It’s arts month here in Dallas, which means that art collectors and investors from all over the world are in town.
Although art collectors will pay hefty sums for aesthetic reasons, high art prices and secretive auction sales have also become a prime money laundering vehicle.
Money laundering in the high-end art world happens in two primary ways:
Sales: There was more than $63.8 billion worth of art sold in 2015. It appears that even for high-value sales, auction houses sometimes don’t know the true identity of an art work’s owner. This makes buying and selling art an easier way to launder questionable funds than real estate or other means.
Loans: Anonymous sales of art aren’t the only way that money laundering happens in the art world. Some auction houses also accept artworks as collateral for securing loans without looking closely into how the art was originally acquired. Sometimes these loans are characterized as “advances on consignments” to further obscure the true nature of the underlying transaction.
It is unclear whether regulation will solve the problem however, or just push the auction industry into private hands or overseas markets.
“Has the Art Market Become an Unwitting Partner in Crime?” Graham Bowley and William K. Rashbaum, The New York Times.
“An Auction House Learns the Art of Shadow Banking,” Katya Kazakina, Bloomberg.
Photo: Igor Miske