After striking a deal last week, the European Parliament and European Council presidency will enhance anti-money laundering checks (AMLs), and the new legislation specifically includes the art industry for the first time.
The legislation follows warnings made by the EU Parliament committee in 2018, which noted there was a “lack of political will to tackle” financial crime.
Supplementing AML Regulations introduced by the EU in 2017, the recent establishment of the EU Anti-Money Laundering Directive should take effect by 2020. This Directive will be known as 5AMLD and is something the whole art market should be made fully aware of.
Conducting AML checks are already a common process for many industries. When opening a bank account, for example, you would expect to be asked to verify your identity. Passports and recent utility bills are often required to curtail the use of fraudulent identities and the laundering of money.
But how will 5AMLD affect regulation within the art industry?
All art dealers who accept high value cash payments or cash buyers will need to comply, although the new obligations only apply to any cash payments in excess of €10,000 (£8,591).
Dealerships will need to complete a full risk assessment and have policies in place around how the payment is processed. Additionally, it is now compulsory for art businesses handling such large payments to register themselves as high value dealers with HMRC.
Large penalties have been put in place for art businesses who do not observe the new legislation, which may force some dealers to implement entirely no-cash policies.
Fundamentally, the new legislation aims to reduce financial crime and the laundering of ‘dirty money’ in all sectors, ultimately assisting financial security for dealers and buyers in the art world.
Ludek Niedermayer and Jeppe Kofod, committee co-rapporteurs, emphasised at a recent press conference the need to create “political willingness” to tackle money laundering issues, which they believe is the “most serious issue” the Special Committee addresses.