You’re probably aware of how expensive the art world can be. More than once you’ve seen on the news how seemingly rudimentary paintings are sold for more money than you hope to make in your life – the one above, Onement VI by Barnett Newman, reached the hefty price tag of 43.8 million USD at a Sotheby’s auction in 2013. And that’s not even the highest amount paid in recent times for a piece of art. However, one might wonder, is it really worth it? I mean, when there are so many good alternatives to spend your money on, why choose a pretentious canvas that will, at best, give you bragging rights when chatting with your friends.
How To Get Away with Laundering
Let’s start small. You’ve just acquired 2 million EUR through questionable means and you’re looking for convenient ways to hide that from authorities. After all, they might not be very happy about your illicit business. After a bit of research, you settle on the money laundering method closest to your heart – art.
First, you need an artist. Let’s say a relative or acquaintance of yours is trying to make a name for themselves in the world of fine art, though they have had little success up to this point. Desperate as they might be, you strike a deal – you buy some of their works at a relatively low price and sell them to one of your shell companies or a ghost entity that will account for the dirty money. For a little bit of extra security, it would be wise to sell the art pieces to multiple enterprises, so as to avoid unwanted attention. Accordingly, you sell five paintings for around 400,000 EUR each. As the paintings carry the signature of the artist, such inflated transactions will give them a boost in notoriety. Making use of their newly elevated status, they will probably start selling their paintings to private collectors at even higher margins.
By now, your initial 2 million EUR has been laundered and the five art pieces are sitting comfortably in a deposit somewhere. But why stop here when you can make a profit? The initial value of the five paintings that you’ve bought a couple of years ago has skyrocketed – due to ongoing trends, personal taste or whatever weird force binds the world of fine art together. Your shell companies can finally sell the artworks at high-level actions. As their appraisal value has risen, the paintings are bought for a total of 3 million EUR. That amount goes back to you and, best of all, it’s 100% clean. You’re happy, the artist is happy, the buyers are happy, everyone profits – well, maybe except for the government or whoever you tricked in order to get all that dirty money.
There’s also the option to launder money through already established – and probably dead – artists. The process is quite similar: you get the dirty money, funnel it through shell corporations, buy the painting, stock it somewhere safe, then, ultimately, sell it. Yet, there are two major differences. Firstly, as the artwork is already quite valuable, your profit margin will be significantly smaller. You’re just going to end up with a similar amount of cleaner money. Secondly, due to the problem of already existing notoriety, the process of selling or moving the painting is likely to draw unwanted attention. For this reason, a lot of paintings are smuggled after being acquired, to avoid taxes or other kinds of governmental intervention.
The Bigger Picture
Why choose art at all? What makes this industry so attractive when there are so many alternative vehicles for money laundering – I’m looking at you, real estate market. When you take a look at how transactions take place in the art world, there are some key factors which make it quite appealing with regard to concealing dirty money.
One of them is anonymity. In the absence of stringent regulation, the buyers and sellers of art can remain completely anonymous during the entire trade. For instance, the white dash painting at the beginning of the article, Onement VI, was acquired by an anonymous buyer. Whilst not necessarily the case for this painting, this allows individuals to legally conceal their identity, thus hiding whatever questionable trades they are making from the prying eyes of the authorities. Furthermore, there’s the matter of mobility. Paintings are relatively small objects – albeit there are exceptions – which make them really easy to move around without drawing too much attention. Thus, illegally smuggling and storing these objects becomes extremely convenient. Last but not least, there’s the matter of price. The art industry is highly volatile, as it is at the mercy of individual taste. This, in turn, allows the trading parties to easily manipulate prices, in accordance with their own needs. Do you need to launder 1 million EUR? Oh, suddenly this painting by this previously unknown artist is appraised at this exact amount. All these factors converge into making the sale of paintings an ideal instrument for laundering money.
All things considered, the situation might not be as dire as I paint it to be. Nowadays, regulators are getting better and better at closing the loopholes which previously allowed for illicit art trading. As such, the case for laundering money through art might be overstated and its occurrences rare. However, whenever you’ll see a simple painting sold for an obscene sum of money on the news, you might wonder: did this person really like the painting or just wanted to get away with some dirty cash?