Page 51 - Banking Finance May 2024

ARTICLE

criminals, allowing them to transfer large amounts of money Easy movement of Art Pieces: Art Pieces can be moved
hiding behind legitimate transactions with relative ease. easily from one place to another place even internationally
without much hassle. Where the hidden value of art piece
might be huge, the movement is not that much restricted.

In recent years, many countries have started applying
money-laundering rules to the art world. Because of this,
criminals are now turning to the internet and modern
technology to clean their illegal money.

2. NFTs (Non-Fungible Tokens):

NFTs (Non-Fungible Tokens), which are digital art pieces
whose ownership can be anonymous and whose values can
change rapidly, are becoming popular among criminals for
money laundering. They like NFTs because they don't need
to reveal their identity while dealing with someone.

Source : https://ww3.rics.org/

The process often begins with the purchase of an artwork
using funds acquired through illegal means. The inherent
value of the art piece is then subject to manipulation. For
example, it might be resold at an inflated price to an
accomplice, thereby converting the "dirty" money into
"clean" money. The revenue from this transaction is then
claimed as legitimate income.

At times, the artwork may not physically move between
parties, but officially, it appears as a bona fide sale, thus
enabling criminals to legitimize their illegitimate gains Source: https://www.gracworldforums.com/
through what seem to be legitimate art dealings.
The Financial Crimes Enforcement Network (FinCEN) points
Several factors make art auctions particularly susceptible to out that NFTs can be sent over the internet quickly and
money laundering: across countries without worrying about the distance. This
Non-Transparent Valuation: Art's worth is inherently makes it easy for criminals to use digital art to hide and move
subjective, leading to significant discrepancies in valuation their illegal money without the usual costs or risks of moving
that can be exploited for financial manipulation. physical items.

Privacy Concerns: The privacy sought by high-end art A typical way to launder money is by first buying an NFT
auction participants can be leveraged by criminals to conduct cheaply with one digital wallet, and then selling it to
significant transactions unnoticed. themselves at a higher price with a different wallet, without
needing to prove their identity. Finally, the NFT is sold to
Cross-Border Transactions: The frequent international someone who doesn't know it was part of a scheme, turning
buying and selling of art facilitate the cross-border their dirty money into clean money through what looks like
movement of money, camouflaged as lawful exchanges. a normal sale.

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