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Art Fair Season Is Upon Us

Here are the top three things you need to know to keep on top of DD

June 20, 2022

It’s that time of year again, art fair season. Whether you are at Basel, TEFAF or Masterpiece we know you want to meet your obligations with as little admin as possible. So we’ve put together the top three things you need to know to keep on top of DD during this busy season - because we know you need to do what you do best - share incredible pieces of art. 

DD on Deposits 

So you’re at the fair and you want to take a deposit on a piece of artwork - do you need to conduct due diligence?

Any business can accept a deposit and impose their own terms, so it is ultimately up to your discretion. However, with any large deposit, there is a risk that it may be used/abused to launder money. Therefore, any supervised business should expect to be asked to demonstrate how it manages this risk. It is therefore important to ask yourself:

  • What do you know / want to know about a collector before accepting a deposit?
  • How do you as a seller follow up on a deposit to ensure that the potential buyer completes the transaction?
  • How do you monitor those potential buyers that leave a deposit and then decide that they’ve changed their mind and want their deposit back?

Also keep in mind that HMRC may ask questions such as: 

  • Where do you keep deposits?
  • In what account?
  • How do you keep deposits secure from operational bank accounts?
  • How do you ensure a deposit is safe from being spent or otherwise disposed of until it is either added to the balancing payment or returned if the purchase is canceled?

At the end of the day, to conduct due diligence on a deposit ensures that you have established trust with your buyer and that the future payment or payments do not require DD again. This means you have created a consistent experience with your collector and saved them the confusion down the line when they pay the remaining balance. 

For more information on how to integrate this experience into your brand identity read our article How to make your Due Diligence Process Part of your Brand and Buying Experience. 

Explaining Regulation to International Clients

You have a US client who doesn’t understand regulation - how do you explain DD on the spot? 

It can be complicated to try and convey to an international client why they need to provide their personal information, so we have compiled a few points to hit in conversation. 

Be sure to explain the following: 

  • The UK Government has passed AML legislation which affects all UK based art dealers, galleries and their clients.
  • As a result you have to be seen to take all reasonable steps outlined by HMRC (your regulator) to prove you are meeting your legal requirements.
  • This means you will be sending a request through Arcarta for their personal details, including ID and proof of address. This process is very similar to setting up a bank account. You can even frame it this way, “Once you provide your information, it’s as if you have opened an ‘account’ with us. Next time you buy a piece of art you will not need to provide your information again, unless your information has changed, or we need to update our records.”
  • Quick reminder! These details need to match the information on the invoice. 
  • If they wish to pay through a company, you can phrase it the same way and include that you will require evidence of incorporation, directors and ultimate beneficial owners.

For more information on DD for entities and ultimate beneficial owners read our article Mandatory Watching: From Russia with Cash where we break down what is required under regulation. 

How do I explain to a client their information is safe?

A client has confirmed a sale and is worried about sending their ID - what do you say to assure them their information is safe?

  • You can assure your client that Arcarta is independently audited and utilises banking level infrastructure and systems to ensure the safety, security and availability of information.Our systems utilise best in class encryption to ensure all data remains confidential. You can also refer them to our ‘Trust’ page where we explain our data security and privacy policy in depth.

At the end of the day, Arcarta is here to make DD a non-event. We want our community members to feel confident transacting and meeting their legal requirements under pressure. So if you need a helping hand, take advantage of our free Whatsapp SOS line. Follow the link to access assistance, because no one should lose a sale by meeting their legal obligations.

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Arcarta is a Due Diligence platform for the art market and is used by over 300 Art businesses internationally.

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