Late in 2024, the UK’s Office of Financial Sanctions Implementation (“OFSI”), the agency within His Majesty’s Treasury that is charged with the implementation of financial sanctions in the UK, introduced new sanction measures aimed generally at augmenting the operation and enforcement of UK financial sanctions and targeted specifically at High Value Dealers (“HVDs”) and Art Market Participants (“AMPs”).

These new measures come into force in May 2025—just two months from now—making time very much of the essence.

To Whom do the New Sanctions Measures Apply?

The new measures extend the existing statutory definition of “Relevant Firms” to include HVDs and AMPs.

HVDs are defined as firms or sole traders whose business is trading in goods and who make or receive payments of at least EUR 10,000, whether executed in one transaction or a series of linked transactions. HVDs typically sell luxury goods, high-end vehicles, and jewelry, and encompass anyone manufacturing, selling and/or supplying any articles made from gold, silver, platinum, palladium, or precious stones or pearls. Auctioneers, who facilitate the sale and purchase of these items, are considered HVDs.

AMPs include firms or sole traders whose business is trading in, or acting as an intermediary in the sale and purchase of, works of art, where the transaction value or the value of a series of linked transactions is EUR 10,000 or more.

What are the Key Requirements under the New Sanctions Measures?

The effect of extending the definition of “Relevant Firms” to include HVDs and AMPs is to subject them to a range of mandatory reporting requirements.

Specifically, starting May 14, 2025, HVDs and AMPs will be required to inform OFSI “as soon as practicable” if they know or have reasonable cause to suspect that a person:

• is a “designated person” (i.e., an individual or entity subject to financial sanctions imposed by the UK government); or
• has violated UK sanctions regulations.

With respect to the UK’s Russia sanctions regime (the Russia Regulations), HVDs and AMPs also will have to inform OFSI as soon as reasonably practicable if they know or have reasonable cause to suspect that they hold or control, in any jurisdiction, funds or economic resources for a designated person. 

What must Reporting to OFSI Include?

When reporting to OFSI, HVDs and AMPs must include:

• the information or other matter on which the knowledge or suspicion is based; and
• any information the HVD or AMP holds that may identify the relevant person or designated person.

If a person or firm knows or has reasonable cause to suspect that a person is a “designated person” and that person is also a client, then details of the nature and amount of any funds or economic resources held for that client must also be provided.

What are the Consequences of Non-Compliance?

Violating UK financial sanctions, including by failing to report, is serious. OFSI may impose a civil penalty of up to GBP 1 million or 50% of the total value of each violation, whichever is higher, on a strict liability basis.

Additionally, OFSI may refer cases to law enforcement agencies for investigation and potential prosecution, and anyone convicted of violating UK financial sanctions is liable on conviction to imprisonment for up to seven years and/or a fine.

Additional Considerations

Recent Guidance issued by OFSI[1] makes clear that high value and luxury goods are extremely susceptible to misuse by malign actors, particularly those seeking to circumvent UK financial sanctions. The susceptibility is due in part to the following factors:

• the art market’s penchant for anonymity, including the common use of shell companies and intermediaries;
• the relative ease with which many of these goods are concealed and/or transported internationally;
• the subjectivity of their value, meaning prices and payment amounts can be easily manipulated; and
• the relatively unregulated nature of international markets for some high value goods.

Given the severe criminal, civil and reputation harm that flow from sanctions violations, it is imperative for HVDs and AMPs to carefully assess their business operations and implement robust compliance programs prior to May 14, 2025. In particular, HVDs and AMPs would be well-served by:

• conducting risk assessmentsto evaluate exposure to common sanctions evasive practices;
• developing, implementing, and adhering strictly to written compliance policies, procedures, processes, and standards of conduct;
• conducting appropriate due diligence on customers, including ownership and control structures, and all participants in trades and related transactions;
• providing updated compliance trainingto relevant personnel; and
• conducting regular audits, including periodic external audits,to ensure that compliance programs remain effective.

[1] UK Government, Financial Sanctions Guidance for High Value Dealers & Art Market Participants, (November 14, 2024).