International sanctions are actions taken by one country against another, either unilaterally or multilaterally. Their aim is to change the behaviour of the target country’s regime in order to maintain or restore international peace and security, or to improve the situation in that country.
International sanctions are generally imposed by the United Nations or the European Union. Trade sanctions typically involve a ban on trade, possibly limited to certain sectors such as armaments, or with certain exceptions (such as food and medicine). Financial sanctions target individuals in government, government bodies and terrorists or terrorist groups.
Art businesses operating in the UK, like any other UK business, must abide by international sanctions. They are not allowed to do business with certain individuals or organisations, and they are not allowed to handle types of artworks subject to trade restrictions.
It is a criminal offence to breach an international sanction without the appropriate licence or authorisation.
In the UK, the following countries are currently subject to limited financial sanctions:
Afghanistan, Belarus, Democratic Republic of the Congo, Egypt, Eritrea, Federal Republic of Yugoslavia & Serbia, Iran, Iraq, Ivory Coast, Lebanon, Liberia, Libya, North Korea, Republic of Guinea, Republic of Guinea-Bissau, Somalia, Sudan, Syria, Tunisia, Zimbabwe.
Financial sanctions have also been imposed on Al-Qaida and other terrorist groups.
For each country (with a slight variation for the Federal Republic of Yugoslavia & Serbia), regulations are in force imposing restrictions on any dealing with the funds or economic resources (which includes all assets which may be used to obtain funds, and therefore would include artworks) of a designated person, if the individual dealing with the funds or economic resources knows, or has reasonable cause to believe, that they belong to a designated person.
A “designated person” is a person or entity listed under the relevant legislation.
The Treasury keeps an updated consolidated list of all designated persons – available at http://www.hm-treasury.gov.uk/d/sanctionsconlist.pdf. Note that there are currently no designated persons in Eritrea or Lebanon.
In some instances, the Treasury may, on application, issue a licence permitting a particular dealing with a designated person.
Additional financial sanctions are imposed on Iran and Syria. Those imposed on Syria are unlikely to affect art businesses, but Iranian sanctions could have a significant impact.
Wide restrictions are imposed on the transfer of funds to Iranian financial institutions or persons or entities resident in Iran. It should be noted that the restrictions are not absolute bans and there may be instances where funds can be transferred.
Transfers to Iranian credit or financial institutions
A UK credit or financial institution is not permitted to make any transfer of funds to:
- a credit or financial institution domiciled in Iran;
- a branch or subsidiary (anywhere in the world) of a credit or financial institution domiciled in Iran; or
- a credit or financial institution controlled by any person domiciled in Iran,
unless a specified exception applies. The exceptions are, however, very narrow. The only one that may apply to art businesses is where the transfer is in connection with a specific trade contract, and prior authorisation has been obtained from the Treasury pursuant to a request by the payment service provider of the payer. “Specific trade contract” is not defined, but, in our view, it is likely only to apply where the consignor or seller of the art is acting in the course of business.
Note that banks are obliged to carry out customer due diligence and may refuse to make a payment if they do not receive all information requested relating to the beneficiary.
Transfers to Iranian persons
The transfer of funds to persons who are in, or resident in, Iran, where the transfer does not fall within the restrictions imposed on transfers to Iranian financial institutions, is only permitted in the following circumstances:
- if the transaction is of €10,000 or more, but less than €40,000, and the Treasury is notified in writing before the transaction takes place by the payment service provider of the payer (e.g. by the art dealer’s bank); and
- if the transaction is of €40,000 or more, and the Treasury provides authorisation before the transaction takes place, which, again, must be requested by the payment service provider of the payer.
There are no restrictions on transferring funds to Iranian nationals who are not in, and do not reside in, Iran (assuming they are not listed as a “designated person”, and funds are not transferred to an Iranian bank account).
Accordingly, when considering consignments from Iranians, art businesses should note that:
- if the Iranian person is in, or resident in, Iran, restrictions apply;
- if the Iranian person is outside Iran and non-resident of Iran:
a) restrictions apply if his/her bank account is with an Iranian bank;
b) no restrictions apply if his/her bank account is with a non-Iranian bank, unless he/she is a designated person.
Art businesses should note that it is not permitted to provide insurance to (a) any Iranian entity (whether connected to the government or not), although the provision of insurance to a “natural person” is allowed; and (b) any Syrian government body.
From time to time, the UN and EU impose sanctions on the import and export of specified goods from and to certain territories.
Pursuant to a UN resolution, the UK has imposed a ban on the handling, importation and exportation of any item of illegally removed Iraqi cultural property. This is defined as “Iraqi cultural property and any other item of archaeological historical, cultural, rare scientific or religious importance illegally removed from any location in Iraq since 6th August 1990”. Any person who holds or controls any such item must deliver it to the police.
Separately, a range of EU sanctions bans the import of certain goods into the UK. Current sanctions should not affect auctioneers and dealers unless they sell jewellery. The importation of diamonds and raw and semi-manufactured precious metals from government bodies in Iran and Syria is prohibited.
Restrictions on the importation of precious stones from Burma were lifted in May 2013.
From an export perspective, auctioneers and dealers should note that there are currently EU regulations in force prohibiting the sale, supply, transfer or export, directly or indirectly, of luxury goods, including works of art and antiques, to Syria and North Korea.
Government guidance on current restrictions on imports from particular countries is available at https://www.gov.uk/government/publications/do-i-need-an-import-licence.
A person (whether an individual or a corporate body) who breaches any of the sanction measures commits a criminal offence. Further, where an offence is committed by a corporate body with the consent of an officer of the body corporate, that officer will also be guilty of the offence.
A person convicted of an offence for breach of a financial sanction may be liable for imprisonment for a maximum term of two years and/or a fine. The penalties for breach of a trade sanction are more severe: dealings with illegally removed Iraqi cultural property could lead to imprisonment of up to seven years, as well as a fine, and those breaching export controls on the supply of luxury goods to Syria may face up to 10 years’ imprisonment plus a fine.
Please note that this note deals only with financial and trade sanctions under UK laws. Any transaction originating in other countries will be subject to the laws of those countries.
Articles published on this blog reflect the opinion of the stated author of the article only. The information they contain does not constitute legal advice.