Navigating financial sanctions: OFSI sanctions guidance for high-value dealers and art market participants

The UK’s Office of Financial Sanctions Implementation (OFSI) has issued new guidance for high value dealers (HVDs) and art market participants (AMPs) to enhance compliance with financial sanctions.  

Understanding financial sanctions 

Financial sanctions are measures imposed by the UK government to achieve foreign policy and national security objectives, including combating terrorism, preventing nuclear proliferation, and addressing human rights abuses. These sanctions can target specific individuals, entities, or entire sectors within a country. HVDs and AMPs must ensure they do not engage in transactions with sanctioned parties, as non-compliance can lead to severe legal and financial consequences. 

Due diligence obligations 

To mitigate the risk of sanctions breaches, HVDs and AMPs are advised to implement robust due diligence measures: 

• Customer identification: Verify the identity of clients, including beneficial owners, especially in transactions exceeding €10,000.
• Transaction monitoring: Scrutinise unusual or high-risk transactions that may indicate a connection to sanctioned parties. 
• Record keeping: Maintain detailed records of transactions and due diligence processes to demonstrate compliance. 

Common evasion practices 

Despite the due diligence measures firms are expected to implement, OFSI acknowledges several methods by which individuals or entities may attempt to circumvent financial sanctions: 

• Use of intermediaries: Engaging third parties to conduct transactions on behalf of sanctioned individuals. 
• Complex ownership structures: Establishing layered corporate structures to obscure the involvement of sanctioned parties. 
• False documentation: Providing counterfeit provenance or invoices to disguise the true origin or ownership of high-value goods. 

Reporting obligations 

To prevent financial crimes from occurring and to closely monitor those under financial sanctions, new OFSI sanctions guidance has brought reporting requirements into place for HVDs and AMPs to abide by. From May 14, 2025, if HVDs and AMPs have knowledge or reasonable suspicions that someone is a designated individual, or has committed an offense under financial sanctions regulations, they must report it to the OFSI promptly. This is what is known as a suspicious activity report (SAR). = 

Licensing and compliance 

In certain circumstances and under specific licenses issued by OFSI, transactions involving sanctioned parties may be permitted. HVDs and AMPs should familiarise themselves with the licensing process and ensure strict adherence to the terms of any licenses obtained. 

Penalties for non-compliance 

Breaching financial sanctions can result in significant penalties, including fines and imprisonment. OFSI has the authority to impose monetary penalties and refer cases for criminal prosecution. Recent enforcement actions have underscored the importance of compliance, with several galleries facing fines for lapses in due diligence.  

The art and high-value goods markets are particularly susceptible to exploitation by sanctioned individuals seeking to launder money or evade restrictions. By adhering to OFSI’s financial sanctions guidance, HVDs and AMPs can play a crucial role in upholding the integrity of the UK’s financial system and contribute to global efforts against illicit activities. 

Veriphy specialises in Anti-Money Laundering (AML) and Know Your Customer (KYC) solutions that help businesses, including high-value dealers and art market participants, comply with financial sanctions and regulatory requirements. 

Want to find out more? Get in touch with our friendly team to have a chat about how we can help you to strengthen your AML and KYC compliance processes.