Art, risk and regulation: the challenges facing art dealers in a global market

Art Basel will return to its namesake Swiss city from 18-21 June 2026, hosting 290 galleries across 43 jurisdictions. The pre-eminent international art fair is an important calendar fixture for art galleries, dealers, and high net-worth individuals, both facilitating sales and shaping market confidence through valuation and the signalling of demand.

While art sales rose by 4% in 2025 to an estimated $59.6 billion, political and economic tensions, and in particular, the impact of US tariffs on global supply chains, continue to pose difficulties for art dealers. This, alongside an increasingly complex regulatory landscape and growing administrative costs, is presenting significant challenges for the art market, according to the Art Basel and UBS Art Market Report 2026.

So, where do these risks leave art dealers and how can these be managed when facilitating transactions at global art fairs, such as Art Basel?

Know your client (KYC) checks

The implementation of Russian sanctions following Russia’s full-scale invasion of Ukraine in 2022 has driven a significant cultural shift in the art market. Once characterised by discretion and relationships built on loyalty and trust, the market has increasingly moved towards caution and transparency, as KYC checks have become normalised in response to evolving regulatory and behavioural expectations.

Under UK Money Laundering Regulations (UKMLR), art market participants must register with HMRC any transaction (or a series of transactions) which exceeds €10,000. Note that this requirement is also prescribed under section 70 and section 71 of The Russia (Sanctions) (EU Exit Regulations) 2019. UKMLR requires further due diligence by way of identifying the client and verifying their identity with a primary identification document and proof of address, such as a utility bill. When transacting with companies, checks must be in place to identify and verify the name of the company and its registered company address before proceeding. Full records of the above are advisable as proof of compliance.

The UK sanctions regulations against Russia include prohibitions relating to the provision of luxury goods, which include works of art. This captures the export of luxury goods to, or for use in, Russia, making goods available to a person ‘connected with’ Russia, or for the movement of goods to Russia from a ‘third country’. Consideration should also be given to whether any other sanctions regimes apply to the transaction, such as those in force in the EU or US.

Source of funds

Under section 21A of the Terrorism Act 2000, a person will commit an offence if they fail to make a suspicious activity report (SAR) if they know, or have reason to suspect, that someone is funding terrorism or using assets for that purpose.

The case of the convicted art dealer Oghenochuko Ojiri exemplifies this law in action. Ojiri was convicted under section 21A of the act in May 2025 after conducting sales with a Lebanese collector suspected of financing Hezbollah. Ojiri failed to comply with SAR requirements and wilfully neglected his duty to administer further identity checks, despite the collector’s widely reported links to terrorist financing and frequent use of art transactions to launder money.

In addition to completing a SAR, KYC checks should be performed (as described above), and art dealers must also consult the UK Sanctions List, published by the Foreign, Commonwealth and Development Office, before proceeding with onboarding a client. The list must be checked regularly, both for prospective clients and existing clients, especially when ownership structures change, such as the addition of persons with significant control to Companies House records.

Regardless of whether an entity or a person is named on the UK Sanctions List, it is always advisable to conduct the UK’s ownership and control test when transacting with non-individuals, to determine if there could be links to sanctioned entities.

An entity is owned or controlled directly or indirectly by another person in any of the following circumstances:

• the designated person (DP) holds (directly or indirectly) more than 50% of the shares or voting rights in an entity;
• the DP has the right (directly or indirectly) to appoint or remove a majority of the board of directors of the entity;
• it is reasonable to expect that the DP would be able to ensure the affairs of the entity are conducted in accordance with their wishes.

The test is used to combat the use of complex corporate structures and shell companies being used as vehicles of concealment to hide the operations of sanctioned DPs. Note that if any of these criteria are met, then financial sanctions will also apply to that entity.

US tariffs

The imposition of blanket tariffs on US imports has caused considerable disruption to global trade networks. While original paintings (with the exception of contemporary artworks from China), sculptures, and drawings are considered ‘informational material’, and are thereby exempt from tariffs by virtue of their protection under the First Amendment of the US Constitution, the same protections are not in place for other art works, such as decorative arts of a functional nature. These include furniture and design collectibles, and are subject to a surcharge of up to 35%.

Given that the US accounts for 44% of global art market sales, the introduction of tariffs on selected goods is likely to impact purchasing power amongst US art collectors at Art Basel. This, alongside the expansion of the Bank Secrecy Act to include antiquities dealers, and the proposed Art Market Integrity Act, signals a broader shift toward increasing regulation and pressures which may reduce the dominance of the US in global art market sales going forwards.

How Penningtons Manches Cooper can help

Drawing on expertise across our art, cultural property and luxury group, including experts in our private client, commercial dispute resolution, and marine, trade and aviation teams, Penningtons Manches Cooper can offer a bespoke and collaborative approach to safeguarding art transactions. Do get in contact with our team should you require assistance.