanctions reporting previously included businesses such as financial services providers, estate agents and casino operators. From 14 May 2025, the list has expanded, and relevantly to the art market the list now includes two new categories of operator:
High value dealers (HVDs)
An HVD is a dealer trading in goods, such as an auctioneer or art dealer who can be a sole practitioner or firm, who pays or receives €10,000 cash in respect of any transaction. This can be in a linked series of payments, and refers to physical cash payments only, i.e. banknotes handed over in person, not bank transfers or digital payments.
Art Market Participants (AMPs)
An AMP is a firm or sole trader required to register with HMRC as an art market participant for the purposes of Money Laundering Regulations.
The reporting obligations on AMPs apply in relation to “information or another matter” which comes to the AMP in the course of conducting its business, i.e. when it trades in, or acts as an intermediary in trading in, works of art of €10,000 or more in one transaction or a series of linked transactions.
As well as those who buy, sell and negotiate transactions, AMPs include anyone who stores art for a client worth €10,000 or more, with the exception of artists who sell or store their own work.
What needs to be disclosed?
HVDs and AMPs must report to OFSI as soon as practicable when they come to know, or have reasonable cause to suspect that:
- A person is a “designated person” (i.e. that a client for whom they act is subject to sanctions and listed on the UK’s consolidated sanctions list)
- There has been a breach of a financial sanctions prohibition or other failure to comply with an obligation under the UK sanctions regulations
When making a report the AMP/HVD should give details of the “information or other matter” on which their knowledge or suspicion is based, as well as any information which can identify the person they are reporting. They must also disclose the nature and amount of any funds they may be holding for the person they are reporting.
Importantly, HVDs and AMPs are only subject to this reporting obligation where the knowledge or reasonable suspicion comes in the course of carrying on their business.
Ownership and control
Financial sanctions equally apply to those owned or controlled by the designated person.
Practical steps
It is the HVD/AMP’s responsibility to ensure they comply with their obligations. A strong compliance programme might include the following measures:
- At the outset of any new business, routinely check the UK Sanctions List and OFSI’s consolidated list or seek professional legal advice to do the same.
- Always assess transaction risk. If operating in or in connection with high-risk territories, take care to understand the sanctions regulations and seek independent legal advice if unsure.
- Conduct enhanced due diligence checks if the transaction involves high risk countries in addition to client identity checks, assessing all aspects of proposed new business. Do any partners, contractors, third parties or financial institutions involved in the transaction appear on the OFSI consolidated list?
- Check ownership structures. Is the client owned or controlled by another person or entity? Some information may be available freely, and also consider paid subscription-based resources to conduct thorough checks.
- In general: have a clear written compliance policy, implement and adhere to it, train staff and provide resources in respect of it, and communicate compliance expectations clearly. Protect whistle-blowers. Document which checks have been undertaken and decisions made. Professionally audit compliance policies routinely.
If you know or suspect that a client is subject to financial sanctions, you must immediately:
- stop dealing with them;
- freeze assets you are holding for them; and
- inform OFSI as soon as you can
Specific rules apply to those designated under the Russia regulations, detailed in the Russia Sanctions Guidance.
Trade sanctions
Financial sanctions are dealt with by OFSI, including enforcement, licensing and penalties. Separately, UK trade sanctions are dealt with by the Department for Business and Trade, through the Office of Trade Sanctions Implementation. AMPs and HVDs should consider the application of both these types of sanctions. Specific licences may be available in relation to each type of otherwise sanctioned activity.
What are the penalties?
Breaches of financial sanctions are a serious criminal offence. Penalties can include imprisonment, or a fine, or both. OFSI can impose fines for breaches of financial sanctions of the greater of £1 million, or 50% of the value of the breach.
Conclusion
As the UK’s financial sanctions reporting framework evolves, businesses in the art and luxury sectors face renewed responsibility for their compliance. Taking a robust approach to reporting obligations will help those in the art market to navigate legal, financial and reputational risks, as well as building business by establishing integrity. A flourishing art market relies on trust and transparency – and so does everyone operating in it.
Contact Wedlake Bell’s Art & Luxury team for independent legal advice on sanctions-related issues, and for compliance training.
This article is for general information only and does not seek to give legal advice or to be an exhaustive statement of the law. Specific advice should always be sought for individual cases.
Meet the team: