Author: Nicola Sharp 19 November 2019
With a Transparency International report warning of money laundering in the art world, Nicola Sharp of Rahman Ravelli considers the implications of the Fifth Money Laundering Directive for those trading in this sector.
Transparency International’s (TI) “At Your Service’’ concludes that laundered money is frequently being invested in art. It recommends that the UK government has “greater levels of outreach to the art and antique world, both to understand the risks better and to provide better, more tailored advice.”
Research carried out by TI into one global money laundering scheme found a total of 31 transactions in relation to art, auctions and antiques. TI’s report also refers to case studies, including Malaysian businessman Low Taek Jho, who is accused by the US Department of Justice of stealing money from a Malaysian state fund and then purchasing art from auction houses, including Sotheby’s and Christie’s.
TI’s report has been published as the UK’s art world is set to face new anti-money laundering regulations. The European Union’s Fifth Money Laundering Directive (5MLD) is to be implemented in January 2020.
Art intermediaries are already regulated for anti-money laundering and counter terrorist financing (AML/CTF) purposes if they are classified as a high value dealer under the money laundering regulations – meaning someone who makes or receives a payment in cash of at least 10,000 euros in total from a single or series of linked transactions.
But 5MLD expands the scope of obliged entities beyond the high value dealer category to include art intermediaries for transactions exceeding EUR 10,000, including art galleries, auction houses and free ports. As a result, dealers and intermediaries will now have to establish the identity of their client (including any beneficial ownership if the client is a company), obtain documentation to support identification and examine the potential risk of money laundering. The scope is also extended as regards the way a payment is made: all transactions exceeding 10,000 euros are now covered, regardless of whether they involve cash, bank transfer, cheque or other payment method.
This article was also featured on Lexology.com.
Nicola is known for her fraud, civil recovery, arbitration and business crime expertise, her experience of leading the largest financial disputes and multinational investigations and her skills in devising preventative measures and conducting internal investigations for corporates.