OFSI Introduces New Financial Sanctions Obligations for High-Value Dealers and Art Market Participants

The Office of Financial Sanctions Implementation (OFSI), which is part of HM Treasury, has introduced new reporting obligations to strengthen the financial sanctions framework of the UK.

It was first published on 14 November 2024, amended on 12 March 2025, and became effective from 14 May 2025.

These obligations expand legal reporting duties to include High Value Dealers (HVDs) and Art Market Participants (AMPs) that reflect the increased focus of government on the risks associated with the luxury goods and art sectors.

The changes have been made to highlight the growing risk of financial sanctions evasion in the sector dealing with luxury goods, art markets, and specifically via concealed transactions, asset transfers, and digital assets.

The revised framework simply aims to reduce risk levels, improve compliance, and cover loopholes that have the tendency to be exploited by designated persons (DPs) and others who assist them.

It has been noticed that the UK has become a major global hub, particularly for trading high-value goods such as fine art, antiques, luxury cars, precious metals, wines, and spirits.

In 2023, worldwide art sales reached USD 65 billion, with the UK accounting for 17% of the market at USD 11.05 billion, ranking third.

The luxury goods are difficult to value, and their portability and frequently ambiguous ownership structures also make them vulnerable to sanctions evasion.

The UK regulatory body, OFSI, has also called attention to the common sanction evasion strategies that include using intermediaries to transfer the assets, hiding the ownership of shell companies, and manipulating the prices with an agenda to tuck away the true value of assets.

The impacted businesses and sectors are then required to conduct more due diligence and screening as a result of such activities.

Key Pointers:

• High value dealers (HVDs) who are into handling cash payments over €10,000 in single or linked transactions must report suspected financial sanctions breaches to OFSI.
• Art Market Participants (AMPs) who are involved in buying, selling, or storing artwork valued at €10,000 or more are required to report such breaches to OFSI also.
• Insolvency practitioners and letting agents who are involved in transactions with designated individuals also require compliance enforcement.

These obligations do not replace current anti-money laundering (MLR) compliance standards, but rather add a legal responsibility to disclose when enterprises suspect a breach.

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Noncompliance with the new financial sanctions reporting duties results in serious legal repercussions, including:

• Serious offenses can result in up to 7 years in jail.
• Fines up to £1 million, or 50% of the transaction value, whichever is greater.
• Regulatory sanctions, including restrictions on business activities.

The guidance mandated that businesses must employ rigorous due diligence processes to comply with financial sanctions, such as enhanced checks on customers and payment chains in line with the UK’s sanctions regime.

This involves assessing risks, screening all parties against the OFSI consolidated sanctions list, and recognizing ownership structures.

A reliable sanctions compliance program is advised, including explicit clear regulations, frequent staff training, whistleblower protections, and third-party audits, says OFSI.

Routine screening against updated sanctions lists during onboarding and transactions is important, as sanctions status might change over time.

Legal counsel and a risk-based strategy should lead compliance initiatives, particularly in high-risk nations or territories.

OFSI is involved in active monitoring and enforcement of the given regulations, collaborating closely with law enforcement agencies.

As per OFSI, this extension of reporting duties reportedly demonstrates the UK government’s commitment to mitigate sanctions loopholes and protect the integrity of its financial system.