ECSH54650 - AMPs - What would you expect to see

A visit to an Art Market Participant (AMP), regardless of the specific AMP services they provide, or sub-sector they cater to, will share some similarities.

Additional information regarding AMPs and AMP risk and compliance visits is contained in section ECSH54675 and compliments this page of the Handbook.

 

Who you will be visiting?

An AMP can range from a traditional art gallery with a few staff, to online only AMPs with no traditional premises, to large auction houses with multiple worldwide offices and hundreds of staff. AMPs are located all over the UK, but tend to be focused around wealthy areas, particularly around London.

The AMP sector is relatively diverse, and the style, location and premises can differ depending on the sub-sector that the AMP is trading in.

 

What does an AMP premises look like?

A visit to an AMP can vary greatly from Art Galleries to large Auction Houses.

Some AMPs do not have a dedicated premises for customers and only operate online, or at art fairs.

 

When do AMPs operate?

The operating times for AMPs vary based on the business in question. Some may have retail premises and galleries only open by appointment, others will hold standard business hours.

Some auction houses will only be open to the public on viewing days and days when auctions are held. Some online AMPs will have longer operating hours.

 

How do AMPs communicate and engage with their customers?

AMP customers can be geographically spread due to the nature of the art market, the rise of online only AMPs and the use art fairs which attract visitors from all over the world.

A lot of business in the art world is conducted by word of mouth and recommendation. Many AMPs will specialise in specific types or eras of art and will be well known in the industry.

Traditional galleries with retail premises will still receive engagement by customers visiting and passing by their physical premises.

Different types of AMPs interact and engage with customers differently and their risk assessments should take account of this.  Many AMPs will have online galleries or stores that allow buyers and sellers to interact with them virtually.

 

 

Where do AMP customers live?

AMP customers can come from all over the world. They can range from institutional buyers, such as hotels or restaurants buying works of art to decorate their business, to art investors and ultra-high net worth individuals.

Some customers may be non-UK residents, such as those visiting art fairs in the UK.

 

What type of records are kept?

It is standard practice for AMPs to maintain a file for each of their customers which will record basic information such as names, addresses and phone numbers. 

Records of customer due diligence (CDD) measures applied to the customer at the outset of the transaction business relationship, including the AMPs risk assessment of that customer and any ongoing monitoring records, should be held alongside or separate to these working papers.

The MLRs do not specify the medium in which records should be kept, but they must be readily retrievable.  It is essential that an AMP has an efficient record keeping process in place as you will need to review business records to firstly understand how the business operates and what paperwork is created during sale.

 

What types of systems and software do AMPs use?

Software is available that can be used to support tasks an AMP may undertake, for example to store and manage records, or systems for customer relationship management (CRMs). There are also systems which are marketed as aiding business’ compliance with their obligations under MLR 2017. 

Any business using computerised records will typically have a backup process, so that records can be retrieved in the event of a data loss. This may be cloud-based or the AMP may have physical hard drives.  The use of any software/system which aids an AMP with their CDD, record keeping and/or any other of their obligations under the MLRs should be fully understood by the AMP, including its limitations, and the AMP should be able to explain this to a compliance officer on a visit. 

Any failures or limitations of the systems or software an AMP uses to assist them in complying with the MLRs, remain the responsibility of the AMP.

Use of systems and software depend on the AMP in question. Some AMPs will still use physical and paper files.

 

Third Party Identity Providers

There are many third-party identity providers that operate with the AMP market that undertake CDD checks on behalf of the AMP. What they provide differs depending on what identity provider the AMP uses and what level of service they pay for. Some providers will conduct basic background checks, whereas others may only check against sanctions. Most will provide a report, which could show a colour risk score or ticks and crosses.

Important note:  The business is responsible for having the relevant CDD paperwork, not the identity provider. Any report they provide must be examined by the business, and then they will need to decide if any further action needs to be taken to ensure they have the met the CDD requirements under the regulations.

 

Commissioned sales  

Commissioned sales are the sale of a new work of art which the artist has been commissioned to produce. Sometimes these sales will use an AMP as an intermediary between the artist and the buyer.

Often a deposit may be paid and a pro forma invoice raised, with full payment/paperwork once the artwork is released to the customer. This can take months or even years.  

It is important to remember it’s the value of the work of art which brings it in to scope (including the commission paid to the AMP and any VAT etc.) and not just the commission paid to the AMP.