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Treasury study 2022: why and how the high-value art market is vulnerable to money laundering

We summarised the key findings of a study on money laundering and terrorist financing by the US Department of the Treasury, which was mandated by Congress.

Napier AI
March 21, 2022

The Study of the Facilitation of Money Laundering and Terror Financing Through the Trade in Works of Art by the US Department of the Treasury was mandated by Congress in the Anti-Money Laundering Act of 2020.

The study set out to assess the extent to which the high-value art market attracts illicit finance, and whether certain sectors of the market are particularly vulnerable to abuse by criminal actors. Here we will set out the most significant takeaways from the study for tackling financial crime.

Setting the scene: the state of the art market

  • Approximately 10 percent of sales by auction houses internationally in 2020 had values over $50,000, but those sales accounted for over 85 percent of the total sales value
  • In 2020, global sales of art were valued at an estimated $50 billion, reflecting a modest pandemic hit with sales reaching approximately $67 billion worldwide just a few years earlier
  • The global art market has grown rapidly over the last 30 years. For example, between 1991 and 2004, less than 150 Western works were sold in Hong Kong, with a total value of approximately $12 million. In 2018 alone, nearly 500 works by Western artists were sold in the same city for a total of more than $130 million

Why is the art market vulnerable to financial crime?

As the high-value art market has grown into an attractive financial and investment asset, it has also become vulnerable to financial crime:

  • Art has a relative high value compared to other retail goods and commodities, allowing more money to be laundered in a single transaction.
  • The high-value art market is historically opaque. For example, third-party intermediaries such as art dealers, shell companies and interior designers may be used to purchase, sell, and hold artwork to hide a client’s identity and create layers of anonymity. With little transparency, art can effectively become an “invisible asset” which is not held by a financial institution and has no related transactions.
  • Art pricing is highly subjective, easily manipulated, and unpredictable. For example, prices can be artificially raised or lowered using straw bids through shell companies or other third-party entities.
  • Art is highly portable and frequently transported, making it an attractive way to transfer money internationally. It is not only difficult for law enforcement to monitor the movement of artwork, but it is also difficult for border authorities to identify misdeclared high-value art because they lack the specialist expertise required to do so.

Which areas of the art market are most vulnerable to money laundering?

The study identifies several art market participants with money laundering vulnerabilities. The most notable include:

Auction houses

Auction houses can be vulnerable to money laundering because they generally operate in the secondary market. They therefore do not necessarily have to consider artist reputations and, in comparison to sales that are priced pre-transaction, they have the financial incentive to sell at a higher price.

Online marketplaces

Online sales can make it difficult for dealers, galleries, and auction houses to verify identities. While video calls can be useful for due diligence, they are resource intensive.


Museums can be exposed to money laundering risk if they buy or sell a piece of art independently.

Third-party intermediaries

Third-party intermediaries like interior designers and independent art advisors can provide anonymity to those seeking to launder funds by purchasing high-value art on behalf of illicit actors, effectively concealing their identity.

Art finance

Art finance entities allow owners to use their art as collateral for loans, without the legal obligation to collect any information on the ultimate owner or source of funds. This can enable money launderers to purchase artwork using illicitly gained funds and use it to quickly, easily, and privately unlock seemingly legitimate finance. Transaction layering can effectively hide the initial source of funds.

Free trade zones and art storage facilities

Free trade zones and art storage facilities can be used for cross-border value transfer when these institutions are abused or best practices are not followed.

Examples of money laundering through the high-value art market

Art can be used to launder money in the following ways:

1. As a medium of exchange or value transfer

By accepting art as a form of payment, illicitly generated or acquired funds can be integrated into the financial system.

2. To hide illicit proceeds

Art assets can be hard to discover and confiscate. They therefore offer an attractive and effective, albeit slow, way of laundering funds. Criminals are able to exploit the vulnerabilities of the art market to purchase high-value art and hold it for several years, before eventually selling it to cash in on the gains.

3. As collateral to obscure illicit proceeds

As described under art finance above, the use of art as collateral in asset-based lending can disguise the original source of funds.

Regulatory landscape and considerations

Unlike in the EU and the UK, participants in the US art market are not subject to AML/CFT obligations. Instead, they are subject to certain general reporting requirements.

The study concluded that because a significant portion of money laundering in the art market is likely conducted with the help of complicit professionals, applying AML/CFT requirements such as customer identification and suspicious activity reporting obligations to certain art market participants would provide authorities with additional information and pathways to address the money laundering vulnerabilities outlined by the study.

Moreover, the study concluded that boutique art lending firms, auction houses with lending programs, and other art market participants that provide similar financial services should be subject to AML/CFT requirements.

With that said, before turning its focus to the high-value art market, the Treasury is urged to first complete its ongoing work to close the outstanding money laundering and terrorist financing gaps relating to beneficial ownership, real estate, and potentially investment advisers and non-financial gatekeepers.

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