Anti-Money Laundering for the art and finance market

Adopting a risk-based approach means making sure that enough time and energy is invested in areas where ML/TF risk is highest.
First, you must identify and assess the severity of your business’ potential risk indicators. You can assess this risk by considering various factors, including:

• The type of buyer/seller (e.g., an individual collector, a specialized company, another art professional, an offshore trust, etc.)
• The way art professionals enter into contact with the buyer/seller (e.g., face-to-face, at an art fair, through a web platform or an intermediary, etc.)
• The type of artwork and transactions at stake (e.g., are the goods consistent with the profile of the buyer/seller, is the origin of the artwork well-known and documented, is the initiated transaction a sale, a loan, or a donation, etc.)
• The countries involved (e.g., is the buyer/seller domiciled in a country with equivalent AML and counter terrorist financing [CTF] regulations, is the artwork from a country that is subject to trade sanctions, etc.)

Art professionals must identify and verify their customers’ identities.
A few universal rules apply when performing customer due diligence:

• Timeliness: it must be performed as soon as the business relationship starts.
• Risk-based: it must be tailored to the customer’s risk level.
• Up-to-date: it must be regularly performed on an ongoing basis to collect accurate information and documentation on the customer.

When an art professional has a business relationship with a customer, the customer’s information must be kept up-to-date. The customer’s circumstances are likely to change throughout the relationship; therefore, the risk exposure of the customer may change. Such changes may affect the overall customer risk profile and, as a consequence, the checks to be performed.

Effective AML risk management relies on the design and implementation of adequate internal AML processes. An adequate internal organization includes the following key elements:

• Developing internal AML policies, controls and procedures.
• Appointing a person in charge of AML-related matters (compliance officer).
• Training staff to assess AML risks and ensure a good level of awareness.
• Keeping track of the risks identified and the actions taken to mitigate them.

Art professionals who fall within the scope of the AMLD5 must cooperate fully with the authorities by:

• Filing, without delay, suspicious activity/transaction reports if ML/TF is suspected.
• Responding to requests for information from the competent authorities.