Money laundering through the art market
The use of artwork transactions to give illicit funds a legitimate appearance, which EU law has fought since 2020 by subjecting art dealers to anti-money laundering due diligence obligations.
The art market offers favorable conditions for money laundering: subjective prices that are hard to challenge, private transactions, possible cash payments, shell companies, freeport storage and international movement. A launderer can buy a work with illicit funds and then resell it, obtaining sale proceeds that look legitimate, or overvalue a transaction between accomplices. The EU's Fifth Anti-Money Laundering Directive subjected art dealers, intermediaries and freeport operators to due diligence obligations once a transaction reaches 10,000 euros: identifying the customer and beneficial owner, examining the source of funds, reporting suspicions. For insurers, these obligations provide useful information about the insured and the source of funds, and a due diligence failure at an insured dealer can lead to seizures and litigation affecting the covered works.
Directive (EU) 2018/843, known as the Fifth Anti-Money Laundering Directive, had to be transposed by January 10, 2020: since then, a French gallery selling a canvas for 50,000 euros must identify the buyer and the beneficial owner of the paying company.
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