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NCA issues Amber Alert re: Art Storage Sector, from galleries to purpose-built warehouses

February 20, 2024

by ArtAML™ Team

A targeted Amber Alert from the UK’s National Crime Agency warns about money laundering via art storage facilities. This impacts businesses and providers in and to the art market and requires direct action to be taken when holding art on short or long term storage for a third party.

Overview

Art storage facilities, including both short-term (think: art on consignment for sale) and long-term (such as climate-controlled facilities near Heathrow Airport, UK) have been directly associated with intentions to fund crime or terrorism. The result is that the UK’s National Crime Agency (“NCA”) has issued an Amber Alert to artwork storage facilities (see below – the meaning is vast), linked specialist service providers and clients that utilise such facilities. The NCA has made a call to raise red flags and report to authorities when applicable over short and long term storage facilities’ use for money laundering, tax evasion, terrorist financing, bribery and corruption.

‘Artwork storage facilities’

The NCA states:

“Within this Alert the term ‘artwork storage facilities’ refers to any facility or space that is used to hold, store or move artworks, antiques, antiquities and collectibles whether shortterm or for prolonged periods of time. This includes purpose-built warehouses, auction houses, art dealerships, galleries, museums and freeports.”

Accordingly, if you hold art on consignment or store it on behalf of a third party, you have an ‘artwork storage facility’ – even if it is your own home or storage unit.

‘Specialist services’

The NCA states:

“The term ‘specialist services’ in this instance refers to any company that provides any service to the art storage sector in order to support or enhance their ability to conduct business. This includes shipping and transport companies, insurance companies and agents, brokers, lawyers, accountants and banking providers.”

Therefore, if you provide a service to a business caught under the ‘artwork storage sector’ above, the Alert is directed at your business. Quick-fire examples include and are not limited to: galleries, art dealers, art advisors, interior designers, other ‘art market participants’ (“AMPs”), packers, transporter, removers, installers, restorers, appraisers and specific professions listed in the above paragraph.

‘Clients of artwork storage facilities’

The NCA states:

“High-net-worth individuals (HNWIs) are known to keep art works in specialist storage facilities, some of which are tax free.”

It continues:

“As the price of art has increased, contemporary collecting has grown, with owners more interested in seeing their artwork investment portfolios appreciate in value. This trend is not exclusively linked to HNWI buyers, but it is prompting concerns about the use of these storage facilities for illegal activities by criminals seeking a capital asset that can be safely stored, that appreciates in value over time, and that can be liquidated if and when required. It is estimated that millions of pieces of art are currently held in specialist storage and have not left those facilities in decades.”

Therefore, if you provide a service to a business caught under the ‘artwork storage sector’ above, the Alert is directed at your business. Quick-fire examples include and are not limited to: galleries, art dealers, art advisors, interior designers, other ‘art market participants’ and the specific professions listed in the above paragraph.

Assumptions and risks

The Amber Alert addresses the assumption that many AMPs deemed to be in the artwork storage sector (note, this includes galleries, auction houses, etc) that someone else has taken responsibility for conducting due diligence and keeping up-to-date customer profiles.

The NCA warns:

“Criminals are known to test organisations’ due diligence processes by conducting legitimate business activity, and then placing illicit items and/or requesting sudden service changes, thereby concealing and moving assets that may be subject to restrictions… Criminals may recruit professional enables working in these fields to assist them in obfuscating and conducting criminal activity through wilful blindness and/or active participation. Illicit activity may be hidden amongst legitimate activity, making it harder to detect.”

Key indicators for awareness and action

The Alert presents the following considerations for artwork storage facilities and specialist services:

Change in client circumstances
- The specific example provided is daily checking against sanctions listings.
Attempts to transfer artwork or cultural property ownership to a family member, close contact, business associate or other intermediary
- Consider the reason and any red flags.
Attempt to sell artwork or cultural property quickly, or move it to another jurisdiction
- Consider the reason, any red flags and if the provenance of the artwork or cultural property has been verified by a trusted source.
Regular payments from an unclear source
- Who has control over the individual or entity, and might payment be originating from an offshore account?
Use of front or shell companies, or complex corporate or trust structures where the UBO is unclear
- Think about the client’s company’s website – is it professional and does it present much information? Is there an attempt to obscure the UBO of any objects? Does the complex nature of the structure have sound commercial justification?
Requests to store objects that are stolen or subject to restrictions
- The specific example provided is daily checking of art registers and other due diligence systems.
Use of financial services to acquire, sell or ship artworks or cultural property in and out of specialist storage facilities
- The Alert states: Is the client completing transactions via an intermediary acting as a middle layer between the buyer and seller, so that the end ultimate buyer and seller remain unknown to each other? It adds mention of unusual activity and businesses that only trade with one or two other businesses that do not trade with other businesses.

How we are supporting the art market with these risks

As Key Stakeholders for AML in the art market, we’re seeking clarification and preparing to implement updates to our customer due diligence (“CDD”) platform*, AML Training courses and AML Risk Assessments & Policies (including policies, controls and procedures).

*CDD platform: It is clear that ongoing monitoring of customers will be a requirement for some AMPs that are holding objects on long or short term consignment. While ‘occasional transactions’ continue to represent the bulk of transactions and CDD is to reflect what was accurate at that time, there are situations in which art is held on behalf of an individual or company. We are also considering scenarios for which regular checks of stolen art registers will apply, pertaining to some AMPs that deal in the secondary market.

In Conclusion

The business of dealing in art involves the storage of movement and art. While the vast majority of are taking advantage of the sector including providers has no involvement in money laundering, financial crime or terrorist financing, the sector is being targeted by criminals. Therefore, being vigilant is of paramount importance, not only to prevent and stop criminal activity if it exists, but to meet your legal obligations.

If you have specific questions or concerns, get in touch with our team via [email protected] .

Related Reporting Obligations

Submitting a SAR related to the NCA Amber Alert re: Art Storage Sector: If you decide to make a report in this way you should adopt the usual mechanism for doing so (see link), and it will help the NCA’s analysis if you would include XXJMLXX within the text, and separately, the reference 0735-NECC for this Alert within the relevant field on the NCA SAR Portal. https://sarsreporting.nationalcrimeagency.gov.uk/
Submitting a SAR related to money laundering and linked to financially sanctioned entities, i.e., an individual or company that has been found to be sanctioned in the screening process: The UK Financial Intelligence Unit (UKFIU) is housed in the NCA and has national responsibility for receiving, analysing and disseminating financial intelligence submitted through the Suspicious Activity Reports (SARs) Regime. The UKFIU has introduced the sanctions-specific glossary code XXSNEXX for reporters where they suspect the activity is consistent with money laundering and is linked to entities sanctioned by the UK, US, EU and other overseas jurisdictions.