ECSH54750 - Art Market Particpants: Freeports

Freeports

The definition of an Art Market Participants (AMPs) under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017) also includes freeports, as per Regulation 14(d)(ii):

Regulation 14(e) MLR 2017 gives the meaning of a freeport.

 

What are freeports?

Freeports (also known as free trade zones (FTZs)), are designated areas within countries that offer a free trade environment with a minimum level of regulation. The number of Freeports and FTZs around the world have increased rapidly in recent years: today there are approximately 3,000 in total, located in 135 countries.

Freeports offer many incentives and benefits to the companies that operate within them, such as the exemption from duty and taxes and simplified administrative procedures. However, the absence of strict regulations and transparency of the FTZs which is beneficial for legitimate businesses, can also make them highly attractive for illicit actors who seek to take advantage of this relaxed oversight to launder the proceeds of crime and finance terrorism.

The EU identified freeports as a key money laundering risk and included art stored in freeports within the scope of EU anti-money laundering controls in the 5th Anti-Money Laundering Directive.

 

UK Freeports

UK freeports are special areas within the UK’s borders where different economic regulations apply. The UK freeports have been designed to be different to those elsewhere in the world.

The UK previously had some freeports that opened in the in the 1980s, but the licences for them were not renewed in 2012. Following the UK’s departure from the European Union, in 2021 the government announced the creation of eight new freeports in England, two in Scotland and two in Wales. There are also plans for one in Northern Ireland.

There are currently 12 UK Freeports:

  • Anglesey Freeport
  • Celtic Freeport
  • East Midlands Freeport
  • Freeport East
  • Forth Green Freeport
  • Humber Freeport
  • Inverness and Cromarty Firth Green Freeport
  • Liverpool City Region Freeport
  • Plymouth and South Devon Freeport
  • Solent Freeport
  • Teesside Freeport
  • Thames Freeport

The freeports in the UK are in various stages of development, and there may be attempts made to exploit them for money laundering and terrorist financing purposes.

The government guidance on freeports is available here.

Freeports and Art

Some freeports hold many works of art, such as the Geneva Freeport, which is said to hold over a million works of art.

These works of art are hidden from public view and, if no money laundering regulations apply, can be sold privately and anonymously within the freeport zone.

No money laundering regulated activity (other than art storage) can occur in a UK freeport - so if it’s a direct private sale, it wouldn’t have anti-money laundering safeguards in place regardless of where it happened; if it goes through an AMP, the sale/purchase will be outside the of the freezone and therefore normal rules apply.

For more information on the money laundering risks of freeports see the FATF Report on Money Laundering vulnerabilities of Free Trade Zones.