NCA sounds the amber alert as money laundering blows up in the art storage sector

The UK’s National Crime Agency (NCA) recently issued amber alert due to concerns regarding money laundering in the art storage sector. According to the agency, money laundering in the sector, alongside other similar crimes, has reached a concerning level, and the NCA seeks immediate action to regulate the space further.

NCA issues amber alert

The amber alert is meant to highlight issues such as cultural property trafficking, sanctions evasion, and money laundering risks to the art storage sector. It is also supposed to help guide the authorities in terms of regulations and digital compliance.

The NCA’s report says that criminals are continuously managing to find new ways of sneaking into privately owned art storage facilities and conducting illicit activities. Owners and collectors tend to keep specialized art storage facilities in order to keep their artwork in a safe, tax-free space. By keeping the art stored away, they allow it to grow in value as time passes.

However, with these spaces being used to store artwork for long periods of time, they are an attractive and vulnerable target for criminals who seek ways to reach capital assets that can be liquidated as needed.

The NCA further explains that criminals tend to conceal their illegal movements by selling, acquiring or moving cultural property in and out of facilities through various financial services. Their activities eventually lead to the creation of an intermediary between transactions. This is why the alert seeks to warn companies to undertake due diligence inquiries.

The importance of regulations and due diligence

The NCA’s warning also provided guidance for security services, giving some advice and recommendations on how owners might conduct better due diligence checks in order to make sure that their storage facilities are safe. They suggest keeping the facilities up-to-date in their customer profiles, as well as properly regulated.

Otherwise, criminals could move artworks into a different jurisdiction, which allows them to evade financial crime charges. Not only that, but they also get certain tax benefits from doing it. SmartSearch’s managing director and lawyer, Martin Cheek, stated that the NCA alert warns artwork storage facilities to guard against financial criminals.

According to him, this is a raw reminder to all regulated industries to keep a close watch against financial crimes and that the NCA’s warning should be used to stress the importance of conducting regular due diligence checks in order to understand any potential change in a client’s circumstances.

“Client checks at onboarding followed by continuous monitoring helps seal the door to criminals. Firms should look out for changes in client circumstances, making sure they check against international sanctions on a daily basis. They should also watch out for the use of front or shell companies or complex corporate or trust structures, where the waters are muddied, and it isn’t clear exactly who is the ultimate beneficial owner.”