Originally the deadline was set for January 2021. However, the Treasury is planning to delay this until June 10, 2021, to give more time due to issues arising from the coronavirus pandemic.
The 5th Money Laundering Directive (known as 5MLD) took effect on January 10 this year. It requires auction houses, art galleries and dealerships to conduct stricter due diligence on buyers who purchase from them works of art above a threshold of €10,000.
The regulation requires Art Market Participants (AMPs) – anyone trading in or acting as an intermediary in the trade of works of art that sell for above the threshold – to register and a pay a fee with HMRC.
This registration is now expected to be delayed following a proposal made by the government in a Statutory Instrument which updates details of the new law. However, businesses are still expected to carry on risk-assessing and putting policies and procedures in place to comply before June.
Pressures on HMRC
A spokesperson for HM Treasury said the Statutory Instrument “extends the period newly regulated art market participants (and letting agents) have to register with HMRC by five months to June 10, 2021”.
She added: “This will mitigate the risks of an application backlog due to Covid-19 pressures on HMRC’s and businesses’ resources. The SI is still at the ‘sifting’ stage and has not yet passed into law.”
Susan Mumford, CEO of ArtAML, a new company providing onl ine AML compliance support, said: “The delay is welcome and appropriate under the circumstances, as preparations need to be thorough and accurately targeted.
“However, it should not be seen as an opportunity to push compliance down the order of business priorities, as all individuals and firms affected need to address the matter seriously.”
Lawyer and compliance specialist Maria O’Sullivan, who recently launched ArtandIP, a firm providing compliance solutions for the fine art and IP arenas, said: “Realistically the art market appears six months behind so it is best to delay it.
“For small to medium size businesses all of this comes at a time when they have reduced finance and income. Some people are more concerned about saving their businesses and are having to adapt to survive.” She added: “Other professions are having their risk assessments rejected by their regulators as they are deemed ‘off the shelf’ and not bespoke to the specif ic business.
“This delay means AMPs will have time to obtain good quality risk assessments, which satisfy the regulators and can help them address the risk areas in their business going forward.”
Art lawyer Tom Christopherson, who worked with trade associations in drafting The British Art Market Federation’s official AML guidance, which was approved by HM Treasury in February, welcomed the extra time for registration.
But he confirmed that AMPs should already be applying the guidance to meet the requirements of the new law, in force since last January.
Due diligence and anti-fraud network Arcarta are offering a compliance quiz to help determine which dealers are regulated and which are not. The short questionnaire is available via the Arcarta website.
