Amber alert: Sanctions evasion and money laundering through the art storage sector

31 Jan 2024, 32 mins ago

NCA, JMLIT, NECC, HMRC and OFSI Amber Alert

In January 2024, the National Crime Agency (the “NCA”), the Joint Money Laundering Intelligence Taskforce (the “JMLIT”), the National Economic Crime Centre (the “NECC”), HM Revenue and Customs (“HMRC”) and the Office of Financial Sanctions Implementation HM Treasury (“OFSI”) issued an amber alert on financial sanctions evasion, money laundering and cultural property trafficking through the art storage sector.

This alert has served as a timely reminder to UK artwork storage facilities that the risks of sanctions evasion and money laundering are on the radar of various UK investigation agencies.

This should also prompt businesses to ensure accurate performance of due diligence checks and reporting obligations, among other things.   

What are the key indicators?

The Alert highlights the following key indicators:

  • Change in client circumstances.
  • Attempts to transfer artwork or cultural property ownership to a family member, close contact, business associate or other intermediary.
  • Attempt to sell artwork or cultural property quickly or move it to another jurisdiction.
  • Regular payments from an unclear source.
  • Use of front of shell companies, or complex corporate or trust structures where the UBO is unclear.
  • Requests to store objects that are stolen or subject to restrictions.
  • Use of financial services to acquire, sell or ship artworks or cultural property in and out of specialist storage facilities.

What are the relevant offences?

The Alert notes that where a person designated under the UK sanctions regime is seeking to move assets following a UK designation, it would constitute breach offences under the UK financial sanctions regime, as well as other potential offences.  

The Alert further notes the transparency and due diligence obligations under the money laundering regulations, and that the transfer of funds following a sanctions breach could become proceeds of crime and recoverable property under the Proceeds of Crime Act.

What are the reporting obligations and mechanisms?

The Alert also highlights the various reporting requirements in order to ensure compliance with the UK financial sanctions rules.

The rules relating to reporting obligations to OFSI with respect to sanctions matters as well as to the UK Financial Intelligence Unit (UKFIU) with respect to Suspicious Activity Reports, are complicated and burdensome.

In addition, the UK sanctions list is constantly changing, necessitating the relevant firms to implement appropriate monitoring on an ongoing basis.

How can Gherson assist you?

In these constantly changing times, it is extremely challenging for relevant firms to keep on top of the various obligations. 

The consequences for any breaches are severe.  

In addition, firms that carry out cryptoasset transactions and/or collaborate with businesses involved in such activities will need to carefully consider all their systems and controls to ensure that they are able to comply with all relevant AML and sanctions regulations.

Gherson’s white-collar crime and regulatory team provide advice and assistance in respect of AML and sanctions compliance, including in situations involving cryptoassets. The team have recently written a series of blogs discussing the relevant details:

Please do not hesitate to contact us for advice, send us an e-mail or, alternatively, follow us on XFacebookInstagram or LinkedIn to stay-up-to-date.

The information in this blog is for general information purposes only and does not purport to be comprehensive or to provide legal advice. Whilst every effort is made to ensure the information and law is current as of the date of publication it should be stressed that, due to the passage of time, this does not necessarily reflect the present legal position. Gherson accepts no responsibility for loss which may arise from accessing or reliance on information contained in this blog. For formal advice on the current law please do not hesitate to contact Gherson. Legal advice is only provided pursuant to a written agreement, identified as such, and signed by the client and by or on behalf of Gherson.

©Gherson 2024