ASK MAT: My customer regularly buys/sells artwork. What additional CDD [EDD] can I undertake?

HI MAT,

• My customer regularly buys/sells art. What additional CDD, outside the norms such as ID&V and sanction, adverse media, and PEP screening, can I undertake?

MAT SAYS:-

• Art market participants [AMPs] should apply Enhanced Due Diligence (EDD); therefore, outside of the expected checks [see below],

STOLEN/LOST

1. I suggest an important check is:-

1. Provenance Checks: Verify the artwork's history to ensure it has not been stolen, looted, or involved in illicit activities.
2. This includes checking ownership history and any changes in the artwork’s value.
3. One EDD check you can do is carry out a LOST/STOLEN ART database check – two sources are as follows:- 

1. 1. 1. THE ART LOSS REGISTER [ALR] = ALR is the leading due diligence provider for the art market and maintains the world’s largest private database of stolen art, antiques, and collectables.

• • 1. • https://www.artloss.com/
    2. INTERPOL [IP] = The Stolen Works of Art database is IP's primary tool for tackling traffic to cultural property. The IP database of stolen works of art combines descriptions and pictures of more than 52,000 items.  It is the only database at the international level with certified police information on stolen and missing objects of art.

• • • • https://www.interpol.int/en/How-we-work/Databases/Stolen-Works-of-Art-Database

SANCTIONS

1. Sanction risks in art and trading art can be significant and multifaceted. Here are some key risks to consider:

1. Dealing with Sanctioned Entities: Conducting transactions with individuals or entities subject to sanctions can lead to severe penalties. This includes buying or selling art to or from sanctioned persons.
2. Asset Freezes: If a sanctioned entity is involved in a transaction, the assets (including artworks) may be frozen. This means the artwork cannot be sold, transferred, or dealt with.
3. Reporting Obligations: Art market participants must report any suspicions or knowledge of dealings with sanctioned individuals or entities to the relevant authorities, such as HM Treasury in the UK.
4. Enhanced Due Diligence: High-value art transactions often require enhanced due diligence to ensure compliance with sanctions. This includes verifying the provenance of the artwork and the source of funds used in the transaction.
5. Reputational Risks: Involvement in transactions that violate sanctions can damage the reputation of art dealers, auction houses, and galleries, causing loss of business and trust within the art community.
6. Legal and Financial Penalties: Non-compliance with sanctions can result in substantial fines and legal penalties, including imprisonment for severe breaches.
7. To mitigate these risks, it’s essential to implement robust compliance programs, conduct thorough due diligence, and stay updated on the latest sanctions regulations. 

OTHER EDD CHECKS WILL INCLUDE:-

1. Source of Funds: Investigate the source of funds used to purchase the artwork. This will help ensure that the money is not derived from illegal activities.
2. Beneficial Ownership: Identify and verify the transaction's ultimate beneficial owners. This is crucial for understanding who truly benefits from the sale or purchase of the artwork.
3. Transaction Monitoring: Implement ongoing monitoring of transactions to detect any unusual or suspicious activity. This can help identify patterns indicating money laundering or other financial crimes.
4. Third-Party Verification: Use third-party services to verify the authenticity and value of the artwork. This can help prevent fraud and ensure the integrity of the transaction.

By incorporating these additional measures, you can enhance your CDD processes and better manage the risks associated with art transactions.

If you need more detailed guidance or have specific concerns, please talk to COMSURE.

Source: 

1. New UK sanctions obligations for the art market - Arcarta. https://www.arcarta.com/stories/new-uk-sanctions-may2025.
2. Financial sanctions guidance for High-Value Dealers & Art Market .... https://www.gov.uk/government/publications/high-value-dealers-art-market-participants-guidance/financial-sanctions-guidance-for-high-value-dealers-art-market-participants.
3. New Sanctions Regulations for the UK Art Trade | Fieldfisher. https://www.fieldfisher.com/en/insights/new-sanctions-regulations-for-the-uk-art-trade.
4. THE ART LOSS REGISTER [ALR] = ALR is the leading due diligence provider for the art market and maintains the world’s largest private database of stolen art, antiques and collectables. https://www.artloss.com/
5. INTERPOL [IP] = The Stolen Works of Art database is our main tool to tackle the traffic in cultural property. The IP database of stolen works of art combines descriptions and pictures of more than 52,000 items.  It is the only database at the international level with certified police information on stolen and missing objects of art. https://www.interpol.int/en/How-we-work/Databases/Stolen-Works-of-Art-Database