An early attempt at highlighting vulnerabilities the art market faces of financial crimes was included in the National Risk Assessment 2020 (UK).
ArtAML was involved as a key stakeholder, and we therefore understand the challenges that were faced in presenting information on a newly regulated sector in the midst of a pandemic that saw a decrease in the global art market of more than 25% (Art Basel / UBS Art Market Report 2020).
A key difficulty in gathering industry insights was that initial research was being undertaken in 2019 Q4, yet the art market was not directly regulated under the Money Laundering Regulations until January 2020. Therefore, when stakeholders met with HM Treasury, HMRC and others in July 2020, we were given a further opportunity to provide and seek input from members (where appropriate). This at least enabled input for the initial period that the sector had been regulated, with the caveat being that the market was grappling with the Covid-19 pandemic with reduced qualifying transactions (of 10K+ Euros).
National Risk Assessment findings:
“Although there is still a lack of complete understanding of the mitigations and vulnerabilities in the art market, the ability to conceal the beneficial owners and final destination of art make it attractive for money laundering” (p.5).
Risk rating (p. 138-9):
Money Laundering = HIGH
Terrorist financing = LOW
WHY has the NRA identified the art market as ‘high risk’? The following points are highlighted (p. 140-142)Use of offshore trusts, and also use of intermediaries;
- Value of art is subjective and prices vary. High value pieces can conceal funds;
- Subjective valuation = market manipulation. Buy £100 and sell £1m… looks legitimate;
- The international nature of the art market attracts those who want to move funds around the world; and
- Easy to move, alongside fake shipping documents and other forged items.
In closing, the study admits that while findings are limited owing to the lack of information available at the time, there are qualities of the art sector that make it vulnerable to money laundering.
Read the full report (note p. 5, 138-142, 144):
National Risk Assessment 2020
> See our article on HMRC’s Risk Guidance that provides excellent insights based on their real-life, on-the-ground findings as sector regulator (pub. June 2021): https://artaml.com/hmrcs-risk-guidance-for-the-art-market-a-must-read/
> Art Basel / UBS ‘The Art Market Report 2020’ by Dr. Clare McAndrew): https://www.ubs.com/global/en/media/display-page-ndp/en-20210316-art-basel.html