Artworks, the Perfect Money Laundering Tool

Do you know about artworks such as the painting of the Mona Lisa and Vincent van Gogh's Starry Night? Their prices are quite astonishing. For example, the Mona Lisa has been appraised at around 830 million dollars.

However, behind the beauty of a piece of art lies an unseen story. The world of art is one filled with beauty, but it also harbours many dark secrets.

One of the most phenomenal aspects is that art can be used as a tool for money laundering. Unlike houses or cars, paintings do not possess intrinsic value.

They cannot be sold based solely on the cost of materials, such as the price of the canvas or paint, marked up by a certain percentage or doubled. The value of a piece of art is not determined in the same way. The price of an artwork can skyrocket simply due to the artist's name or even market trends, and this is where the loophole emerges.

This is a perfect canvas for criminals, making the art market very opaque. The identities of buyers and sellers are often kept secret, and transactions are conducted anonymously and privately. Ownership documents can change hands without any digital trace. One of the most notorious cases involves Yves Bouvier, an art dealer from Switzerland, and Dmitry Rybolovlev, a Russian billionaire who is also the president of AS Monaco football club.

Bouvier assisted Rybolovlev in purchasing over 38 artworks for a total price of nearly 2 billion dollars. For instance, he bought works from Picasso, Modigliani, and Leonardo da Vinci. However, Rybolovlev later accused Bouvier of unfairly inflating the prices of the paintings for personal profit. One example is a painting by Modigliani that Bouvier sold for 118 million dollars, while he had purchased it for only 3 million dollars.

In my opinion, this is a common practice in business, as selling inherently involves seeking profit. I used to be a real estate agent and often marked up property prices, which was permitted by the property owners. However, this case reveals not just a typical business dispute but also dark practices within the art world, such as price markups, the use of offshore accounts, and art transfers to conceal money derived from crime.

So, how can art serve as a perfect vehicle for money laundering? Imagine someone with money obtained from criminal activities, such as drug trafficking or tax evasion, purchasing an expensive artwork at a gallery or auction house. This transaction is conducted in cash or through accounts in countries with weak financial regulations, such as the Cayman Islands or Panama. The artwork can then be resold to another person, either through auction or private transaction, maintaining or even increasing its value. This way, the proceeds from crime are transformed into seemingly legitimate income.

Moreover, artworks are often used to transfer wealth across borders due to their flexible size and subjective valuation. Art can be hidden or sent abroad without much oversight. For example, if you wanted to send 10 billion in cash abroad, you would likely raise suspicions and face issues at immigration. Transferring such a large amount internationally is also complicated. Thus, art can be used to carry high-value assets to another country.

Currently, there are easier and legal methods, such as cryptocurrency, like Bitcoin, which is legal. This is why many people dislike cryptocurrency. One reason is that it can undermine the art market. The high value of art partly stems from its use as a tool for transferring wealth across borders. However, with the rise of cryptocurrency, interest in the art market is likely to decline, and art prices will also drop. This is why there is significant opposition to cryptocurrency.

Additionally, art owners sometimes use shell companies or art brokers to conceal their identities, making the flow of money nearly impossible to trace. In the art world, where values cannot be easily appraised, intrinsic value lies not only in beauty but also, unfortunately, in the opportunity to hide the truth.

Another case occurred in 2016 when the FBI seized artworks worth millions of dollars belonging to Jho Low, an international fugitive involved in the 1MDB scandal. There is a documentary about this on Netflix that I have watched.

Jho Low used funds stolen from the Malaysian people to purchase artworks, such as "Das Heads" by Jean-Michel Basquiat, valued at 35 million dollars, or hundreds of billions, around 500 million. The purchase of these artworks was part of Jho's efforts to launder money from corruption in a nearly undetectable manner. The stolen money was transformed into assets that could be stored or sold at any time without leaving a direct trace to the source of the funds.

The art market is one of the last places where large transactions can still occur with minimal oversight and without stringent regulations. Art serves as a perfect medium for concealing the flow of illicit money. Therefore, stricter regulations are indeed necessary. Some countries have begun implementing new rules, such as requiring the reporting of high-value art transactions and identifying buyers and sellers. However, the road ahead is still long. Without transparency, the art world will continue to be fertile ground for criminals.

Picasso once said, 'Art washes away from the soul the dust of everyday life.' According to him, art is a cleanser of our souls. However, in the wrong hands, art can become a weapon for deception and crime. The question is, will we continue to allow the beauty of art to be used to cover up wrongdoing?