The 5th Anti-Money Laundering Directive: A Risk-Based Approach

As someone who has been working in the art world for over a decade both in the USA and United Kingdom, I’ve seen a lot of interesting characters. You have the flamboyant, the unique, the particular and the private individuals who all partake in this market surrounded by beauty and prestige. Many of the participants in this market are worried about protecting their identity for a variety of reasons: fiscal, personal, security, corporate or - less frequently - because of dodgy dealings. When we first set up Vastari, we very much wanted to be able to work with those who are worried about their privacy, while also avoiding working with anyone who might have ulterior, or even criminal, motives. 

We conduct basic due diligence on our customers at a superficial level, and then advise our museums to continue with their own research on partners before signing any contract. When working on larger transactions, we make sure we understand who the other party is and conduct further research. In my experience, it is those who rush a transaction to close, who tend to be the most difficult in the long run. Taking time to know the others you’re working with is worthwhile.

But things are getting more complicated as legislation changes. The EU Fifth and Sixth Anti-Money Laundering Directives will start being implemented in January 2020, and all processes should be in place by September next year, and ideally much sooner. For the first time, “art business intermediaries” are named, meaning they will need to be conducting the same kinds of due diligence practices as lawyers, accountants and bankers to understand who the ultimate beneficiary is of a transaction (the “UBO”), identify any persons of political interest (PIPs for short) and report anything suspicious to the authorities for transactions amounting to more than 10,000 euros.

Though it does not relate to Vastari directly (we do not buy or sell art, and our subscriptions are less than 10,000 euros), we heard a lot of questions come up amongst our users about this. The most important aspect to remember is that this regulation requires a “risk-based” approach. But what are the risks really? What should an art intermediary be looking for? Does this apply to museums and donations as well?

I will be publishing some articles about this subject in the months up to January 2020, but if you would like to ask a professional these questions directly, please join us on 9 July 2019, for an event at Fieldfisher Solicitors, where these issues will be discussed frankly and openly. You will be able to ask direct questions and assess in detail, what the authorities are looking out for, what you should be trying to identify, and how to approach a problem, if it was to happen.

We think that it’s important to be prepared for the worst, and understand the issues at hand from the law enforcement’s point of view, so you can approach difficult situations with knowledge rather than panic. Hope you can join us. 

Find out more here: https://page.vastari.com/event-a-risk-based-approach/