Art dealer jailed for terrorism offence for failure to comply with anti-crime checks

It demonstrates the importance for the art market to implement robust compliance procedures to ensure they comply with their obligations under both anti-money laundering ("AML") and counter terrorism financing ("CTF") legislation.

Background

On 10 January 2020, AML and CTF obligations for individuals, businesses and intermediaries trading in works of art were expanded beyond high level dealers to the broader art market, designed to minimise the risks of criminals exploiting the prevalence of confidentiality in the art market and using the market to disguise or clean criminal property. The obligations were expanded to art market participants and intermediaries involved in transactions exceeding €10,000, whether executed in one transaction or a series of linked transactions, which brought them into the regulated sector. A guide for those participating in the art market was issued by HMRC in February 2020.

These regulations introduced additional steps to prevent money laundering, including requirements to identify the person or entity being dealt with in any transaction, i.e. customer due diligence, as well as requirements to undertake a risk assessment and assess the purpose and intended nature of each transaction. These requirements include understanding the source of a customer's wealth and the source of funds being used for a transaction.

The Case of Mr Ojiri

The extended AML and CTF obligations meant that Mr Ojiri's art gallery was required to conduct due diligence checks on clients and to be registered for money laundering supervision. He was also required to report suspicions of terrorist financing.

Mr Ojiri, the owner and operator of Ojiri Gallery, engaged in discussions with Nazem Ahmad about art acquisitions between 24 October 2020 and 18 December 2021. During that time eight works valued at £140,000 were sold.

At that time Nazem Ahmad was not designated under the UK sanctions regime (only being listed by the UK in April 2023). However, he had been listed by the US as a "specially designated global terrorist" since 2019, on the basis of being a major donor to Hezbollah, a terrorist group designated by both the UK and the US. It is believed that Mr Ahmad uses his considerable wealth, including in the form of art, to launder money and finance terrorism.

As such, Mr Ojiri was prosecuted under section 21A of the Terrorism Act 2000 for failing to make a disclosure during the course of business. This provision requires a disclosure to be made where in the course of business it is known or suspected, or there are reasonable grounds for knowing or suspecting, that another person has committed or attempted to commit one of the substantive terrorism offences, which includes funding terrorism, or using money or property for terrorist purposes. Mr Ojiri was aware that Mr Ahmad had been accused of financing terrorism and as such he was legally required to report his suspicions.

Mr Ojiri should have submitted a suspicious activity report ("SAR") to the National Crime Agency. By doing so, he would have avoided committing the nondisclosure offence for which he was convicted (and may have been able to even proceed with the transactions, in the event that the authorities gave the go ahead).   

Mr Ojiri first stated to the police that he had no reason to believe that Mr Ahmad was a terrorist and money launderer. However, evidence seized from his phone showed that he had researched who Mr Ahmad was and knew that he had been sanctioned by the US for financing Hezbollah. Mr Ojiri had discussed Mr Ahmad's status with contacts in the art market and a business partner had even warned Mr Ojiri against doing business with Mr Ahmad.

Despite this, Mr Ojiri  chose to disguise Mr Ahmad's name both on his phone and in paperwork. He ignored obvious red flags when - in response to a request for photo ID for Mr Ahmad and other due diligence requests - he received documents relating to another individual and a company, when to his knowledge all eight sales were actually to Mr Ahmad. The invoices Mr Ojiri kept for his own accounting records were addressed to a Mr Hijazi and White Star DMCC, yet the invoices sent to Mr Ahmad for his own records, did bear Mr Ahmad's name. The Judge also noted that Mr Ojiri agreed to a request that the transactions be completed in Sterling rather than US dollars as  Mr Ahmad was prohibited from dealing in US dollars due to his sanctioned status in the US before shipping the works to Dubai or Lebanon.  

Further evidence showed that Mr Ojiri used a specialist platform to assist with compliance with AML and CTF regulations. His email exchanges with that platform showed that he was aware of his obligations to make suspicious activity reports and to complete risk assessments, yet one was never completed for Mr Ahmad.

Lessons for those in the art market

Mr Ojiri's case involved a deliberate breach, reflected by the significant custodial sentence he has received. In sentencing remarks from Mrs Justice Cheema-Grubb DBE, it is clear that heavy emphasis was placed on the fact that Mr Ojiri was aware of his obligations to comply with AML and CTF regulations, yet he ignored those obligations, evaded red flags and initially gave a false account to the police, claiming ignorance and that he did not know who Mr Ahmad was until he ceased dealing with him. Mr Ojiri apologised for his actions saying that he was blinded by the kudos of dealing with a 'name' in the art collecting world. He produced character references and the Court noted that Mr Oriji had no experience of working in a regulated sector before 2019. Despite these mitigating circumstances, the Court handed down a very severe penalty.

The prosecution of the case is a timely reminder for those in the art market to ensure that they are fully complying with their obligations under AML and CTF regulations, including conducting the necessary customer due diligence and identifying and acting upon red flags. Whilst prosecution by the authorities will focus on those, such as Mr Ojiri, who knowingly do business with people identified as funders of terrorist groups, ignorance of your obligations to conduct due diligence on customers and to file suspicious activity reports where required will not absolve art market participants of liability.

The maximum penalty under 21A Terrorism Act 2000 for failure to report in the regulated sector is 5 years. There are no sentencing guidelines for the offence. Mr Ojiri pleaded guilty which would have reduced his sentence but his knowledge that the individual was sanctioned and his attempts to cover up his activities led to the lengthy term. He has until 4 July 2025 in which to appeal the sentence.

If you have any questions as an art market participant about your compliance obligations under AML, CTF or sanctions legislation, please do not hesitate to contact us.