AML Compliance for the Art Market Webinar Sept 23

Thank you again for attending the webinar on Tuesday 26 September.

During the event we received a tremendous number of questions from Art Market Participants (AMPs) in the audience. While time limited responses to all of these in the live session, as promised, Rena has addressed the remaining questions from anonymous attendees here below:

Questions & Answers

Q: Where US subsidiaries of UK companies exist, how are interventions conducted on those US subsidiaries?
A: We have yet to see HMRC ask to conduct interventions on the subsidiaries of UK AMPs, however, one might speculate that HMRC would simply ask the UK parent company for the information.

Q: To do Customer Due Diligence (CDD) for a private company, is it always mandatory to have ID of the ultimate beneficiary or only risked-based?
A: As with nearly every situation involving CDD, the answer to an 'always' or 'never' question is usually, it depends. This is true in this case: the answer depends on the individual facts and circumstances.

Q: What about American-based third parties, i.e. Artsy, Saatchi Art, etc etc? It's not clear that they are registered. How do we stand?
A: The HMT Guidance regarding online service providers includes:

14. An intermediary could therefore be an agent or an art dealer, which could include an art gallery, auction house or an online sales platform. An intermediary could themselves be such an entity, or might simply be a person or entity paid by the seller or buyer for whom they act.

15. An online sales platform will be an intermediary, if they are conducting relevant activity in the UK and receive commission in relation to transactions (sales or purchases of works of art) taking place on their platform. This may also include online sales platforms that are based outside the UK but are acting as an intermediary for their UK customers. If such a non-UK based platform cannot access the registration portal at GOV.UK, they should email MLRCIT@hmrc.co.uk.

An online service provider acts as an intermediary if they are an active participant, usually understood to be active in the execution or negotiation of the transaction. So, each service provider should register if they are an intermediary. However, there are challenges to non-UK entities who may not be able to register with HMRC due to technical issues. In these cases, we understand that the non-UK entity should comply even if they are not able formally to register. Thus, once again, these need to be considered on a case-by-case basis.

Q: If you go back through CDD to 2020 in preparation for the intervention in order to fill any gaps but find there is a high-risk client but the property has been released, what is the procedure then?
A: If during your own risk assessment you discover a weakness or gap in your CDD, do your best to complete the CDD and document your steps and reasoning. You should also consider whether it is appropriate to file a Suspicious Activity Report (SAR). Finally, if the inadequate CDD discloses any weaknesses in your CDD procedures, it would be important to implement corrective procedures so that the gaps/weaknesses do not occur in future, and to document these new procedures.

2 related questions:
Q: What level of staff need to receive AML training? For example, would a porter need to receive training? Or would simply knowing who the AML Officer is be sufficient?

Q: Would a part-time bookkeeper need to undergo training if they don't have any client engagement?
A: The Guidance is that relevant staff should be trained. In addition, an AMP has an obligation to make sure that their agents, part-time and occasional staff (collectively, Special Category Staff) are trained and familiar with the AMP's obligations, AML Policy and Procedures, in particular as the foregoing relate to the work of the Special Category Staff.

As the AMP determines which members of staff are 'relevant', it should take into consideration the various roles and responsibilities of each category of staff. To the extent staff might be in a position to uncover a red flag or risk, it is advisable to have them trained. Of course, the short answer is that the more staff that are trained on the company AML programme, the better it is to help create a 'think-risk' culture of compliance.

Q: If an agent is selling on a client's behalf e.g. a finance company. The funds are being transferred to the finance company but eventually to the client of the finance company. Do the auction house need CDD on the original finance company vendor, or is CDD on the finance company sufficient?
A: If we have understood correctly, where an AMP has reason to believe that the ultimate customer is behind an agent/intermediary/consignor, it would be appropriate to do CDD on both the intermediary and on the ultimate customer. If the agent is themselves a registered, regulated AMP in good standing, there are situations in which conducting CDD on the agent may be sufficient.

Q: Is CDD applicable to clients and suppliers, or clients only?
A: The distinction between clients and suppliers is not self-evident. However, an AMP must conduct CDD on its customer, those being paid for art or services in connection with qualifying transactions.

Q: If I sell a client's object through a US auction house, do I need to know who their (auction house) client is?
A: Strictly applying the UK Art Market Guidance, the answer is yes, as a US auction house is not subject to similar AML regulations as the UK. As mentioned in the webinar, it might be helpful to make it clear that the AMP is not to use CDD for commercial purposes.

PLEASE NOTE:
The webinar and content on this page does not contain legal advice. Moreover, although Art Market Participants (AMPs) are permitted to consult third parties, please remember that art market participants remain liable for their adoption and implementation of a risk based approach and their own customer due diligence decisions.

And a last one from us:
Q: How can FCS Compliance help my business?
A: No matter what your AML requirement, our team of highly-experienced experts are on hand to support you. They can offer the right services to help you meet all your legal AML obligations.

Please contact our friendly team today:
Simply call: +44 (0)207 924 7979 or email info@compliance.co.uk and we will get in touch.

HMRC Interventions & Avoiding Penalties

2 related questions:
Q: What level of staff need to receive AML training? For example, would a porter need to receive training? Or would simply knowing who the AML Officer is be sufficient?

Q: Is CDD applicable to clients and suppliers, or clients only?
A: The distinction between clients and suppliers is not self-evident. However, an AMP must conduct CDD on its customer, those being paid for art or services in connection with qualifying transactions.

Access the Webinar Recording

HMRC Interventions & Avoiding Penalties

2 related questions:Q: What level of staff need to receive AML training? For example, would a porter need to receive training? Or would simply knowing who the AML Officer is be sufficient?

Q: Is CDD applicable to clients and suppliers, or clients only?A: The distinction between clients and suppliers is not self-evident. However, an AMP must conduct CDD on its customer, those being paid for art or services in connection with qualifying transactions.

Access the Webinar Recording

2 related questions:
Q: What level of staff need to receive AML training? For example, would a porter need to receive training? Or would simply knowing who the AML Officer is be sufficient?

Q: Is CDD applicable to clients and suppliers, or clients only?
A: The distinction between clients and suppliers is not self-evident. However, an AMP must conduct CDD on its customer, those being paid for art or services in connection with qualifying transactions.