The earliest progeny of humanity, is crime, and therefore, the inception of dirty money coincided, with that of money itself. From earliest traders, hiding their riches from tax officials and pirates attempting to sell their loot, to modern day multi-billionaires attempting to transfer riches, to tax havens and mafia bosses attempting to make gross purchases, in the legal market with their blood-stained riches, the conception remains unchanged. What has, made terrible strides is not the morality of men, rather the cunning in hiding their immorality.
One of the most elaborate money laundering schemes, involves surprisingly, the fine arts market. That is, of course with good reason. Anonymity from both the consumer’s and seller’s end (often both being under same ownership), is one of the most important reasons for the art world becoming target to money laundering. Since, the conversion of dirty money into tradeable assets is the most vulnerable point in the process for the launderer. Coupled with that, the fact that the pricing of art is subjective and thereby manipulatable and the general prices of art usually are at a rise makes them excellent for the intended purpose. Furthermore, the relative superior portability of paintings, compared to voluminous cash and heavy metals; as well as minimal paperwork compared to real estate add to this long list of advantages. Externally, unlike the financial markets that are highly regulated to prevent illicit transactions and terrorist funding, the fine art world is relatively less regulated. This is perhaps its biggest advantage.
Pieces of art such as fine paintings, sculptures, photographs among others can be purchased from museums and art galleries (usually in auctions), and then transported to private or high security warehouses near sea or air ports (usually ones exempt from customs duty- free ports) and bunkers in tax havens. Ones transported here, these pieces can be stored safely without fear of damage for years on and in essence disappear from and regulator’s eyes. Since technically in this stage these pieces are considered in-transit, no taxes are levied on them. Therefore, establishing that art is an excellent way to move money around the globe without garnering attention of the regulators or store money beneath the radar, guaranteeing a steady cash flow if ever required by the super wealthy.
Prices in this market are highly speculative and manipulative. For instance, a collection of 5 pieces can be bought for a million US dollars privately, and then a single piece can be put up for a highly publicised auction where in the owner himself can bid for the one art piece through shell companies at twenty million US dollars. While no real transaction actually occurred, through historical sales figures, the entire collection is now worth a hundred million US dollars. Thereby any donations hereafter made would be tax deductible at whopping twenty million US dollars, each painting! Furthermore, the paintings can now be mortgaged for credit at this artificially inflated rate.
The above mentioned are usual tactics of the corrupt around the world, to steal on taxes and make illicit donations to questionable organisations or transfer value for illicit transactions.
However, these pieces can be used to straight up launder dirty money, held in tax havens to utilise in major legal economies. Art pieces can be bought and put to auction in the legal market. Wherein, the owner himself may bid for the piece through shell companies holding the dirty money at significantly higher prices. Ones the purchase is made, the shell company transfers the cash (with questionable origin) to the owner’s personal accounts (with now a clear origin story). Ready to be used, to buy a fabulous yacht or an island.
The beautiful market of fine arts is constituted not majorly of connoisseurs, willing to spend outrageously for art pieces. Rather it is dwelled by the super wealthy and the corrupt who use these pieces of beauty for corrupt money transfers and illicit money laundering. Consider them, as crypto for the wealthiest.
The only thing that precedes crime is human inception, and financial crime is the most lucrative of them all. From stealing on taxes, to straight up converting blood-money to legal cash.
Within one of the most innovative schemes in this genre of crime, lies the colourful world of fine arts. Commonly, fine art is used by the super wealthy to store value under the radar of authorities, transfer money beneath regulations, steal on taxes and for manipulation of value.
Samiran Saha is a student pursuing Economics from Jamia Millia Islamia.
Edited by: Varda Ahmad
The opinions expressed in this publication are those of the author. They do not purport to reflect the opinions or views of The Jamia Review or its members.