Art Under the Hammer

Gavin Irwin discusses the impact of OFSI’s new guidance and Threat Assessment for the Art Market

The UK is a major international hub for the trade in high value goods including art and antiques.  There are c.8,000 businesses within the British art and antiques market providing direct employment for c.40,000 people.  It is the third largest art and antiques market in the world with a global share of c.20%.  In 2014, total sales reached GBP c.£9 billion and, in 2023, GBP c.£10 billion[1][2].

In addition, the UK plays a significant role in the global auction market, again ranking third in the world, with a market share of 12%. Three of the world’s leading auction houses have been based in London since the 18th century.

On 18 March 2025, in anticipation of the inclusion of Art Market Participants (AMPs) and High Value Dealers (HVDs) as “relevant firms” for the purpose of financial sanctions, the Office of Financial Sanctions Implementation (OFSI) published guidance for the sector.

On 14 May 2025, both AMPs and HVDs became relevant firms (see, for example, the Russia (Sanctions) (EU Exit) Regulations 2019/855 (Regulation 71(1)(k) and 71(3E) to 71(3G)) and the Iran (Sanctions) Regulations 2023/1314 (Regulation 69(1)(k) and 69(6B) to 69(6D)).  A relevant firm has sanctions reporting obligations the breach of which is, in itself, a criminal offence.

Then, on 18 June 2025, OFSI published a “Threat Assessment” for Art Market Participants (‘AMP’) and High Value Dealers (‘HVD’)[3], to add to those already published in relation to Financial Services[4], Legal Services[5] and Property and Related Services[6].

The Threat Assessment states that:

“Numerous designated persons across several UK sanctions regimes are high-net-worth individuals with historical footprints and assets in the UK, including high value goods (HVGs). Dealing with these HVGs, including by arranging for their acquisition, sale, transport and/or maintenance, without a relevant OFSI licence risks breaching UK financial sanctions.”

HMRC and Anti-Money Laundering (AML)

In 2020, AMPs were brought within the regulated sector under the Money Laundering Regulations 2017.  For those purposes, an AMP is a company or sole practitioner who is either:

• ‘By way of business’ trading, or acting as an intermediary, in the buying or selling of works of art where the transaction value (or a series of linked transactions) is 10,000 euros or more; or
• The operator of a Freeport storing works of art in the Freeport and the value for a person (or a series of linked persons) is 10,000 euros or more.

A ‘work of art’ is defined in section 21(5) of the Value Added Tax Act 1994 and includes: paintings and photographs; engravings and prints; sculptures and ceramics; and, tapestries.  Since January 2020, AMPs have been required to comply with customer due diligence, document keeping, disclosure and notification requirements and, since January 2021, to register with HMRC.

OFSI and Financial Sanctions

OFSI is responsible for the monitoring of compliance with UK financial sanctions and for assessing suspected breaches of prohibitions or failures to comply with obligations. OFSI can refer matters for prosecution and has powers under the Policing and Crime Act 2017 to impose monetary penalties of up to £1 million or 50% of the estimated value of relevant funds or economic resources.

An AMP is defined in sanctions regulations in essentially the same terms as in AML regulations although, for sanctions purposes, the definition does not cover a firm or sole practitioner in relation to the sale or storage of a work of art which is created by, or is attributable to, a member of the firm or the sole practitioner.

Under regulation 70 of the Russia Regulations 2019, a relevant firm must inform the Treasury (OFSI), as soon as practicably, if it knows or suspects or has reasonable cause to suspect, that:

• It is dealing with a Designated Person (DP);
• It is holding a DP’s funds or economic resources;
• Any person has breached a financial sanction relating to providing a DP with funds or economic resources.

A relevant firm which fails to do so commits an offence.  (Relevant firms are, of course, also subject to the other provisions of the regulations, as are all UK persons.)

OTSI and Trade Sanctions

The Office of Trade Sanctions Implementation (OTSI), the newer sister organisation to OFSI, is actively monitoring the luxury goods sector[7].  Luxury goods are exhaustively defined in, for example, Schedule 3A of the Russia Regulations 2019 (but do not feature in the Iran Sanctions Regulations 2023 which are, currently, more limited in scope).

Paragraph 21 relates to, “[w]orks of art, collectors’ pieces and antiques, meaning any thing which falls within chapter 97 [of the UK Integrated online Tariff[8]]” and Paragraphs 10 and 14 respectively relate to tapestries and ceramics.  Under Regulation 46B, the export of luxury goods to or for use in Russia is prohibited.  So too is making luxury goods “available to a person connected with Russia”.  A person who contravenes a prohibition commits an offence.

The Threat Assessment

The Threat Assessment sets out Red-Flags and includes common evasion practices relevant to the sector:

• Counterparties with discernable links to sanctioned jurisdictions or attempting to conceal links to a sanctioned jurisdiction, for example, through the use of a ‘golden passport’.
• Counterparties whose personal details match the OFSI Consolidated List of Financial Sanctions targets in the UK or who refuse to provide information, particularly in relation to KYC checks, without reasonable justification.
• Counterparties, particularly sellers, attempting to rush or delay a transaction while failing to engage with KYC checks.
• Buying or selling at a price substantially higher or lower than the market value, or where the seller (or a third party acting on their behalf) is uninterested in recouping their initial investment.
• The source of funds used for the acquisition is not clear.
• Buyers or sellers attempting to split the overall cost into smaller payments, particularly if they negotiate the price below EUR 10,000.
• A non-designated individual (including family members and business associates of a DP claiming to be the original owner despite indications that the asset was acquired using the DP’s funds prior to their designation.
• Requests for unusual or complex delivery arrangements, including those involving intermediary jurisdictions without a clear rationale.
• Complex corporate structures linked to DPs, including family trusts registered in intermediary jurisdictions, obfuscating ultimate beneficial ownership.
• Counterparties without experience or an established reputation in the market, including small entities with limited clients.
• Transactions structured through multiple intermediaries, thereby obfuscating the ultimate beneficiary.
• Requests for payment through a combination of cash and/or cryptoassets.
• The use of complex payment arrangements, including routing payments through banks or payment providers based in sanctioned or intermediary jurisdictions (including High-Risk or Other Monitored Jurisdictions as identified by the Financial Action Task Force).
• A non-designated individual or entity making payments to meet an obligation (e.g., storage costs) previously met directly by a DP.

The British Art Market Federation

The British Art Market Federation[9] (BAMF) was founded in 1996, “to represent the interests of the UK’s large and diverse art and antiques market in its contacts with government”.  The BAMF states that, “[t]he British art market is unusual for being a global entrepot market place, and is therefore particularly active in cross-border trade. Works of art are sent to London from vendors throughout the world to take advantage in the UK’s expertise”.

On 6 February 2023, the BAMF published guidance, approved by H.M. Treasury[10], in relation to anti-money laundering compliance which should be read together with the guidance published by HMRC[11].  Since this is “statutory guidance”, a failure to observe it may have significant consequences in the event of a breach.

The guidance sets out the need for:

• Conducting a thorough and proportionate Risk Assessment
• Adopting adequate policies, controls and procedures
• Adequate record-keeping
• Adequate Customer Due Diligence
• Reporting concerns

The BAMF’s AML guidance now needs to read together with the sanctions guidance and Threat Assessment – the two have converged.

Conclusion

Do you, as an AMP, know that sanctions and/or money laundering is taking place?  Do you suspect it?  Do you have reasonable cause to suspect it?  The last is an objective test and is, by any account, a low bar.  You may be determined to have reasonable cause to suspect if any of the red-flags above are present.  If so, the risk of criminal liability attaching through inadequate compliance systems and procedures is clear.

Gavin represented Oghenochuko Ojiri in the first prosecution brought under section 21A of the Terrorism Act 2000 (failure to report money laundering within the regulated sector) and Alexei Owsjanikow in the first prosecution brought under the Russia Regulations 2019 (circumvention of prohibitions in relation to providing funds and economic resources to, or for the benefit of, a DP).

Gavin advises businesses and professionals on risk management, compliance and self-reporting obligations and has considerable experience in navigating  monetary and compound penalties.

[1] https://tbamf.org.uk

[2] https://www.gov.uk/government/publications/high-value-dealers-art-market-participants-guidance/financial-sanctions-guidance-for-high-value-dealers-art-market-participants

[3] https://assets.publishing.service.gov.uk/media/68529606679778c74ec15e35/OFSI_Art_Market_Participants_and_High_Value_Dealers_Threat_Assessment.pdf?utm_content=&utm_medium=email&utm_name=&utm_source=govdelivery

[4] https://assets.publishing.service.gov.uk/media/67f3f2467ed82b90fcf5bffc/OFSI_Financial_Services_Threat_Assessment_Report.pdf

[5] https://assets.publishing.service.gov.uk/media/67ee635698b3bac1ec299c3e/OFSI_Legal_Services_Threat_Assessment.pdf

[6] https://assets.publishing.service.gov.uk/media/67f7d42804146682e61bc80f/OFSI_Property_and_Related_Services_Threat_Assessment.pdf

[7] https://www.ft.com/content/0c30c5a7-44fb-4be3-af52-553e02bf8adc

[8] https://www.trade-tariff.service.gov.uk/chapters/97

[9] https://tbamf.org.uk/

[10] https://tbamf.org.uk/wp-content/uploads/2023/02/BAMF-AML-Guidelines-February-6th-2023.pdf

[11] https://www.gov.uk/guidance/money-laundering-supervision-for-art-market-participants