Galleries Fined under Money Laundering Rules: Challenges of Current and Future Compliance

The Regulations

Since 2021, any business selling more than €10,000 worth of art in a single transaction has been obliged to register as an ‘art market participant’ with HMRC, the UK’s body for tax oversight. This was part of a broader effort to ensure that HMRC could better identify the parties with whom the art industry was trading.

Initially, this change was met with a little hostility, since the art market often values anonymity and the non-disclosure of purchases. Indeed, the impacts of the regulation have been meaningfully felt – FCS Compliance’s Head of Art has noted that there has been a dramatic increase in the amount of information known about traders.

Fines

At the end of March, prominent art market participants suffered fines for non-compliance with this regulation.

Most notable among them is the White Cube, an international organisation with two spaces in London, one being Europe’s largest commercial gallery. White Cube also represents some of the biggest names in contemporary art. Last year, they established the White Cube Ukraine Appeal, an organisation to handle revenue made from selling artworks to support the Ukrainian war effort. However, they failed to register this organisation under the regulation, and were fined £1,350.

Since then, the fines handed out to White Cube and other galleries (like Arcadia Missa and Tiwani Contemporary) have stayed relatively low. 147 fines have been issued, but none more than £25,000. Fines have also been handed to individual art advisers. 

Looking Forward

From May, art-market participants will come under a further duty. In support of the Ukrainian war effort, and the broader push for compliance with government sanctions globally, art market participants will have to report any assets they hold for customers they know or reasonably suspect to be on the UK sanctions list.

The number of fines issued by HMRC seems to have peaked in 2023 – however, with this new regulation, the number may increase once again. Interestingly, though, the penalties for not complying with this regulation are stricter, as non-compliance could result in a prison sentence of up to six months. If financial sanctions are actually breached, the sentence increases to seven years.

Therefore, though galleries are currently facing challenges in complying with tax regulations, the penalties so far remain fairly minor. With the new changes, however, art market participants may be keener to meet the obligations imposed on them.

References and Further Reading 

“Top art galleries fined for money-laundering failures” (Financial Times)

“Money laundering supervision for art market participants” (HMRC)

“Value Added Tax Act 1994” (UK Parliament)