Money Laundering in the Art World – A Comprehensive Guide to Safeguard Your Assets



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  • Anti-Money-Laundering


    We all have heard of anti-money laundering…

    What is AML?

    Very simply, AML are the laws and regulations enforced to prevent criminals from concealing the identity of their illegally obtained funds and disguising it as legitimate income.

    Governments and Banks around the world are closely monitoring all financial transactions and determining the source of funds in order to comply with AML requirements.

    Now, what is the connection between AML and the art world?!

    Read on…

    Art world 

    When we talk about the art world, we are talking about the rich people who invest in expensive paintings and pieces of art and purchase these from auctions and art galleries.

    So, where does the AML angle come into the art world?…

    The wealthy people who purchase these paintings are very sensitive to their confidentiality and secrecy.

    In many instances, they do not wish to disclose their identity or even sources of their wealth. 

    This is where the dealings in the art world start crossing the paths of AML inspections…

    Some high-value art sales

    Let us take a look at some of the expensive paintings that have been sold across the world, to get an idea about the values we are talking about…

    A Botticelli painting was auctioned by Sotheby’s this year (2021) in New York for a whopping $ 92 million! Who was the purchaser?

    It was “assumed” that the buyer was a Russian oligarch since the bidding was done by a person who is an adviser to wealthy Russians!

    In fact, in order to ensure they remain anonymous, many wealthy art collectors use the telephone bidding process where their nationality remains concealed or unknown, thereby protecting their identity.

    While this secrecy helps auction houses make their big sales to ultra-rich clients who look forward to such steps to conceal their privacy, there have been many instances of fugitives using high-value paintings to launder their ill-gotten funds.

    Disgraced Brazilian financier Edemar Cid Ferreira bought an $ 8 million Jean-Michel Basquiat painting and shipped it to a New York storage with a $100 label!

    A Malaysian fugitive Jho Low, who looted from the country’s 1MDB sovereign wealth fund, spent $137 million on paintings!

    Actions taken by Regulators 

    Given the scope of using investments in high-value paintings to conceal the source of illegal funds, regulators around the world are getting their act together to tighten their scrutiny.

    Their argument is that this culture of secrecy in the art world is actually being exploited by criminals to launder their money and make it “clean” or “white”.

    New AML rules require art and antique dealers in Britain and the European Union to record the actual beneficiaries of their sales.

    The US Congress has also passed similar legislation that should be in place by the year 2022.

    In summary 

    While art dealers may not be knowingly supporting AML transactions by criminals, their line of business and easily portable paintings do make them an easy target. High-end dealers could embrace technology,

    for example, block-chain to continue assuring privacy whilst also keeping a traceable log of purchases.

    It would indeed be a culture shift in the art industry and time will tell how the future of art sales evolves…

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