New Sanctions Regulations for the UK Art Trade

From 14 May 2025, High Value Dealers and Art Market Participants must abide by the OFSI's financial sanction reporting obligations or risk penalties.

The relevance of this announcement for the UK art trade is that the definition of ‘relevant firms’ subject to financial sanctions reporting requirements will be expanded to include High Value Dealers and Art Market Participants.  We describe the reporting obligations below.

High Value Dealers

A High Value Dealer is defined as a person or firm dealing in goods, when the trader makes or receives, in any transaction, a payment of €10,000 or more, whether the transaction is executed in a single operation or in several operations which appear to be linked. High Value Dealers typically sell luxury goods, art, jewellery, and high-end vehicles.

From May 2025, High Value Dealers will fall within the definition of “relevant firms”, accordingly they will be subject to the reporting obligations described below. 

Anyone engaged in making, supplying, selling (including selling by auction) or exchanging articles made from gold, silver, platinum, or palladium, or precious stones or pearls are already Relevant Firms (since 2021) and are subject to the reporting requirements being extended to the rest of the art trade in May 2025.

Art Market Participants

An Art Market Participant is defined as a firm or sole practitioner who by way of business trades in, or acts as an intermediary in the sale or purchase of, works of art and the value of the transaction, or a series of linked transactions, amounts to €10,000 or more.  Art Market Participants must register as such with HMRC and are subject to a raft of compliance obligations.

The definition of Art Market Participant does not extend to artists who store or sell their own works.

From May 2025, Art Market Participants will also fall within the definition of ‘relevant firms’ and they will be subject to reporting obligations described below.

Reporting Obligations

“Relevant firms” are required to inform the OFSI as soon as practicable if they know or have reasonable cause to suspect that a person:

(i) is a “designated person”, or

(ii) has committed breaches under the UK sanctions regulations.

“Designated persons” are individuals or entities that are subject to financial sanctions imposed by the UK government. These sanctions can include asset freezes and restrictions on making funds or economic resources available to them. The designation is typically based on the person's involvement in activities that are deemed contrary to national security or foreign policy interests.  They are identified by the OFSI and listed on the UK’s consolidated sanctions list[1].

So for example, a dealer who transacts with a shell company or intermediary without properly checking whether they are connected to a Designated Person then later discovers or suspects that the Designated Person is behind the acquisition, needs to report details of the (suspected) Designated Person as well details of the transaction and if it is still possible, retain the work and any payment. Another example might be a storage company which holds a work on behalf of a dealer and subsequently learns that the dealer has been trading without carrying out sanctions checks, should also report details of the dealer and the assets it holds on the dealers behalf.

In the Course of Carrying on its Business

The obligation to report arises where the information or other matter on which the knowledge or cause for suspicion is based came to you in the course of carrying on your business:

• In relation to a High Value Dealer, this means in the course of carrying on the activity mentioned in the definition of High Value Dealer.
• In relation to “a person engaged in the business of making, supplying, selling (including selling by auction) or exchanging (i) articles made from gold, silver, platinum or palladium, or (ii) precious stones or pearls", this means in the course of carrying on an activity mentioned in that description. 
• In relation to an Art Market Participant, this means:

• in the course of trading, or acting as an intermediary in the sale or purchase of, works of art when the value of the transaction, or a series of linked transactions, amounts to €10,000 or more; or 
• in the course of storing works of art where the value of the works of art so stored for a person amounts to €10,000 or more.

Storing works of art includes activity such as:

• offering storage services to Designated Persons including preceding or post a sale; or
• transferring items on behalf of Designated Persons to third party storage facilities.

A “relevant firm” is subject to this reporting obligation only where the information or other matter on which the knowledge or reasonable cause for suspicion is based came to it “in the course of carrying on their business”.

Reports to the OFSI must include:

• the information on which the knowledge or suspicion is based.
• any information held which can identity the person or designated person.

If a person or firm knows or has reasonable cause to suspect that a person is a “designated person” and that person is a client, then details of the nature and amount of any funds or economic resources held for that client must also be provided.

These regulations apply to Relevant Firms in the UK and to UK nationals and UK business branches based abroad.

What Due Diligence is required?

The OFSI recommends that High Value Dealers and Art Market Professionals implement a robust sanctions compliance programme proportionate to the risks of the business. The UK art trade is already subject to AML and sanctions compliance obligations. The financial sanctions reporting requirements go beyond what is currently required.

From May 2025, in order to know when you must make a report to the OFSI, you will need to have processes in place to identify the relevant information, then to know what to do with that information.  First, you will be need to identify clients or potential clients who qualify as “designated persons” (someone featuring on the consolidated sanctions list which is updated regularly), secondly you will need to be familiar with the boundaries of UK sanctions regulations to identity when a person has committed a breach.

The OFSI also recommends that sanctions compliance programmes are routinely audited by qualified third parties.

Currently, many in the art trade outsource their AML and sanctions checks to specialist art AML tech entities. Outsourcing remains possible, but it is not a complete answer.  Recently, Starling Bank, a fintech bank, was fined nearly GBP29 million after it outsourced some of its screening functionality for sanctions but it later transpired that the screening tools used had not been updated, nor did they  capture the sanctions lists from a series of competent authorities, over several years.  Screening tools, whether outsourced or not, are only part of a “best practice” compliance system. A robust policy, a good understanding of the business to properly risk-assess individual situations, and a strong internal training programme, are the three facets of a sound compliance programme, in addition to outsourcing the more mundane identity verification and sanctions checks. 

The OFSI Guidance for High Value Dealers and Art Market Participants[2] published recently explains that the existing sanctions due diligence requires:

• Routine checks of the UK Sanctions List[3] and the OFSI Consolidated List[4]
• Checks at the point of starting a new business relationship with a client
• An analysis of who ultimately controls a business.

Lists change regularly and while a client may not be designated at the start of a business relationship, they could be added to the list and will then be subject to financial sanctions at any time during the course of a transaction.

Specific Russia Regulations

Separate to the reporting obligations outlined above, Designated Persons under the Russia Regulations who are a “UK person” (a UK national or UK entity) are required to disclose details of any funds or assets owned, held or controlled in any jurisdiction, and their location.  

In addition, Designated Persons who are not UK persons but who own or control assets in the UK are required to report the value, nature and location of any funds and assets that are owned, held or controlled in the UK.

If anyone who deals with a person or entity who is subject to financial sanctions, then they must:

• stop dealing with them;
• retain any assets owned or controlled by them; and
• inform the OFSI as soon as practicable.

Licences

In certain instances, it may be possible for a firm or person to obtain a licence from OFSI which permits an activity that would otherwise be prohibited.

Penalties

The OFSI has powers to impose penalties of up to £1 million or 50% of the total value of the breach, whichever is higher, for breaches of financial sanctions.

The OFSI can also refer cases to law enforcement agencies for investigation and potential prosecution.

Breaches of financial sanctions are considered a serious criminal offence and are punishable by up to 7 years imprisonment on conviction on indictment.

Final observations

The art trade consists mainly of sole traders and small and medium sized business that, unlike the finance, insurance or legal industry, lacks the time and the resources to fully grasp sanctions rules and reporting obligations.  Legal advice is expensive, and most art businesses do not have the in-house resources to handle these layers of technical compliance.  This is not helped by the perception in the civil service that the art trade is “high risk”. 

Yet failure to comply with sanction reporting obligations can attract financial, and potentially criminal, penalties.  Further, the publicity associated with penalties can cause serious reputational harm; the OFSI has the power to name entities found in breach of sanctions, even where no financial penalty is imposed.

Fieldfisher's Sanctions team is a Tier 1 rated team and would be happy to provide independent legal advice on any sanctions issue.