A rapid increase in online transactions has led to a rise in criminals using fake identities to buy and sell valuable works of art and launder their ill-gotten gains.
In 2020, the EU’s Fifth Anti-Money Laundering Directive was extended to include art market participants (AMPs) as well as financial institutions and other regulated businesses. As a result, anyone participating in the sale of an artwork valued at €10,000 or more must now take reasonable steps to prevent money laundering.
One of those steps is Customer Due Diligence (CDD), which requires you to verify your customers by checking their identity documents, for example a passport or government-issued ID card.
But that raises the question for AMPs—as fake identity documents get increasingly sophisticated, how confident are you that you could spot one?
Here are a few tips:
- Where possible, let clients know in advance that you will be conducting thorough identity checks. This acts as a natural deterrent to many would-be fraudsters.
- Familiarise yourself with the security features of common identity documents and know how to check them. Use publicly available information, such as Edison TD, which lists the security features of more than 2,500 travel and residence documents from 200 countries.
- Look out for errors in spelling or grammar, missing accents or non-standard fonts.
- When conducting in-person identity checks, be aware of suspicious behaviour. If your customer seems reluctant to hand over their document or is asking lots of questions, this could be a warning signal.
- Beware of imposters. The passport may be genuine, but does it belong to the holder? Make sure you check, either by comparing key facial features of your customer and the document photo—in person or on a live video stream—or by using face matching software.
- Don’t make the mistake of assuming that unfamiliar documents are more likely to be fake: in 2020, over 40% of the fake documents TrustID saw were from just three countries and British documents were fifth on the "top fake nationalities" list.
And if in doubt remember this: as an art dealer, you are obliged to take "reasonable measures" to verify the identity of clients who are purchasing or selling valuable works of art. But if you do not have the expertise to confidently verify an ID document, outsourcing might be your best bet. Online identity verification services are cost-effective and reliable and leave you to concentrate on what you do best—buying and selling art.
- Christie Lewis is head of client services at TrustID, which verifies ID documents