Recent Incidents of Money Laundering in the Art World

Art Sales Vault

June 14, 2022

“Art and antiquities have special value and meaning that cannot readily be quantified. As a result they have long been the subject of theft and deception, as well as a means to launder illicit proceeds. Art…should not be allowed to become a conduit for crime.”

— Preet Bharara, June 18, 2015, reparation ceremony for Jean-Michel Basquiat’s Hannibal[1]

In recent times works of art have played a leading role in hiding illicit source of funds, cleaning the proceeds of a crime. Art is commonly portable and it lives in a rarefied place of cultural significance. It is often of uncertain value and purchasers have been known to use intermediaries to ensure anonymity. The opaque nature of the world art market has made it an attractive and effective mechanism for masking criminal activity.

Mexico, in the 2010s was a mecca for artists and art sales. Traffic in art and antiquities expanded so quickly that the Mexican government passed laws requiring more information about buyers and capped the amount of cash that could be used to purchase a single work.[2] Following its lead, the European Union brought art market participants (“AMPs”)[3] under the Fifth Anti-Money Laundering Directive (“5ALMD”) in 2018. Since June 2021, AMPs doing business in the UK are obligated to register with their regulatory body, Her Majesty’s Revenue and Customs (“HMRC”) and comply with similar anti-money laundering regulatins. Most recently the US Treasury issued a study on controlling money laundering suggesting law enforcement agencies have become interested in the possibility that money laundering is hidden in the lucrative financial transactions of the art world and supported upcoming regulation.

The accepted anonymity of buyers and sellers, the use of intermediaries, fronting for the real buyers, issues surrounding the legitimacy of a work’s provenance, including forgeries and fake histories of previous sales, and the acceptance of ‘handshake transactions’ has created an opaque arena where illicit transactions may unknowingly or knowingly occur. Further, the uptick of art works being purchased with cryptocurrency complicates and obscures the involved parties’ identities and the source of their funds, and added a new avenue for money laundering practices.

Recent Incidents of Money Laundering in the Art Market

Helly Nahmad, 2013

As a prominent member of a family of international art dealers, Helly Nahmad, had ready access to the fabulously wealthy. Helly Nahmad Gallery was (and still is) a go-to gallery for blue-chip art purchases. Helly organized and ran a high-stakes illegal sportsbook gambling operation and found it convenient to hide the operation’s profits in works of art. The transaction of Raoul Dufy’s Carnaval à Nice was investigated by US law enforcement agencies and Helly was ordered by the Treasury to forfeit $6.4 million and his right, title and interest to Carnival.  He was also sentenced to 366 days, of which he served five months in a prison and the remainder at a half-way house.[4]

Peruvian Church Theft, 2014

In May and July of 2008, nine works by Miguel Cabrera, an 18th-century Peruvian painter, were stolen from a church in Lima.[5] By October , a Chilean antiques dealer had consigned one of the works with a New York auction house, and a resident of Lima had consigned the other eight works with an Iowa auction house. Both parties denied knowledge that the artworks were stolen and cooperated with the a justice department’s Money Laundering and Asset Forfeiture Unit who worked in collaboration with the Peruvian embassy to return the works to their original home.[6]

Edemar Cid Ferreia, 2015

Upon being convicted of crimes against the national financial system and money laundering in Brazil, Edemar Cid Ferreia, moved a multitude of high-value artworks out of Brazil, and brought them to New York by way of the Netherlands, in an attempt to prevent their confiscation based on the Brazilian court finding that the acquisition was secured with illicit funds. The works smuggled out of Brazil included Modern Painting with Yellow Interweave by Roy Lichtenstein (the “Lichtenstein”), Figures dans une structure by Joaquin Torres-Garcia (the “Torres-Garcia”), and Composition abstraite by Serge Poliakoff (the “Poliakoff”), Hannibal by Jean-Michel Basquiat (the “Basquiat”), as well as a Roman Togatus statue.[7] A major portion of of Ferreia’s collection was subject to confiscation. It was valued as between $20 million to $30 million.[8]

Matthew Green and Beaufort Securities, 2018

An UK based art dealer, Matthew Green, got involved in an illegal arrangement with Beaufort Securities, an investment management firm, to clean funds derived from the fraudulent sale of securities and illegal stock market manipulation.[9] Beaufort Securities explained that it chose Green to launder the proceeds because he was an expert in “the only market that is unregulated.”[10] Green was to sell high-value works, including most notably Pablo Picasso’s Personnages, conceal the ultimate buyer’s information, and store the work in a private location. Then according to the plan he was to purchase the work back from the individual and retain5-10% of the laundered money as payment for his services.[11] Although it is unclear based on Personnages’ provenance who actually owned the painting (Green himself, the gallery, or another individual), the work was at the time on loan to a Danish museum. Should the scheme have ultimately panned out, the loan would have provided concealment in plain sight for the transfer in ownership and money laundering. Green was charged with six counts of attempted money laundering by the United States and his UK gallery was declared insolvent by regulators.

Source Citations

  1. Manhattan US Attorney Announces Return to Brazil of Two Masterpieces Linked to Bank Fraud, US Attorney’s Office Southern District of New York, June 18, 2015.
  2. After these laws were passed sales plummeted by 70% in less than a year; Charlie Pogacar, How Money Laundering Works in the Art WorldApril 28, 2022.
  3. Under the United Kingdom regulations, Art Market Participants are defined as: ‘a firm or sole practitioner who: (a) by way of business trades in, or acts as an intermediary in the sale or purchase of, works of art and the value of the transaction, or a series of linked transactions, amounts to 10,000 euros or more; or (b)is the operator of a freeport when it, or any other firm or sole practitioner, by way of business stores works of art in the freeport and the value of the works of art so stored for a person, or a series of linked persons, amounts to 10,000 euros or more;’ For a visual representation of who this applies to check out ASV’s June 9, 2022 Roundtable Terrace Talk here.
  4. Rachel Corbett, Breaking (Out): Art Dealer Helly Nahmad Released Early From Prison, The Observer, December 13, 2014.
  5. Adam Klasfeld, Stolen 18th Century Art Returned to PeruCourthouse News, September 5, 2014.
  6. Art Daily, US Attorney and FBI Announce Repatriation of Nine Stolen Miguel Cabrera Paintingslast visited June 14, 2022.
  7. Manhattan US Attorney Announces Return to Brazil of Two Masterpieces Linked to Bank Fraud
  8. Eileen Kinsella, Bad Banker’s $8 Million Basquiat Smuggled with Shipping Invoice for $100 Returns HomeartnetJune 19, 2015.
  9. Tom Mashberg, The Art of Money Laundering, International Monetary Fund, September 2019.
  10. Eileen Kinsella, UK Art Dealer Matther Green Charged in a $9 Million Picasso Money-Laundering Scheme, artnet, March 6, 2018.
  11. Mashberg.

“The opaque nature of the world art market has made it an attractive and effective mechanism for masking criminal activity.”