Art market players, including advisors and dealers who travel abroad, must be more attuned to the ever-shifting regulatory landscape in the battle against laundering illicit funds.

The world of fine art and collectables has had to get more used to the sort of compliance controls that have been imposed on more conventional financial services. And, at a time when sanctions have been imposed by the West on Russia, and certain other select nations, the pain points can be particularly important. In this article, Angelika Hellweger, legal director at Rahman Ravelli, the international law firm based in London, explores the intersection of fine art and sanctions.

The editors are pleased to share these insights. The usual disclaimers apply to guest content. Email tom.burroughes@wealthbriefing.com

A high-profile art collector has had all his assets frozen due to allegations that he uses his collection to launder money for the Lebanese group Hezbollah.

Nazem Ahmad has been placed on the UK’s sanctions list – and faces charges in the US – due to claims about the way he uses his collection, which includes works by the likes of Antony Gormley, Pablo Picasso and Andy Warhol. 

The UK action against him is the first use of powers to designate an individual under the Counter Terrorism (Sanctions) (EU Exit) Regulations 2019, which are in place to target those who the Treasury has reasonable grounds to suspect are involved in terrorist activity.

The diamond and art dealer, who has not yet been located, had already been placed on a US sanctions list in 2019. The US has accused him of being a major donor to Hezbollah since 2016. A New York court has now charged him and eight others, including his son and daughter, with defying his sanctioned status by conducting art and jewel transactions worth a total of $160 million since 2019. 

The UK’s announcement of sanctions against Mr Ahmad describes him as a suspected financier of Hezbollah, a religious political movement backed by Iran that the UK government classified in its entirety as a terrorist group four years ago. All of his UK-based assets have now been frozen, and the UK art world has been prohibited from trading with him or six named companies linked to him.

Mr Ahmad is accused of using art to shelter and launder money for the purposes of terrorism. The art world is seen as attractive to money launderers as it often functions in a discreet, very private way and items can be sold across borders without arousing the suspicion of the authorities.

In addition to this, the art, antiquities, and cultural objects market is a complex landscape – and one that had a global value of $65.1 billion in 2021. The trend is towards greater regulation, with states putting in place regimes that place anti-money laundering and combating the financing of terrorism (AML and CFT) obligations on those participating in the art market. 

Recent developments have shown that sanctions compliance for art market participants is a focus of the enforcement authorities. Only recently, federal prosecutors in New York subpoenaed several auction houses for years of sales records as part of ongoing efforts to identify violators of Russian sanctions.

In order to ensure that they are not exposed to civil and/or criminal liability, individuals or businesses conducting activity in, or around high-risk jurisdictions have to develop a robust understanding of the sanctions' regulations in place, and the relevant obligations placed upon them. 

There are rapid changes and frequent updates to the sanctions lists produced by the UK’s Office of Financial Sanctions Implementation (OFSI), the US Office of Foreign Assets Control (OFAC), the European Union and the United Nations. This makes it essential for art businesses to closely monitor announcements and developments in government legislation.

Sanctions screening is important and enables checks to be made on the ownership structures of companies. Those conducting such checks should keep comprehensive records of them to show that all efforts have been taken to ensure compliance with sanctions regimes. Enhanced due diligence checks (including checks with Companies House) before onboarding a new client or agreeing to new business are vitally important – as they are during ongoing business relationships. It is important to understand the full range of activity and the persons involved in any supply chains. Enhanced due diligence should certainly be considered by shop owners, insurers, transporters, and storage facility companies. 

The need to comply with the sanctions wherever one conducts transactions should also be recognised. This is particularly relevant for art advisors and dealers who travel from one country to another for fairs or other events. Such travelling can often mean that an art market participant needs to increase the scope of checks: not only to cover the sanctions list in their home country, but also the list in the jurisdiction in which the transaction takes place – and possibly where the client is based.

About the author
Angelika Hellweger is a specialist in international, high-level economic crime investigations and large-scale commercial disputes. As a multilingual lawyer she represents corporates and conglomerates across Europe, the Middle East, Africa and the US. Her experience and understanding of all aspects of white-collar crime have led to her representing corporations in multijurisdictional investigations and in some of the most complex commercial litigation.