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From 14 May 2025, high value dealers, art market participants, insolvency practitioners and letting agencies must now comply with the reporting requirements under the UK financial sanctions regime.
This change forms part of the package of measures announced in The Sanctions (EU Exit) (Miscellaneous Amendments) (No. 2) Regulations 2024 to plug the gaps in industries deemed at high risk for exploitation by those seeking to evade financial sanctions and in which OFSI suspects that breaches of sanctions have not been proactively reported.
By way of example, in its Financial Sanctions Guidance for High Value Dealers & Art Market Participants, OFSI describes the UK as “a major international hub for the trade of high value goods”. It identifies a number of common evasion practices in this industry ranging from taking advantage of the subjective value of luxury goods to manipulate price and conceal true value, to using intermediaries to source, buy and sell high value goods, to the use of cryptocurrencies.
OFSI’s stated aim behind this change, as set out in its Explanatory Memorandum, is “to facilitate OFSI’s aim of encouraging better sanctions compliance, as well as improving OFSI’s understanding of how financial sanctions are being implemented in the impacted sectors, raising impacted businesses’ awareness of their sanctions obligations, and assisting OFSI in identifying potential circumvention gaps and financial sanctions breaches.”
High value dealers, art market participants, insolvency practitioners and letting agencies are now required to report to OFSI in specified circumstances.
This includes, for example, informing OFSI, as soon as practicable, if pursuant to information received in the course of carrying on a business, relevant firms know, or have reasonable cause to suspect, that:
(i) a person is a “designated person”;
(ii) a person has breached a prohibition or failed to comply with specified provisions of the sanctions regulations; or
(iii) in the case of the Russia (Sanctions) (EU Exit) Regulations 2019, they hold funds or economic resources for a “prohibited person”.
Where a “designated person” is also a customer, relevant firms are also required to inform OFSI of the nature and amount or quantity of any funds or economic resources that they hold for that customer.
These reporting obligations will not apply retrospectively, but they will cover existing clients in respect of any work conducted from 14 May 2025 onwards.
Failing to comply with these reporting obligations is a criminal offence and may lead to the imposition of a monetary penalty.
In practice, and while OFSI does not mandate specific measures, this will mean – as unsurprisingly recommended by OFSI – implementing a strong and proportionate sanctions compliance programme. Such a programme should provide for the conduct of proportionate due diligence and contain appropriate procedures to ensure that any suspected sanctions breaches are identified and reported to OFSI.