In addition, non-fungible tokens (NFTs) have become the breakout stars of the art market, with a digital collage by Beeple selling for $69.3mn, making it one of the most expensive pieces ever sold by a living artist. The overall NFT market hit $22bn. In sum, tens of billions of dollars of art and antiquities change hands every year, with little scrutiny, in what many have called the world's largest unregulated market – until now.
Increasing regulatory focus
Regulators in Europe have already taken notice: since July 2018, the EU’s fifth anti-money-laundering directive has applied to persons operating in the art market or acting as intermediaries in the trade of works of art where the transaction is worth €10,000 (£8,320) or more. The directive, which EU member states were required to implement by January 10 2020, went further than its predecessor, which only targeted similar transactions in cash.
The UK implemented the directive through amendments to the UK’s money laundering regulations. The amendments put art market participants (AMPs) into the regulated sector, the same category as financial institutions and estate agents. AMPs include art dealers, auction houses and operators of freeports – but not artists selling their own works.
Since 2003, the Proceeds of Crime Act has required persons in the regulated sector to report any person that they know or suspect is engaged in money laundering. The amendments go further, AMPs must:
- Follow a risk-based approach to prevent and detect money laundering, considering the nature of the business and the level of risk in a particular customer.
- Carry out customer due diligence.
- Undertake ongoing monitoring activities.
- Train their staff to recognise money laundering.
- Prepare policies and procedures on anti-money-laundering.
- Appoint a nominated officer and register their business with HM Revenue & Customs.
AMPs must also verify their customers’ identities for transactions concerning works of art valued at or more than €10,000. HMRC can impose a fine on AMPs if they breach these obligations and in serious cases can result in imprisonment.
In May 2021, the UK’s National Crime Agency issued an amber alert inviting businesses in the regulated sector, such as financial institutions, to file suspicious activity reports related to art and antiquities.
In the US, the enactment of the Anti-Money Laundering Act of 2020 kicked off a suite of measures aimed at cracking down on illicit finance in the US art and antiquities market. The first of these was to amend the definition of "financial institution" in the Bank Secrecy Act to include persons involved in the antiquities trade.
