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Sunday, Nov 01, 2026

UK Art Dealers Are Exploiting a Loophole to Avoid New Money-Laundering Rules

UK Art Dealers Are Exploiting a Loophole to Avoid New Money-Laundering Rules

The UK’s art market has been subject to stringent new regulations since an anti-money laundering directive came into force in January 2020.
While the new requirements to conduct identity checks and other due diligence on art buyers initially came as a shock to an industry that has for centuries operated on handshakes, much of the market is now accustomed to these processes.

But experts say that some art businesses may have misunderstood a key part of the regulations, and could be unwittingly breaking them.

In some transactions, such as an art sale conducted through a chain of different parties, the rules allow for a business to rely on customer due diligence checks carried out by someone else.

Susan J. Mumford and Chris King, who co-founded ArtAML, a tool designed to facilitate customer due diligence checks, have found that some are leaning on this “reliance” option as a way to avoid disclosing the identity of their clients to other businesses they transact with. But they warn that this is actually a dangerous misinterpretation of the rules, and businesses doing this could face fines or even jail time.

“One of the art market’s greatest concerns about the imposition of anti-money laundering regulations is the potential loss of confidentiality surrounding clients,” Mumford says. “The obligation to reveal the identity of the buyer to another dealer as part of compliance in a transaction may risk having your client poached.”

Some dealers may be tempted to see reliance as a solution to this problem. “They tell you, ‘I have checked my client and they’re okay;’ they don’t reveal the collector’s name, and the deal proceeds,” Mumford says. “The problem is: that’s not how reliance works.”

According to both the official legislation and the guidelines published by the British Art Market Federation, if you are relying on the checks carried out by someone else, you still need to know the identity of the ultimate beneficial owner, as well as what level of customer due diligence has been carried out. This is in addition to coming to an agreement with the third party ensuring that they will make copies of this data available on request if needed for compliance purposes.

Plus, the reliance option cannot be used with just anyone. Businesses can only “rely” on other UK entities that are subject to the same money laundering regulations they are. (They can check whether they are listed as an “Art Market Participant” on the government website after the final deadline for registration has passed on June 10.)

If conducting transactions outside the UK, businesses can only use reliance if the other business is subject to the requirements of a previous money laundering directive that’s in force across Europe—meaning UK art businesses can’t use reliance when collaborating with dealers in the US. (Anti-money laundering regulations could soon be coming to the US, however, following the government’s move to create stricter oversight of antiquities dealers earlier this year.)

If a business wants to avoid breaking the rules, it is in their best interest to carry out the checks themselves, or at the very least verify that the checks have been carried out by the other party. “Arguably, it increases your risk,” Mumford says of the reliance option. “Regardless of who carries out the checks, you are ultimately responsible for them and cannot opt out of responsibility.”
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