Proliferation Financing: What HMRC's new guidance changes for the art market

Money Laundering (ML) and Terrorist Financing (TF) are familiar concepts for most Art Market Participants (AMPs). Proliferation Financing (PF) may feel more remote, but it is already a risk AMPs are required to assess—and HMRC's new 2026 guidance gives clearer direction on what that means in practice.

What is proliferation financing?

HMRC defines PF by reference to Regulation 16A(9) of the Money Laundering Regulations: broadly, providing funds or financial services connected with the manufacture, acquisition, development, movement, stockpiling or use of chemical, biological, radiological or nuclear weapons, their means of delivery, or related goods and technology, where this breaches relevant financial sanctions. In plain terms: financing that supports weapons of mass destruction, or helps circumvent sanctions meant to prevent this.

That may sound remote from selling a painting, but exposure arises through familiar vulnerabilities: high-value, portable assets, cross-border transactions, and structures that can obscure who's really behind a deal.

What's changed?

PF isn't new—HMRC's September 2025 risk assessment already required AMPs to assess ML, TF and PF together. The 2026 guidance sharpens this in two ways.

First, HMRC now explicitly assesses PF risk through the AMP sector as "very low"—but this is a sector-level assessment, not permission to omit PF from your own framework.

Second, the country framing has narrowed. The September 2025 guidance grouped Iran, North Korea, Russia and Syria together. The 2026 guidance states the PF sanctions caught by the MLRs currently target Iran and North Korea specifically.

Russia and other sanctioned jurisdictions remain highly relevant to sanctions and broader geographical risk, but shouldn't be treated as interchangeable with these specific PF regimes. HMRC also expects AMPs to consider wider exposure—jurisdictions bordering sanctioned countries, or used to route funds or goods to obscure their ultimate destination.

What does PF risk look like for an art business?

Exposure is likely to arise through the customer, payment route and geographical links rather than the artwork itself. Indicators may include:

customers, beneficial owners or intermediaries linked to Iran or North Korea (subject to being updated in time), or to jurisdictions bordering or routing around them;
opaque corporate or trust structures obscuring the ultimate customer, including entities owned or controlled by a designated person (see our guide on the 50% rule)—even where the entity itself is not named on the UK Sanctions List;
unusual third-party payments routed through jurisdictions with no obvious connection to the transaction;
attempts to conceal a sanctioned person or entity's involvement; and
transactions where sanctions, trade-sanctions or export-control concerns arise alongside other unusual features.

Much of your PF control will overlap with sanctions screening—checking customers and counterparties against the UK Sanctions List. Screening should not be treated as a one-off onboarding check: OFSI recommends checking the UK Sanctions List when the relationship begins and again at new points in a transaction. But PF assessment goes further: consider whether the structure, payment route or geography could facilitate evasion, even where a name-check comes back clean.

"Very low risk" doesn't mean "no action required"

This is the most important practical point in the new guidance. Your business-wide Risk Assessment must still identify how your business could be exposed to PF—customers, beneficial owners, transactions, geography, delivery channels.

HMRC also expects you to draw on external sources, including its sector risk assessment and the UK's National Risk Assessment of Proliferation Financing. If your own exposure is genuinely very low, say so—but reason and document the conclusion, and reflect it in your AML policies alongside ML and TF.

What AMPs should do now?

Check that your Risk Assessment and AML Policy:

expressly cover PF, distinct from broader sanctions risk;
reflect HMRC's current focus on Iran, North Korea and bordering jurisdictions;
look at ownership and control, not just name-matching against the Sanctions List;
explain when PF indicators should trigger EDD, monitoring or a SAR; and
document the sources used in your assessment.

If ArtAML™ prepares your documents, our Compliance Team is already incorporating this. If yours were prepared elsewhere, check whether they distinguish PF from sanctions risk at all—if not, they might pre-date current expectations.

Questions? Get in touch with the team.