UK Calls for Regular Due Diligence Checks in Artwork Storage Facilities to Counter Sanctions Evasion

January 24, 2024

The National Crime Agency in the UK has issued a warning alert for artwork storage facilities to be aware of individuals under Russian sanctions, who might use these places for illicit activities.

As the sanctions list gets updated frequently, the alert notice emphasizes the artwork storage sector to conduct regular due diligence checks on customers and comprehend any changes in clients’ situations or the people they represent.

High-net-worth individuals like Russian Oligarchs utilize artwork storage facilities for multiple purposes like secure storage of art for investment or tax benefits. It is recognized that criminals, including those subject to sanctions, are exploiting these services to evade sanctions and launder money obtained from illicit activities.

Lack of adequate and irregular due diligence checks may create opportunities for criminals or corrupt professionals to evade laws, posing a risk to the sector and compromising the integrity of the sanctions framework.

Talking about the loopholes in the sanctions compliance, Adrian Searle, Director National Economic Crime Centre at the NCA, reportedly stated,

Sanctions evaders undermine UK national security, working against our foreign policy objectives which promote international peace and security, and the rule of law. For this reason it is vital that we close down every opportunity they may seek to exploit.

He further stated,

The potential value that can be transferred through the art market makes the sector as a whole attractive to criminals, money launderers, and designated individuals. This is why we need the sector to increase its vigilance and embrace their role as the gate keeper of the legitimate art market.

How Criminals Proceed Illicit Activities?

Criminals examine the due diligence processes of the organizations by conducting legitimate business activities and later hide or request sudden service changes. Then, they use this strategy to hide and move funds that might be proceeds of crime or fall under sanctions.

Every individual engaged in the art market, whether working in art storage or related specialized service, must be able to spot any changes in clients’ status or suspicious activity in the business.

What are the Warning Signs?

Here are the warning signs to detect any changes or suspicious activity;

  • Are the international sanctions lists monitored daily to get updates on changes in clients’ status?
  • Attempts to transfer ownership of artwork or cultural property to a family member, close acquaintance, business partner, or other intermediary.
  • Attempts to promptly sell artwork or cultural property, or relocate it to another jurisdiction
  • Employing front or shell companies, or complex structures with unclear ultimate beneficial ownership

It is crucial for everyone working in the artwork market to follow these warning signs to stay ahead of the sophisticated criminal activities.

Also read: UK Creates ‘Office of Trade Sanctions Implementation’ to Reinforce Russia Sanctions