The European Commission is intensifying talks with the Belgian government to secure a crucial €140 billion reparations loan to Kyiv as the clock ticks down to Ukraine running out of money in spring. But with Belgium’s Prime Minister Bart De Wever focused on a budget crisis at home and the European Parliament likely to get a say in the reparations loan, which would slow down approval, time is looking tight. The latest round of negotiations on the mooted loan, which would be backed by frozen Russian state assets held on Belgian soil, comes to a head Friday morning when senior officials from the Commission’s economic and budgetary departments will try to reassure the Belgian leadership that any financial and legal risks associated with the loan are taken care of. De Wever is standing in the way of the planned EU mega-loan, which aims to give Kyiv three years’ financial breathing space. Ukraine currently faces a budget shortfall of some $60 billion over the next two years, excluding the cost of supporting the army. Failure would force the bloc’s leaders to look to their own coffers to sustain Kyiv’s defense against Russian forces — or risk leaving Kyiv to fall into Moscow’s hands. It’s the Commission’s job to assuage De Wever’s fears that Belgium will be on the hook to repay Moscow if the war ends, or the Kremlin’s lawyers successfully sue his government for using the immobilized assets, which are under the stewardship of Brussels-based financial depository Euroclear. The immobilized assets are under the stewardship of Brussels-based financial depository Euroclear. | Ansgar Haase/Picture Alliance via Getty Images One official, who like others in this article was granted anonymity to reveal deals of confidential meetings, said there will be talks in the coming days at all levels, including the highest. But the negotiations come as De Wever faces a political pickle at home. His government’s parties are locked in tense talks in an attempt to nail down the country’s budget and make good on the coalition’s promise to cut €10 billion in spending.  De Wever said Thursday that he asked Belgium’s King Philippe to give the government until Christmas to hash out a budget deal after missing several previous deadlines to do so, and stressed that it was the government’s final shot at agreeing a budget. IF BELGIUM AGREES, WHAT THEN? Once Belgian concerns are satisfied, the Commission will formally propose legislation on the reparations loan in the coming weeks, according to two officials briefed on the plans. Two other EU officials briefed on the plans told POLITICO that the Parliament will likely also be involved in crafting the legislation. This could prolong the process and threaten the Commission’s hopes of getting €140 billion before April, when Kyiv is expected to run out of money. Adding to the pressure is the fact that the International Monetary Fund’s continued support for Ukraine hinges on the EU loan. “The longer we now run delays, the more challenging it will become,” Economy Commissioner Valdis Dombrovskis told reporters in Sofia this week on the margins of a conference. “It may open questions on some possible bridging solutions or so. So sooner is better.” As a safeguard, the Belgians are demanding that EU governments provide national guarantees worth over €170 billion against the loan that can be paid out at a moment’s notice. De Wever also wants assurances that using the cash value of the Russian assets would also stand on legal ground. The Commission’s lawyers have “very thoroughly assessed all the legal risks or possible litigation risks,” which they see as “contained,” Dombrovskis said in Sofia. He added that “in any case, guarantees to be provided to Belgium [are] to cover potential financial risks Belgium may face” if Moscow’s lawyers sue the government. The goal is to have the bloc provide national guarantees against the loan “at least for the next two years, which could be taken over by the EU guarantee” in 2028, when the next seven-year EU budget begins, said Dombrovskis. The more difficult task is eliminating the veto threat to EU sanctions from Kremlin-friendly countries, such as Hungary and Slovakia. The Commission is considering a legal loophole that would keep Russian state assets frozen until it ends the war and pays reparations to Ukraine. Otherwise, the EU must unanimously reauthorize its sanctions against Russia every six months. Unfreezing the Russian assets would force Euroclear to wire all sanctioned cash back to the Kremlin. Hanne Cokelaere contributed to this report.

BRUSSELS — The EU is ratcheting up pressure on governments reluctant to agree on funding for war-ravaged Ukraine — telling them if they don’t force Russia to foot the bill, they’ll have to do it themselves. The European Commission is acutely aware that its plan B — joint EU borrowing known as eurobonds — is even more unpalatable for funding a €140 billion reparations loan for Kyiv than its idea of using frozen Russian state assets, which hit a roadblock last week. Governments historically hostile to big spending, especially Germany and the Netherlands, nicknamed the “frugals,” loathe the prospect of piling greater debt onto taxpayers. Spendthrift nations, France and Italy in particular, are too indebted to take on more.  But that’s the point. European officials are betting that Belgium, which houses nearly all the assets and has expressed concerns about the legitimacy of seizing them, along with other countries that have raised objections more quietly, will be won over to the plan by the prospect of the joint borrowing alternative, which they’ve long considered toxic. “The lack of fiscal discipline [in some EU countries] is so high that I don’t believe that eurobonds will be accepted, certainly by the frugals over the next 10 years,” said Karel Lannoo, chief executive of the influential Centre for European Policy Studies, a Brussels think tank. That’s why using the frozen Russian assets looks like the only game in town. “€140 billion is a ton of money and we have to use it. We have to show that we’re not afraid.” European governments and the European Central Bank have slowly come round to using seized Russian assets to fund the €140 billion. Initially they were wary, considering snatching another country’s cash ― no matter how badly that country had acted ― legally and morally dubious. But Ukraine’s pressing needs, and Washington’s uncertain approach, has focused minds. At last week’s summit of EU leaders, however, Belgium’s Bart De Wever refused to budge on the plan, which needs the backing of all 27 governments, forcing the bloc to postpone its approval until December at the earliest. ‘THIS IS DIPLOMACY’ Now the EU is in a race against time on two fronts. First, Ukraine is set to run out of money by the end of March. And second, decision-making of any kind could be about to become far tougher as Hungary looks to join forces with Czechia and Slovakia to form a Ukraine-skeptic alliance. There’s a sense that it’s now or never. That means Commission officials are engaged in a delicate balancing act to get the assets plan across the line, three EU diplomats said. “This is diplomacy,” said one of the diplomats with knowledge of the choreography, granted anonymity to speak freely about the plans. “You offer people something they don’t want to do, so they accept the lesser option.” A second diplomat familiar with the situation was equally dismissive of plan B. “The idea that eurobonds could seriously be on the table is simply laughable,” they said. So although De Wever told his fellow leaders at the EU summit last week that the Commission had underestimated the complexity of using Russian assets and the legal knock-on effect it could have in Belgium, the EU doesn’t think he’ll hold out past December, when leaders are scheduled to meet again. The Russian asset-backed loan “is going to happen,” an EU official said. “Not a question of if ― but when.”  STEP UP SUPPORT Many European nations have long opposed the idea of eurobonds, believing they shouldn’t be on the hook for indebted governments they perceive as unable to keep their finances in order. The Covid pandemic weakened their resolve, with governments agreeing to joint borrowing to finance an €800 billion recovery fund to revive the bloc’s economy. Brussels has continued to mutualize EU debt since then to fund other initiatives, most recently involving a series of loans to help capitals procure military contracts to bolster their defenses against Russia, but capitals are still broadly against its widespread use. “Support for Ukraine and pressure on Russia, that is ultimately what could bring Putin to the table and that’s why it’s so important that the European countries step up,” Swedish Europe Minister Jessica Rosencrantz told reporters after Thursday’s summit. | Thierry Monasse/Getty Images There is a third option on the table: The EU could embark on a €25 billion treasure hunt for Russian assets in other countries across the bloc. This, though, is likely to take more time than Ukraine has so it could look as if Europe is taking its foot off the gas. “Support for Ukraine and pressure on Russia, that is ultimately what could bring Putin to the table and that’s why it’s so important that the European countries step up,” Swedish Europe Minister Jessica Rosencrantz told reporters after Thursday’s summit. COLLECTIVE RISK The vast majority of the assets are under the guardianship of a financial depository called Euroclear in Belgium, leaving the country with considerable financial and legal risk. “The Commission has engaged in intensive exchanges with the Belgian authorities on the matter and stands ready to provide further clarifications and assurances as appropriate,” a Commission spokesperson said. “Any proposal will build on the principle of collective risk sharing. While we see no indication that the Commission`’s original approach would lead to new risks, we certainly do agree that any risk coming with our future proposal will of course have to be shared collectively by member states and not only by one.” The Commission has played down the risks to Belgium, stressing that the €140 billion would only be repaid to Russia if the Kremlin ends the war and pays reparations to Ukraine. The chance of that happening is so remote that the money is unlikely ever to be repaid.  But Belgium fears Moscow could send in an army of lawyers to get its money back, especially considering the country signed a bilateral investment treaty with Russia in 1989. The officials and diplomats interviewed for this article remain confident of an agreement. “I really expect that at the next European Council [scheduled for Dec. 18] there will be finally progress,” Lithuanian Foreign Minister Kęstutis Budrys told POLITICO. Gerardo Fortuna contributed to this article.

Elisabeth Braw is a senior fellow at the Atlantic Council, the author of the award-winning “Goodbye Globalization” and a regular columnist for POLITICO. Seven years ago, Sweden made global headlines with “In Case of Crisis or War” — a crisis preparedness leaflet sent to all households in the country. Unsurprisingly, preparedness leaflets have become a trend across Europe since then. But now, Sweden is ahead of the game once more, this time with a preparedness leaflet specifically for businesses. Informing companies about threats that could harm them, and how they can prepare, makes perfect sense. And in today’s geopolitical reality, it’s becoming indispensable. I remember when “In Case of Crisis or War” was first published in 2018: The Swedish Civil Contingencies Agency, or MSB, sent the leaflet out by post to every single home. The use of snail mail wasn’t accidental — in a crisis, there could be devastating cyberattacks that would prevent people from accessing information online. The leaflet — an updated version of the Cold War-era “In Case of War” — contained information about all manner of possible harm, along with information about how to best prepare and protect oneself. Then, there was the key statement: “If Sweden is attacked, we will never surrender. Any suggestion to the contrary is false.” Over the top, suggested some outside observers derisively. Why cause panic among people? But, oh, what folly! Preparedness leaflets have been used elsewhere too. I came to appreciate preparedness education during my years as a resident of San Francisco — a city prone to earthquakes. On buses, at bus stops and online, residents like me were constantly reminded that an earthquake could strike at any moment and we were told how to prepare, what to do while the earthquake was happening, how to find loved ones afterward and how to fend for ourselves for up to three days after a tremor. The city’s then-Mayor Gavin Newsom had made disaster preparedness a key part of his program and to this day, I know exactly what items to always have at home in case of a crisis: Water, blankets, flashlights, canned food and a hand-cranked radio. And those items are the same, whether the crisis is an earthquake, a cyberattack or a military assault. Other earthquake-prone cities and regions disseminate similar preparedness advice — as do a fast-growing number of countries, now facing threats from hostile states. Poland, as it happens, published its new leaflet just a few days before Russia’s drones entered its airspace. But these preparedness instructions have generally focused on citizens and households; businesses have to come up with their own preparedness plans against whatever Russia or other hostile states and their proxies think up — and against extreme weather events too. That’s a lot of hostile activity. In the past couple years alone, undersea cables have been damaged under mysterious circumstances; a Polish shopping mall and a Lithuanian Ikea store have been subject to arson attacks; drones have been circling above weapons-manufacturing facilities; and a defense-manufacturing CEO has been the target of an assassination plot; just to name a few incidents. San Francisco’s then-Mayor Gavin Newsom had made disaster preparedness a key part of his program. | Tayfun Coskun/Anadolu via Getty Images It’s no wonder geopolitical threats are causing alarm to the private sector. Global insurance broker Willis Towers Watson’s 2025 Political Risk Survey, which focuses on multinationals, found that the political risk losses in 2023 — the most recent year for which data is available — were at their highest level since the survey began. Companies are particularly concerned about economic retaliation, state-linked cyberattacks and state-linked attacks on infrastructure in the area of gray-zone aggression. Yes, businesses around Europe receive warnings and updates from their governments, and large businesses have crisis managers and run crisis management exercises for their staff. But there was no national preparedness guide for businesses — until now. MSB’s preparedness leaflet directed at Sweden’s companies is breaking new ground. It will feature the same kind of easy-to-implement advice as “In Case of Crisis or War,” and it will be just as useful for family-run shops as it is for multinationals, helping companies to keep operating matters far beyond the businesses themselves. By targeting the private sector, hostile states can quickly bring countries to a grinding and discombobulating halt. That must not happen — and preventing should involve both governments and the companies themselves. Naturally, a leaflet is only the beginning. As I’ve written before, governments would do well to conduct tabletop preparedness exercises with businesses — Sweden and the Czech Republic are ahead on this — and simulation exercises would be even better. But a leaflet is a fabulous cost-effective start. It’s also powerful deterrence-signaling to prospective attackers. And in issuing its leaflet, Sweden is signaling that targeting the country’s businesses won’t be as effective as would-be attackers would wish. (The leaflet, by the way, will be blue. The leaflet for private citizens was yellow. Get it? The colors, too, are a powerful message.)

The European Union is about to use the cash value of €140 billion worth of frozen Russian state assets to finance a mega loan to Ukraine. But the European Commission still wants more, according to a document obtained by POLITICO. The bulk of the frozen assets sit in a Belgium-based financial depository called Euroclear. But an additional €25 billion lies in private bank accounts across the bloc, and the EU executive wants to discuss using those funds to issue loans to Kyiv as well. “It should be considered whether the Reparations Loan initiative could be extended to other immobilised assets within the EU,” reads the document, which the Commission circulated to EU capitals ahead of a Friday ambassadorial meeting on the topic. “The legal feasibility of extending the Reparations Loan approach towards such assets has not been assessed in detail,” the document continued. “Such an assessment would need to take place before taking a decision on further steps.” The document outlines the “design principles” for the Ukraine Reparations Loan initiative that will be up for debate ahead of next week’s EU summit in Brussels. EU leaders are expected to have a broad discussion on the initiative and to call on the Commission to present a proposal for the loan. EU officials expect the bill to arrive quickly, and to serve as a platform for further talks on the financial engineering needed to make it work. Finance ministers will discuss the bill when they next meet in November. GUARANTEES AND SPENDING TARGETS Other design principles include national guarantees for the loan, a key demand from Belgium, which fears Moscow could send an army of lawyers its way to retrieve the sanctioned cash. “A solid guarantee and liquidity structure should be put in place to ensure that the EU can always honour its obligations to Euroclear,” the document continued. “For that purpose, it is suggested to build a system of bilateral guarantees from Member States to the Union.” These guarantees would ensure “access to the required liquidity when needed to satisfy any guarantee call,” i.e. to enable an immediate payout. The EU’s next seven-year budget from 2028 would take over the national guarantees “with an adequate cover under the headroom,” a financial cushion that ensures Brussels can meet its obligations. Once the loan is issued, the money would go toward “the development of Ukraine’s defence technological and industrial base and its integration into the European defence industry,” as well as to support the country’s national budget, “subject to appropriate conditionality.”

Russia will sue any EU country that dares to use its sanctioned cash to leverage a mega loan to Ukraine, former president Dmitry Medvedev said on social media. Medvedev, who served a four-year stint as Russia’s president from 2008, issued the threat in response to a POLITICO article that reported on an idea that the EU’s executive arm pitched to deputy finance ministers last week. “If this happens, Russia will persecute the EU states, as well as Euro-degenerates from Brussels and individual EU countries who will try to seize our property, until the end of time,” Medvedev wrote Monday on the social media platform, Telegram. Russia would pursue them in “all possible international and national courts … and in some cases, extrajudicially,” Medvedev said. His current function is deputy chairman of Russia’s Security Council. The European Commission’s pitch, described by one official as “legally creative,” is to take Russian cash that’s building up in a deposit account at the European Central Bank. The cash stems from almost €200 billion worth of Russia’s frozen state assets, held by a Brussels-based financial institution called Euroclear, that reach maturity. The Commission is considering swapping that cash with short-term zero-coupon eurobonds as a way to avoid formally seizing Russia’s frozen assets, which could trigger global lawsuits and set an uneasy precedent for the future. Armed with this cash, the Commission would issue a multi-billion euro “Reparations Loan” to Kyiv to help sustain its war effort against Moscow. Commission President Ursula von der Leyen said last week that Ukraine would only have to pay back the loan if Russia pays for reparations — a highly unlikely scenario. The cash-swap pitch is among several ideas on the table. Medvedev is having none of it and pledged to sue anyone who follows through “in every possible way.”

Margot Wallström is a former vice president of the European Commission and former foreign minister of Sweden. Jytte Guteland is member of the Swedish parliament and former lead negotiator on EU climate law in the European Parliament. Mats Engström is a former deputy state secretary at the Swedish Ministry for the Environment. The chemical industry is vital to Europe’s economy and employs millions of workers across the bloc. However, too many hazardous substances remain on the market, threatening humans and nature alike. For example, the use of a group of chemicals known as PFAS — or “forever chemicals” — has contaminated thousands of sites and can now be measured in our bloodstreams. It is, therefore, worrying that after 18 years in force, the flagship of Europe’s chemicals legislation — the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) — is becoming endangered. What the European Commission has promised is to “simplify” REACH. But the proposal presented to member country experts seems more akin to deregulation and a lowering of ambitions. For instance, if put into action, the goal of phasing out substances of very high concern would be severely diluted. The main reason behind this revision is an intense lobbying campaign for European “competitiveness.” But this approach is too narrow and short-sighted. And while the intention of simplification may be good, undermining vital legislation will harm people, the environment and the economy — not to mention citizens’ confidence in the EU. Among the authors of this article, one of us proposed and negotiated REACH in the early 2000s, and another was the European Parliament’s lead negotiator on the EU’s climate law. In both cases, we witnessed intense lobbying to slow progress, with industry pressure to weaken REACH described as “the largest ever lobbying campaign in Europe.” The situation today seems widely similar in terms rolling back legislation. According to the EU Transparency Register, industry lobbying on REACH and PFAS has been very intense in recent years. However, there’s no evidence that regulation is the main cause of the chemical industry’s current problems — not to mention that substituting the most hazardous substances would provide a competitive advantage in future global markets. It would also help other industries, such as textiles, furniture and recycling, and several companies in these sectors have already called for a stronger REACH rather than a watered-down one. More crucially, though, what the Commission is indicating would cause harm. It would limit the authorization procedure for substances of very high concern — for example, by excluding those with widespread uses — which would result in more such substances remaining on the market and increasing risks. The Commission is also reversing its position on the 2020 Chemicals Strategy for Sustainability. This is particularly evident in its weakened approach to the rapid phaseout of substances with well-established generic risks, such as neurotoxicity, or are persistent in the environment (“forever chemicals”). Essentially, this new approach would reduce regulatory incentive to replace these substances. But we know from experience that voluntary approaches fail to deliver results, with the burden of regulation increasingly falling on national authorities — something that could lead to fragmentation of the internal market. Take the debate on PFAS, which are endocrine disruptors and possible carcinogens. Two of us writing this piece had blood tests done a few years ago, and as expected, the results showed widespread PFAS variants at levels typical of individuals of a similar age. Other potentially dangerous chemicals, such as polychlorinated alkanes, were also present. Commission President Ursula von der Leyen has promoted the “One Health approach” — which links human well-being to that of animals, plants and the wider environment. | Ronald Wittek/EFE via EPA These levels are remarkably high, and their presence is frightening because there are many gaps in research on the effects they might have. Moreover, it’s almost impossible for individuals to do anything about this, as we’re constantly exposed to these chemicals from so many different sources, including drinking water and food. This is why we need legislation and standards. So far, Commission President Ursula von der Leyen has promoted the “One Health approach” — which links human well-being to that of animals, plants and the wider environment — in a very positive way. But we also need an ambitious policy on hazardous substances that is guided by the precautionary principle. Instead, this potential weakening of chemicals legislation is yet another example of how “simplification” often means deregulation. It also makes the commitment to “stay the course on the Green Deal” in the new Commission’s policy guidelines increasingly meaningless. The Commission’s own estimates show that the cost of cleaning up PFAS contamination across the bloc will be between €5 billion and €100 billion per year — that’s just one example of the human and economic cost of inaction when it comes to hazardous substances. As such, Europe’s competitiveness and its citizens would truly benefit from stronger chemicals regulations. In order to achieve that, we must first close the information gap, while the EU accelerates its phaseout of the most harmful substances and ensures regulation is properly enforced in all member countries. To restore the ambition of the EU’s chemicals policy and actually protect both its people and the environment, we need urgent improvements to REACH. Only then can the EU deliver on its commitments to a toxic-free environment.

As countries jostle to win the artificial intelligence race, Google’s former CEO cautioned that AI could pose “extreme risks” if it falls into the wrong hands.  Tech billionaire Eric Schmidt told the BBC in an interview after the Paris AI summit that the booming technology could even be used by terrorists or “rogue states” to harm innocent people using weapons created with it.  “Think about North Korea, or Iran, or even Russia, who have some evil goal. This technology is fast enough for them to adopt that they could misuse it and do real harm,” Schmidt said, adding that it could even mean creating weapons to facilitate “a bad biological attack.” Schmidt noted the 9/11 attacks, in which Islamist terrorists hijacked planes and flew them into the World Trade Center in New York: “I always worry about the ‘Osama bin Laden’ scenario, where you have a really evil person who takes over some aspect of our modern life and uses it to harm innocent people.” The former Google chief called for government oversight of private tech companies developing AI models: “It’s really important that governments understand what we’re doing and keep their eye on us.” But Schmidt also warned that overregulation could hinder the pace of innovation, citing Europe as a bad example, echoing remarks he made earlier this week in Paris. “The AI revolution, which is the most important revolution in my opinion since electricity, is not going to be invented in Europe,” Schmidt said, accusing the EU of overregulating and driving away industry investment.

The French energy giant TotalEnergies welcomed a Mozambican government offer to allow an investigation into allegations of a massacre at its gas megaproject in northern Mozambique — and urged an inquiry be carried out “as soon as possible.” The call comes after the company’s Mozambican subsidiary Mozambique LNG said it had conducted its own “extensive research” and “not identified any information nor evidence that would corroborate the allegations of severe abuses and torture.” POLITICO reported in September that a Mozambican military unit operating out of TotalEnergies’ gas plant herded a group of between 180 and 250 people into containers at the energy giant’s gatehouse and kept them there for three months. Eleven survivors, plus two witnesses, testified that only 26 men survived the ordeal. POLITICO published a summary of a survey that identified 97 victims, and listed their causes of death as suffocation, being beaten to death, being shot, being “disappeared” — taken away and presumably executed — and missing, presumed dead after last being seen in the army’s custody. Relatives of the victims told POLITICO they had kept silent about the massacre out of fear of reprisals. Work on the site was halted in 2021 as Islamist militants swept through the region. TotalEnergies and the Mozambican authorities have denied all knowledge of the attack.  In a statement published Tuesday, Mozambique LNG noted that in October the Mozambican Ministry of Defence expressed a “total openness and willingness to accept a transparent and impartial investigation.” “Mozambique LNG has invited the authorities of Mozambique to carry out such an investigation as soon as possible,” the statement read. “Mozambique LNG will keep following up with the Mozambican authorities as only they can take the investigations further at this stage.”  On November 24, a joint investigation by the French newspaper Le Monde and the investigative news outlet Source Material published similar findings.  Two weeks ago, protesters from the Afungi peninsula where the gas plant is located began a blockade at Total’s front gates, holding up signs that read: “Total, we don’t want war. We want our rights.” Friends of the Earth are among a raft of campaigners and lawmakers across Europe calling for an independent United Nations investigation of the atrocity.  A spokesperson for the group in France said that by proposing that Mozambican authorities investigate the military’s human rights abusers, TotalEnergies “once again displays its collusion with the very same authorities whose role in and responsibility for these alleged atrocities are currently being called into question.”  “Our demand for a truly independent investigation is more needed and urgent than ever,” she said, adding that TotalEnergies’ “complete dismissal of the voices and pain of the victims … reflect very poorly on the company.”

LONDON — At London’s annual Frieze art fair, attendees trickle into a fake sauna. Inside, a screen shows a person dressed as a pink alien in fuchsia lingerie, gyrating in an abandoned swimming pool. Thumping techno accompanies the spectacle. An employee speaks over the deep bass to lament Britain’s new anti-money laundering art rules. “It puts off rich people buying art in London because it’s a pain in the backside,” the gallery employee, granted anonymity like others in this article to speak freely about a sensitive topic, said. London’s art market is the third largest in the world, accounting for 17 percent of global sales in 2023, and just behind China, which mostly relies on Hong Kong. But experts fear Britain’s fresh anti-money laundering (AML) clampdown will send the city tumbling down the list. Although they were introduced a few years ago, it’s only in the past year that the British government has started to clamp down aggressively, according to industry experts. The United Kingdom taxman now requires art market participants to register with them for money laundering purposes and follow strict new rules if they sell works worth more than €10,000 — or if they operate a customs warehouse storing works of art above that value. At the heart of the financial crime rules, inherited from the European Union after Brexit in 2020 but adapted to fit the U.K. art market in 2021, is an obligation for sellers to know who their buyers are, requiring proof and verification of identity. “Commercial and personal confidentiality are an important feature of the art market, and for good and valid reasons. However, these new rules are designed to limit the risk of confidentiality being abused in order to hide illicit activity,” say the 2023 guidelines provided by the British Art Market Federation and approved by the U.K.’s Treasury. Industry players, however, say this ruins not only the romance of art sales — but makes them a little awkward too. Frieze, held in London’s Regent’s Park, showcases some of the world’s most expensive art, and has guests willing to meet those price tags. The guest list boasts some of the world’s top A-list celebrities. Spotted on the day POLITICO attended in early October was former Prime Minister Rishi Sunak, alongside hordes of glamorous art world insiders.  London’s art market is the third largest in the world, accounting for 17 percent of global sales in 2023. | Henry Nicholls/Getty Images One gallerist at Frieze pointed out the particularly personal nature of the art world. “We have to ask the mates of our boss for their source of funds, ID, proof of address. It makes that personal connection completely different. It’s embarrassing — you don’t want to ask your friends for that.”  Meanwhile, the United States has no art market money laundering regulations, despite New York coming out on top in the global art market rankings. China and Hong Kong don’t include art in their own AML rules, according to an anti-money laundering expert. “Doing business in the U.K. is seen as quite complicated these days. And perception is really important in a global market, where there are alternatives that people can go to,” said Martin Wilson, chief general counsel at Phillips auction house and chairman of the British Art Market Federation.  “The London art market is entrepreneurial, which basically means artwork comes in, gets sold here, and then often leaves the country. For that to happen, you need a really smooth process. You need it to be as smooth as your competitors,” he said. TRAVELING ART But purchasing art and taking it out of the U.K. now involves a lot more red tape. At another stall at Frieze, a large canvas depicts a fluorescent meadow of flowers, just out of reach, hidden behind a wire fence. The painting, a guide tells a crowd of eager onlookers, is supposed to represent the American dream. The freedom and opportunity of that ethos is something one cannot put a price on. The painting is on sale for £85,000. Someone wanting to purchase that piece of art would now be asked where their money came from. In 2020, the Treasury’s national risk assessment for money laundering and terrorist finance determined the art market to be a “high risk” for money laundering. It joins cash, property and other financial services industries in the high-risk bracket.  “The size of the sector, combined with a previous lack of consistent regulation, means the global art market has been an attractive option for criminals to launder money,” the Treasury’s risk assessment said. As a high-risk threat, sellers must follow new rules including registering with tax authority HM Revenue & Customs (HMRC), writing a risk assessment to state how exposed they are to money laundering and carrying out customer due diligence before a transaction is concluded. “Art is moved easily across borders. That’s the big advantage of art: A house in central London is a good investment, but you can’t take it with you,” explains Angelika Hellwegger, legal director at law firm Rahman Ravelli.  Purchasing art and taking it out of the U.K. now involves a lot more red tape. | Henry Nicholls/Getty Images And although the rules began a few years ago, it’s this year that HMRC has picked up the pace on compliance. “As a company, we have had about three times as many clients receiving interventions from HMRC so far in 2024,” said the expert who works in art and anti-money laundering.  “It feels like the honeymoon period is over. The pace has been definitely accelerating, both in the number of galleries investigated and the strictness of implementation. Previously, they would ask: ‘Are you registered and were you doing the basics?’ And now their questions are much more aggressive and assertive.” Financial penalties have already been dished out. Under the new regulations, between 2021 and spring 2023, 31 art market participants were fined for failing to register with HMRC. Between spring and fall 2023, 32 fines were issued. Figures for 2024 have not been released but art market participants speak of an even greater intensity.  Penalties have been up to £13,000 so far and limited to registration failings. But all art anti-money laundering experts POLITICO spoke to expect that HMRC would begin fining galleries for money laundering faults imminently — a more serious charge.  Even though some clients may have nothing to hide, the threat of increased oversight — which could result in a fine or an investigation — puts some off. “The money laundering regulations are the bane of my life. People who want to buy art want it instantly, they don’t want to wait 22 days to have all their details checked out,” said another gallery employee at Frieze.  Maria O’Sullivan, a lawyer who specializes in compliance in the art industry, described the particularities of the art market which make regulation difficult: “The art world is based on relationships, more than any other business that’s got anti-money laundering regulation,” she said. “The source of wealth is easier to establish than the source of funds. The source of wealth you can nearly always find online, for example, if your client is a major shareholder in a company. Asking about the source of funds is more personal. Galleries don’t want to ask for that information.”  The rules, which were brought in under the former Conservative government, threaten to further injure an already wounded art sector, which suffered increased taxes and red tape in the wake of Britain’s departure from the EU. “Between Brexit and these new money laundering regulations, the London market’s been hit pretty hard,” said the art AML expert. And as new Labour Chancellor Rachel Reeves prepares her first budget, which is set to increase taxes on the wealthy’s assets, art lovers fear it could be another nail in the coffin for London as a top destination for high-end art. THE REAL OWNER Across the Atlantic, the U.S. lacks regulation, despite art being well documented as a vehicle for money laundering. As new Labour Chancellor Rachel Reeves prepares her first budge, art lovers fear it could be another nail in the coffin for London as a top destination for high-end art. | Leon Neal/Getty Images “The art industry currently operates under a veil of secrecy allowing art advisers to represent both sellers and buyers masking the identities of both parties, and as we found, the source of the funds.  This creates an environment ripe for laundering money and evading sanctions,” said Tom Caper, a U.S. senator from Delaware, speaking in 2020 upon the release of a report, which found that the art market was “the largest legal, unregulated market in the United States.” It’s exactly that veil of secrecy that the U.K.’s rules seek to prevent. Beneficial ownership rules, which concern who will ultimately own a piece of art, include any companies or trusts that may be used to purchase it. It’s a key tenet of the U.K.’s anti-money laundering plan. For the U.K.’s Treasury, this isn’t a simple glance at an ID card. Conducting customer due diligence means “exhausting all possible means to verify the identity of the customer, or the ultimate beneficial owner,” it said in its risk assessment. “Criminals can conceal the ultimate beneficial owner of art, as well as the source of funds used to purchase art. This can be achieved by using complex layers of U.K. and offshore companies and trusts, agents or intermediaries, with agents and intermediaries commonly used in the market,” the department adds. While experts argue that the use of offshore trusts to purchase art is a thing of the past, that doesn’t mean gallery employees are willing to find out. “We’re not supposed to be detectives,” the first employee quoted above said. “We take the information from the individual at face value. We wouldn’t go to the authorities of a jurisdiction to check who the beneficial owner of a trust is, for example.” Another argued it is “misguided” to require small businesses to perform due diligence that the financial services industry should do. “The regulations put the onus on the galleries to jump through certain hoops. I think it’s like using a sledgehammer to crack a nut. Banks are subject to money laundering checks, so due diligence is already performed,” they said. Wilson, meanwhile, defended the purpose of the regulations in trying to target dodgy dealings. But the British Art Market Federation chairman also questioned what he sees as a failure to distinguish between low- and high-risk transactions. He pointed out, for example, that a painting sold by a seaside gallery for £11,000 is viewed in the same way as a multimillion-dollar transaction in an auction. As a result, gallerists approach the rules with a “tick box” mentality, he warned. “What’s dangerous is that everyone who ticks those boxes believes they’ve eliminated the money laundering risk.”

BRUSSELS — A battle is brewing between Europe’s most powerful nations and the European Central Bank (ECB) over control of a new monetary tool that both sides fear could destabilize the continent’s banking system if mismanaged. At the heart of the conflict lies the digital euro — a virtual counterpart to euro coins and banknotes. For years, the ECB has been developing the instrument, envisaging a pan-European payment challenger with the ability to rival United States heavyweights like Visa and Mastercard. But as the project nears reality, a tug-of-war has erupted. Several European Union governments, including France and Germany, argue the ECB has gained too much control over one crucial aspect: how much digital currency citizens will be allowed to hold in “wallets” backed by the central bank. While it may seem like a dry technical issue, the stakes are enormous. Politicians and technocrats worry that if the limit is set too high, citizens could pull vast sums from traditional banks during a crisis, jeopardizing the stability of the entire banking system. Some are also concerned that any cap could infringe on personal financial freedom, stoking fears of a “Big Brother” state, according to one diplomat, who like others mentioned in this piece was granted anonymity to speak freely about a sensitive issue. The struggle is raising a fundamental question: Where does the central bank’s authority end and that of EU member countries begin? Thirty years after the ECB became the bloc’s chief monetary guardian, the clash is forcing a reassessment of the delicate balance between politics and central banking. For some, it’s a necessary pushback against the ECB’s overreach. But in Frankfurt, officials view it as political meddling in a realm that should be free of it. At its core, as one diplomat candidly put it, the dispute is less about technicalities and more about a “battle for power.” TECHNOCRACY VS. DEMOCRACY  Over 100 central banks have explored the idea of creating a national digital currency, spurred into action after Facebook’s ill-fated attempt to launch a global cryptocurrency, Libra, in 2019 sent shockwaves through the financial world.  While many of these efforts have since fizzled out, the ECB has remained resolute, championing the digital euro as a game-changing alternative to existing payment systems — one it hopes will loosen Europe’s dependence on dominant U.S. and non-EU payment services, which currently handle around 70 percent of EU payments.  But the central bank’s relentless advance has also spooked key member countries, which now view the project as dangerously technocratic. In Brussels, they’re leveraging their political influence in an attempt to curb the Bank’s power in ongoing negotiations over crucial aspects of the digital euro’s design. Under the draft regulation being worked on by lawmakers and governments, the ECB alone would decide how much digital currency citizens can hold in their wallets.   Frankfurt sees this as consistent with its vision of the digital euro as an expression of European monetary sovereignty. Moreover, officials familiar with the discussions point out that the central bank is the only authority permitted to adjust the money supply. However, at least nine countries disagree. Before the summer, a group that included Germany, France and the Netherlands argued that Frankfurt’s exclusive monetary competence should not be used as an excuse to “limit their decision-making power,” according to notes from a meeting shared with POLITICO. Under the draft regulation being worked on by lawmakers and governments, the ECB alone would decide how much digital currency citizens can hold in their wallets. | Kirill Kudryavtsev/AFP via Getty Images Diplomats further asserted “political supremacy” over the matter, explaining the digital euro was not just a monetary tool but a broader financial services matter that could reshape how Europeans handle everyday payments. The EU’s treaty gives the ECB very strong legal privileges on regulating money supply, but only qualified ones over banking supervision and payments. It also explicitly allows the Council of the EU and European Parliament to “lay down the measures necessary for the use of the euro as the single currency” — albeit “without prejudice to the powers of the European Central Bank.” FINANCIAL STABILITY, HANDED DOWN FROM ON HIGH Some member countries are also deeply concerned about how their citizens will receive a project devised by technocrats they suspect as being out of touch.  “You can create something in an ivory tower,” said one Brussels-based executive familiar with the discussions. “But will it actually be used in a market?”  Another area of concern is that allowing the ECB to set the limit would leave the institution with exclusive influence over a new tool that could have outsized effects on banking stability. The ECB argues that ensuring the soundness of banks is a core part of its supervisory responsibilities, given that such institutions are the main conduit through which it conducts its monetary policy. Many member countries, however, are not convinced. They argue it is the legislature that defines many of those supervisory responsibilities. They also don’t trust the ECB to cut slack with banks they feel it is their patriotic duty to protect.  But Frankfurt, along with the European Commission, has warned that allowing governments to set the limit could expose the independent central bank to political pressure, according to two people familiar with the discussions. Another European official worried that politicians might cave to popular demands to raise the limit, hurting banks. Ironically, many bankers also now side with the ECB, after it rolled out a number of features designed to reduce the threat to their businesses.  Stephen Cecchetti, a professor at the Brandeis International Business School, agreed that the digital euro was primarily a payment system infrastructure, but said the holding limit should be decided by the same people deciding if EU citizens can use €500 notes: the ECB’s Governing Council.  These kind of complaints suggest that “politicians don’t like the fact that the technocrats in their countries took this role,” he said, adding if they have an issue with that “they should complain to their central banks.” But member countries haven’t given up. One possible compromise is to let legislators set the parameters within which the ECB operates but to give the Bank the final say. Even so, that might not do much to resolve the broader worry — that a project intended to save Europe from the overarching economic dominance of U.S. tech now threatens to become a risk in its own right, should the ECB forge ahead without adequate democratic support.