The art world’s need to tackle money laundering and terrorist financing

The conviction of London-based art dealer, Oghenochuko Ojiri, is significant. He received a sentence of two years and six months, after becoming the first person to be charged with a specific offence under Section 21A of the Terrorism Act 2000.

That particular section relates to the obligation on individuals in the regulated sector to disclose information to law enforcement if they suspect or know that another person has committed or is about to commit a terrorism-related offence.

The details of the case

Ojiri was convicted of eight charges of failing to disclose potential terrorist financing, having failed to declare that he sold artworks worth £140,000 to Nazem Ahmad, who has been sanctioned by the US government since 2019 for giving money to the Lebanese group, Hezbollah.

After a multi-agency investigation, Ojiri found himself being sentenced by Justice Cheema-Grubb, who said the art dealer had been aware the works he had sold were going to Nazem Ahmad. Ojiri’s own legal representatives talked of him having suffered humiliation and the loss of his good name and the work he loves through his undermining of trust in the art market. He had been arrested on the same day the UK government announced its own sanctions against Nazem Ahmad.

Ojiri had said that he had no reason to believe Ahmad was a terrorist and money launderer. Yet a search of his phone showed the art dealer had researched Ahmad’s identity. He knew about him being sanctioned by the US, had been alerted to the dangers of dealing with him by a US business partner and had kept him under a pseudonym in his contacts to obscure his identity. 

The identification details of Ahmad were required for a purchase; however, the identification details of a woman were ultimately submitted. Invoices for the sales were made out to a company and another man, even though Ojiri was aware that Ahmad was the actual buyer. He even congratulated him on the purchase and knew about the suspicions that he was a terrorism financier. The sales were conducted in sterling rather than the usually used US dollars as Ahmad’s sanctioning meant he could not use US dollars. The gallery even used a specialist platform that assists art market businesses with compliance risk assessments. Although Ojiri knew how to carry out suspicious activity reports and risk assessments, none were ever completed on Ahmad.

The wider implications of the case

Ojiri’s downfall received more publicity than may otherwise have been the case because of his appearances as an art expert on TV programmes such as Bargain Hunt. But his case is worthy of attention for more off-camera reasons. His conviction highlights the fact that the art market is one of the most structurally vulnerable sectors from an anti-money laundering and countering the financing of terrorism (AML/ CFT) perspective.

The case is a significant precedent in the European compliance landscape. And it is worth emphasising that although there was no evidence of ideological alignment, the judge stated that Ojiri’s actions directly undermined the effectiveness of terrorist-financing detection mechanisms. 

The art market became regulated in 2019 under the Money Laundering, Terrorist Financing (Amendment) Regulations. It was a move that brought those involved in the buying and selling of art in line with other regulated sectors, such as banking and legal services. Ojiri and others in the art world are required to conduct due diligence checks on clients and be registered for money laundering supervision purposes.

Yet, despite this, a significant operational gap remains. Although many galleries, dealers and small to mid-sized auction houses have compliance tools that enable them to fulfil their compliance obligations, the awareness of the need to make proper use of these tools may still be lacking. 

If others operating in the art world do not wish to share Ojiri’s fate, they need to prioritise taking certain actions.

There needs to be training on AML/CFT, training that is tailored specifically to the art world and reflects the situations that arise in the day-to-day business conducted by art professionals. Such people are highly knowledgeable about the items they buy and sell, but very few will have entered the art world with an awareness of the possible implications of their actions in terms of money laundering and/or terrorist financing. That awareness needs to be promoted.

This can be enhanced by the use of sector-specific RegTech, although this would not have been an issue in the abovementioned case. Applying emerging technology can improve the way those in the art world manage regulatory compliance in relation to all-important matters, such as conducting due diligence on clients, identifying the beneficial owners (the ultimate owner or controller of an asset) and assessing all the parties to a transaction. 

There may be those in the art world who do not want to undertake such tasks. But it is important to remember that a lack of awareness or failure to meet reporting obligations can, as Oghenochuko Ojiri can now testify, result in serious criminal liability and reputational damage. 

His case is the strongest reminder to date that the compliance culture that has developed now extends far beyond the financial sector. Combating money laundering and terrorist financing is something that is taking place on an increasingly wide front. Those in the art world must realise they are expected to play their part in that battle.