HMRC turns up the heat on AML compliance

High value dealers, art market participants and estate agency businesses may operate far from the trading floors of banks, but they sit squarely in the crosshairs of money laundering risk. Nearly a decade after the introduction of the current Money Laundering Regulations in 2017 (MLRs), the latest National Risk Assessment (NRA) confirms that these sectors continue to attract criminal activity and represent an ongoing vulnerability in the UK’s defence against illicit finance. 

In this context, HM Revenue & Customs (HMRC) is under pressure to demonstrate effective supervision and align its enforcement approach with that of the Financial Conduct Authority (FCA) and Gambling Commission. This article considers recent trends and the extent to which they signal an increased risk of scrutiny and sanctions for these industries – outside the financial services sectors most commonly associated with anti-money laundering (AML) enforcement – where space for leniency is rapidly disappearing. 

Persistent risk

The NRA concludes that high value dealers, art market participants and estate agents are each ‘medium’-risk sectors, with only art market participants improving on their previous risk assessment. While the report suggests some cause for optimism – the decline in registered high value dealers may indicate that fewer firms are accepting large cash payments, and the spike in registered art market participants and estate agents affords greater opportunity for HMRC’s supervision of these sectors – it warns that these trends may mask deeper issues. 

Longstanding vulnerabilities persist, including in areas identified since 2017 as presenting the highest risk of criminal abuse: jewellery, motor vehicles and alcohol – goods that can move easily across borders. Inherent vulnerabilities common to high value dealers and art market participants include clients who value anonymity, preferring to use intermediaries or overseas entities to obscure source of funds and the identity of the ultimate beneficial owner (UBO). 

For art market participants and estate agents, high-value transactions may be priced subjectively and take place very quickly (as in an auction setting), with the post-pandemic reliance on remote processing and online ID verification further impeding effective customer due diligence. 

These features are attractive to criminals and sanctioned individuals alike, and while the NRA reports a potential drop in Russian investment in UK property, this may in fact mask a pivot in illicit behaviour as sanctioned individuals seek to conceal beneficial ownership through other channels. 

Similarly, the decline in registered high value dealers may, according to the NRA, signal that criminals are finding new ways to exploit high-value goods, including using gift cards purchased with cash or electronic payments that are not caught by the definition of high value dealers. Meanwhile, artificial intelligence tools have the potential to bypass transaction alerts and/or cheat due diligence software, further frustrating AML efforts. Companies House has committed to rolling out compulsory ID verification for company directors from November 2025, but this reform may be too little, too late. 

These rapid technological advances and the evolving techniques used by money launderers represent a significant challenge for businesses that may be too small to resource dedicated compliance teams, and often operate on the periphery of the regulated sector. For example, the NRA records that 90% of estate agents are single-premise operations, and although no corresponding figure is available for high value dealers, the average jeweller or metal dealer is far more likely to be a sole trader than part of a nationwide business. At this level, gold standard compliance is a big ask even for the most well-meaning firms. 

Supervision gaps

While risk-based, proportionate oversight of businesses at risk of money laundering remains a key aim of the Government’s promised supervisory reform, the Treasury’s latest AML/CTF Supervision Report – alongside the NRA – lays bare significant gaps in HMRC’s ability to assess and direct resource to where it matters most. 

Whereas the FCA and Gambling Commission concentrated their desk-based reviews on high-risk firms and conducted no onsite visits to low-risk entities, HMRC’s approach was almost the inverse. More desk-based reviews focused on low-risk firms and nearly half of its onsite visits were to medium- or low-risk businesses. While this may also reflect the relative risk profiles of the supervised populations, herein lies the challenge for HMRC. HMRC’s supervised population – 36,096 entities in 2023/2024 – is more than double that of the FCA and considerably more varied. Although HMRC recognises that factors such as clientele, geographic reach, and the nature of a business’s products or services shape money laundering risk, its supervisory reach appears limited by a lack of intelligence and real-time data.   

HMRC’s approach to gatekeeping and ongoing monitoring compounds the issue. Unlike the FCA and Gambling Commission, which embed their AML registration and ‘fit and proper’ checks into broader supervisory processes, HMRC operates a standalone registration system – narrowing the scope and timeliness of intelligence gathered while consuming significant resources. Thereafter, HMRC’s sector risk assessments rely heavily on external sources such as the NRA and National Crime Agency briefings, which are updated infrequently and are arguably a blunt tool to inform resource allocation across such a varied population. Indeed, the NRA acknowledges that HMRC may lack specialist knowledge in niche fields including the wider art market and commercial property. It is a stark contrast to the FCA’s recent drive to become more intelligence-led, with financial crime specialists last year processing 5,700 firms’ data to identify anomalies, track emerging risks and direct supervisory interventions. 

Finally, despite increased educational outreach and sector-specific guidance for high value dealers, art market participants and estate agents over the last five years, Suspicious Activity Reports (SARs) remains disproportionately low across these sectors, accounting for less than 0.9% of SARs submitted on the SRA Portal between April 2023 and March 2024. Whether a reflection of complacency or ignorance in these industries, this remains a key limitation to HMRC’s understanding of sector-specific risks. It also casts doubt over the effectiveness of the expanded financial sanctions reporting regime, which since May 2025 requires high value dealers and art market participants, as well as estate agents, to report suspected designated persons, frozen assets or suspected breaches of UK sanctions regulations. With increasing convergence of sanctions evasion and money laundering, this could be a crucial source of intelligence for supervisors and law enforcement alike if HMRC can boost engagement. 

Raising the stakes

The NRA highlights persistent MLR breaches by art market participants and estate agents – especially around risk assessments, policies, controls and procedures – the bread and butter of the MLRs. Compliance across registered high value dealers also remains patchy, with HMRC rejecting around 75% of applications at pre-registration stage – clear signs of stagnation rather than effective engagement with the MLRs. These statistics raise serious doubt about HMRC’s current enforcement strategy, but the NRA suggests new priorities on the horizon.  

Since 2020, HMRC has focused heavily on ‘policing the perimeter’ with a notable uptick in the volume of fines for registration breaches. Between October 2024 and March 2025, HMRC issued over 500 penalties against estate agent businesses, mostly concerning late registration. This period also saw an increase in the number and scale of penalties for registration failures in the art market, with several fines exceeding £20,000. Since June 2021, over 90 art market participants have faced regulatory action for trading while unregistered. It is clear that non-financial sectors remain firmly in HMRC’s sights, with the prospect of tougher sanctions growing. 

In particular, HMRC’s focus appears to be shifting to substantive AML failings in these industries. Each year, HMRC fines Money Services Businesses and Trust and Company Service Providers (two high-risk sectors supervised by HMRC) for wide-ranging compliance failures in, for example, risk assessments, due diligence procedures and record-keeping. This trend appears to be spreading to high value dealers, art market participants and estate agents as registration compliance improves. The latest AML/CTF Supervision Report highlights a luxury goods brand (regulated as a high value dealer) penalised for failures including inadequate risk assessments, policies and controls and training, while similar oversights were recorded against DYS 44 Art Gallery Limited (an art market participant) and North West Auctions Limited (a high value dealer) in HMRC’s most recent ‘name and shame’ report. These firms were fined £158,679 and £139,638 respectively – a clear warning that superficial compliance is no longer tolerated. 

Meanwhile, HMRC has demonstrated willingness to pursue criminal outcomes to deter registration breaches. In July 2022, it secured the first conviction of an estate agent for trading while unregistered against Felix Uwuigbe, Director of Century House Estates Ltd. While his sentence (120 hours of unpaid community service) fell well below the statutory maximum of two years’ imprisonment and an unlimited fine, Uwuigbe was also banned from acting as an estate agent for two years, underlining the long-term financial and reputational risk of non-compliance.  

Finally, there is a clear trend towards intelligence-led, multi-agency investigations and use of broader enforcement tools to deter non-compliance in these sectors. In spring 2025, HMRC assisted in Operation Machinize to target cash-intensive businesses such as barbershops, securing 35 arrests, the freezing of accounts holding more than £1 million and the seizure of £40,000 in cash, as well as other goods. 

This initiative followed the trial and conviction of two individuals in 2024 for involvement in a £27 million cash-based, international money laundering scheme, with the defendants receiving custodial sentences of 10 and seven years. 

HMRC also helped secure the recent conviction of former BBC Bargain Hunt expert, Oghenochuko Ojiri, who was jailed for two years and six months in June 2025 for failing to report his sale of artwork worth c. £140,000 to Nazem Ahmad, a UK- and US-sanctioned individual suspected of financing Hezbollah, the Lebanese paramilitary group which the UK government designed as a terrorist organisation in 2021. This investigation – the first of its kind – involved the National Terrorist Financial Investigation Unit, Office of Financial Sanctions Implementation (OFSI), HMRC and the Metropolitan Police’s Arts and Antiquities Unit, reflecting the value of pooling resources and intelligence to drive proactive enforcement. 

What next for HMRC?

Acknowledging limitations in HMRC’s supervisory reach, the NRA signposts new investment priorities to improve HMRC’s oversight in these non-financial sectors. 

• The NRA recognises SARs as providing critical intelligence to inform risk-based intervention, championing the SARs Reform Programme and further education in specific sectors including the art market where self-reporting remains weak, to encourage greater registration and reporting of SARs through the online Portal.  
• The NRA also highlights the value of leveraging Memorandums of Understanding and JMLIT initiatives to close gaps in sector-expertise, including in emerging risks such as crypto assets, supported by recent legislative reform that facilitates data sharing between Supervisors and the regulated sector, as well as private-to-private collaboration.
• Finally, with lessons to be learnt from the FCA and NCA’s banking pilot, HMRC has a clear road map to improve resource allocation with data-led supervision and thereby better target firms most exposed to money laundering risk.  

Against this backdrop, businesses will likely face for sharper scrutiny and more punitive enforcement. Emboldened by a string of headline-hitting convictions, HMRC has shown its readiness to escalate civil fines into criminal sanctions. While the initial focus may be on large or high-profile businesses, the trend towards intelligence-led, cross-agency investigations means that smaller players cannot assume they are beyond the firing line for systemic AML failings.

Conclusion

High value dealers, art market participants and estate agents represent a new front in the battle against money laundering. With vulnerabilities inherent to these sectors not foreseen or appreciated when the MLRs were drafted – and with emerging technologies shifting the compliance landscape – the challenge is significant for both business and HMRC.  

Nonetheless, the last five years have seen decisive moves in these sectors and the direction of travel is clear: firms that remain non-compliant, whether through complacency or ignorance, face growing financial, reputational and criminal risk.