Almost 50 UK art businesses were included in a list of Art Market Participants (AMPs) that have failed to comply with money laundering regulations, which was released by the tax authority HM Revenue & Customs (HMRC) last week.
Among those listed are the galleries Opera, Carl Kostyál and White Cube. The fines outlined were issued between 1 January 2024 and 30 September 2024, with AMP penalties averaging above £3,000 and reaching as high as £13,000, all for failing to apply for registration by the June 2021 deadline.
A number of the companies on the list had voluntarily disclosed their late registration to HMRC, with one gallerist, speaking anonymously, describing how their being fined over £10,000 had “scared so many dealers we know” and that they felt “punished for being honest”. Several sources told The Art Newspaper that they had decided not to appeal as it was hard to identify a contact, and they ultimately wished to move on and forget the experience.
“Late registration fines are calculated by HMRC based on a set formula and one of the strands of calculation takes into account the gross profits of the business’s less allowable expenses,” says art compliance consultant, Rakhi Talwar. “My view is that it is not proportionate to calculate a penalty based on gross profits derived from dealings that involve items that don’t qualify as art or from transactions that fall below the €10,000 threshold, or from services that aren’t related to dealing in or intermediating the sale or purchase of qualifying art.”
Susan Mumford, of the compliance platform ArtAML, agrees, particularly for micro-businesses that rarely transact above the €10,000 threshold. “In such cases, we always recommend working closely with the HMRC officer to set up feasible payment arrangements, as the intention is not to drive AMPs out of business,” she says. Mumford further explains that voluntary registration can reduce fines by 50%, and payment within 30 days can cut the amount by an additional 25%.
An HMRC spokesperson says: “We’re here to support businesses to protect themselves from criminals who would exploit their services. That includes taking action against the minority who fail to fulfil their legal obligations under the money laundering regulations.”
The inclusion of art advisors and interior design companies on the list acts as a reminder of the breadth of the regulations. Rebecca Gordon, of the eponymous art advisory says, “I think that when the [AML] regulations were first introduced there was a lot of awareness-raising with galleries and dealers, but a lot less attention on intermediaries resulting in a number of advisors and interior designers who were, and still are unaware that they are required to become AML registered.” She adds that, as a smaller business, the costs of involving a third-party platform to keep on top of “constantly shifting” regulations can be significant.
Trade bodies responding to the data emphasise the need for a reconsideration of the regulation’s breadth and depth. The British Art Market Federation’s chairman Tom Christopherson says: “[We have] long argued that a more realistic threshold would allow the regulators to adopt a more focussed risk-based approach.” Paul Hewitt, director general of the Society of London Art Dealers, concurs: “Figures like this reinforce our call for higher thresholds, above €10,000, and a re-assessment of the art market’s high classification on the national risk register.”
While Talwar confirms that HMRC views AMPs as “highly engaged and amongst the first to provide feedback” and calls for continued efforts to work with the department who “are trying their best to learn about our sector”, others have concerns for the future impact on businesses. “While we have only seen penalties for failing to apply for registration at the required time, there is no doubt that some AMPs will receive penalties for other breaches in future as seen with other sectors, following long investigations,” Mumford says. “Severe breaches could lead to eye watering amounts. Time will tell.”
