As part of tighter measures designed to prevent money laundering and other illegal activities, the UK government recently implemented various pieces of new legislation. The changes have quickly come to significantly impact a wide range of art market participants, as attorney Daniel Schnapp explains.
"The UK recently enacted a number of new laws that have quickly come to affect the art world," says Daniel Schnapp, "and it's important that all buyers and sellers have paid close attention."
Focused predominantly on tightened anti-money laundering measures, the changes first came into effect in 2020. "Under the new laws, the art market in the UK becomes regulated for anti-money laundering and counter-terrorist financing compliance for the first time," Schnapp reveals. "However, the implications are also proving to be enormous for the wider global market," he adds.
Many of the implemented changes reflect broader aspects of an existing anti-money laundering directive enforced by the European Union. With that, buyers, sellers, and other parties involved in art transactions worth over €10,000 must now agree to extra due diligence checks.
According to Daniel Schnapp, the same applies to operators of art warehouses and storage facilities, also deemed under the new regulations to be key art market participants.
New Regulations Groundbreaking, says Schnapp
The new regulations have been deemed groundbreaking, both in the UK and overseas, Daniel Schnapp said. Dictating, first and foremost, how art transactions are conducted and scrutinized on British soil, the knock-on effects of the legislative changes have, at the same time, quickly proved to be far-reaching.
As such, the UK government's recently implemented new laws are now directly impacting art buyers, sellers, auction houses, dealers, gallerists, and other parties internationally.
Schnapp mentioned an example where a purchaser in New York buying valuable art in London is immediately caught up in the changes. "As an art market participant, they need to know that their funds and identity will be scrutinized," he explains.
If that individual is acting on behalf of a third party, things become even more complicated. "In this case, the relevant ownership structure now needs to be established, too, following which further due diligence is then conducted on what the new legislation terms the ultimate beneficial owner," Schnapp points out.
A closer look at the recently implemented new laws also shows that inquiries will be made into the overriding purpose of all future art transactions, as well as the source of any funds.
"In line with additional regulations, all of the aforementioned art market participants will also be checked against watchlists for sanctioned individuals," adds Daniel Schnapp, "and what the UK government refers to as politically exposed persons
Daniel Schnapp Has Two Decades in the Law
Daniel Schnapp is a trial lawyer focused on commercial, intellectual property, privacy, corporate, entertainment, and art disputes. Now with close to 20 years of experience in the field, Schnapp routinely navigates the complex world of litigation in federal and state courts and before arbitration tribunals.
Schnapp has tried and arbitrated matters ranging from merger and acquisition litigation to defense of class actions, injunction proceedings, and closely held company disputes.
