Picture a painting bought for $1 million and sold a year later for $5 million to a buyer hidden behind a shell company. Nobody can prove what the painting is really worth, which is what makes the trade so useful for moving money.
FATF says the art market's lack of transparency, high prices and reliance on intermediaries make it vulnerable to money laundering and terrorist financing, while noting that most people in the market are not involved in crime.[ref] When the price is a matter of opinion and the owner sits behind layers of companies, it becomes hard to see whose money is changing hands.
How the market gets abused:
🖼️ Private high-value sales - Many deals go through dealers, advisers or auction houses with little visibility. When buyer and seller are shielded, the real owner is hard to trace.
🏦 Prices nobody can check - Listed shares have a market price. A painting or a rare coin does not, so a purchase at $1 million and a resale at $5 million may raise few questions. The price itself becomes a way to move value from one party to another.[ref]
🌍 Easy to move, easy to park - Valuable pieces can cross borders physically, or sit for years in freeports without formally entering a country's customs territory.
🧾 Shell companies and nominees - Purchases made through offshore companies, trusts or nominees hide the source of the money and the real owner. A US Senate investigation found that sanctioned individuals bought high-value art through shell companies and intermediaries.[ref]
🎁 Inflated appraisals and donations - Overvalued pieces donated to charity or sold between related parties can cut taxes and give questionable money an air of legitimacy.
Some rules are catching up. The EU's Fifth Anti-Money Laundering Directive extended AML obligations to art dealers, galleries and auction houses for transactions of EUR 10,000 or more, including art stored in freeports.[ref] In the United States, the Anti-Money Laundering Act of 2020 brought antiquities dealers under the Bank Secrecy Act and ordered a study of the wider art market.[ref]
Why these markets appeal to launderers:
📖 Discretion as a selling point - Privacy is often marketed as part of the service.
📦 A store of value - Tangible pieces are seen as stable wealth that holds its value.
🤝 Borrowed reputation - A prestigious gallery or auction house can lower the scrutiny a deal receives.
What to do:
For financial institutions:
- Apply enhanced due diligence to high-value art and collectibles transactions.
- Look past intermediaries to the source of wealth and the beneficial owner.
- Watch for large price gaps between purchase and resale, and for pieces that change hands quickly.
For dealers, galleries and marketplaces:
- Identify buyers, sellers and beneficial owners, and keep records of each sale.
- Make private sales more transparent, and ask where the money comes from.
- Follow FATF's risk-based approach even where the law does not yet require it.