“Sometimes, the provenance of the funds can be more critical than the provenance of the art.”

— Peter D Hardy (The National Law Review)

AML & KYC Services for the Art Market

Enhanced Due Diligence Reports / Detailed KYC Background Checks and other AML services for Art Market Participants (AMPs)

Money Laundering Risks in the Art Sector

Secrecy and opaqueness have been longstanding features of the art world. Sellers and auction houses often concentrate their due diligence processes on the authenticity and provenance of the actual piece of art and not the source of wealth, funds or background of the individual or entity purchasing it.

With most financial institutions, processes and transactions being subject to ongoing stricter AML and KYC regulations over the last 20 years the Art world is now only starting to catch up.

Perhaps the first point to stress is how there are many legitimate reasons why art transactions can be very secretive, such as security, estate planning, privacy and trust between parties. Unfortunately as most industries and financial sectors continually strengthen their AML, KYC and CFT regulations, criminals will try and exploit any weak points, particularly industries that have high value transactions built on trust. As of 2018 the global art market was worth $67.4 billion and circa $3 billion of that is attributed to laundering and money from associated financial crimes.

One could argue that the art market is a primary money laundering risk sector due to the criminal underworld that already operates throughout the sector with thefts, fakes, illegal imports, looted art works and artworks that are often appropriated as illegal currency on the black market.

However it is very important to stress that the vast majority of businesses and individuals involved in the global art world are honest and diligent. Proximal Consulting wants to ensure that your company and its reputation doesn't become tarnished with organised financial crime by assisting with your regulatory compliance.

The European Union Fifth Anti-money Laundering Directive : 5AMLD

"From 10 January 2020 art market participants who deal in sales, purchases and/or storage of works of art (as defined in s21(6) of the VAT Act 1994) with a value, for a single transaction or a series of linked transactions, of 10,000 euros or more, will be subject to further anti money-laundering obligations, under the Money Laundering Regulations 2017……. At the heart of the new Regulations is a requirement that art market participants must identify the physical person who they are dealing with in any transaction or, when dealing with a corporate body or a trust, the person or persons who control that entity. In other words, “Who are you really dealing with?” This is known as customer due diligence (CDD)."
British Art Market Federation Guidance on Anti Money Laundering

Proximal Consulting understands that many Art Market Participants (AMPs) don’t have the internal resources and knowledge to conduct KYC checks and Enhanced Due Diligence to be 5AMLD compliant. We can therefore work with you to produce detailed KYC EDD reports, specifically tailored to your individual requirements.

Whilst 5AMLD only applies to EU AMPs, the rest of the world is already starting to adopt and legislate similar frameworks. Even if there are no specific laws and regulations that apply to the art market in your jurisdiction, there will no doubt be other laws and regulations to ensure that you perform adequate KYC checks on high value goods and transactions.

What Art Market Participants Have to Do

5AMLD requires EU AMPs to:

Registered for supervision with HMRC
Undertake a written risks assessment of their business and customers including identifying low and high risk customers and transactions
Create and consistently maintain anti-money laundering policies and procedures
Train all staff in anti-money laundering regulations and internal AML policies and procedures
Conduct customer and transaction due diligence before finalising a transaction
Appoint a Money Laundering Reporting Officer (MLRO)
Maintain relevant records

How We Can Help Art Market Participants & Confirm Who They Are Dealing With

Our KYC enhanced due diligence reports will ensure that you know who are dealing with. Our reports are:

Fixed price
Strictly confidential
Tailor-made to the client’s requirements, industry and regulatory requirements
Completed in an agreed time frame
Produced to ensure our client is not exposed to reputational, operational, legal or concentration risks
Rigorously researched and analysed and not just simple database search results
Factual, impartial and objective

Furthermore Proximal Consulting has over twenty years' experience in delivering KYC Enhanced Due Diligence reports, with specific expertise in:

PEPs
The identification of Beneficial Owners
Offshore companies & trusts
Terrorist Funding
Art Market Participants (AMPs) and Ultra High Net worth Individuals
Full global coverage, we are not limited or restricted by geographic borders and have conducted research in over 150 jurisdictions & countries

In terms of our investigations and reports, we seek to confirm the following information in respect of individuals:

Address verification
Confirmation of personal details such as date and place of birth
Verify identity documents
Background information on the family of the subject of our report
Full details of business interests
Whether the subject should be viewed as a PEP (politically exposed person) and/or a close family member or associate of a PEP
Media references
Intelligence about confirmed or suspected links to criminal activities
Details about any allegations or verified intelligence about involvement in corrupt activities
Sanctions risks

Client confidentiality is of the utmost importance to us, and all of our enhanced due diligence checks are conducted in a totally discreet manner.

Our enhanced due diligence reports on individuals and corporate entities will not only ensure that the legal and regulatory obligations of our clients have been met but they are also designed to safeguard our clients from any financial, legal, operational or reputational risks.

Additional Expert Assistance for AMPS

We can also provide expert assistance and advice to AMPs in the following critical areas:

Compile a written risk assessment of your business and customers to highlight high risk customers and transactions
Create relevant anti-money laundering policies and procedures for your business
Provide world class training to your staff on anti-money laundering regulations and internal AML policies and procedures
Advise on what relevant records and documentation you need to maintain