Friday, March 1, 2024

Fine Art Money Laundering?

Could you launder money through fine art auction sales?  Maybe.

On the Internet you see people confidently saying things like such-and-such is "just a money laundering scheme" and everyone seems to nod in agreement.  But is it really the case?  And if so, how would it work?  And what other things are used to launder money?

If you have a lot of ill-gotten money, for example, that is not recorded on the books (e.g., taxable income) or you want to transfer a lot of money to some shady people overseas to buy guns, drugs, or human beings, well, you have a problem.  Transactions going through the regular banking system are monitored and create a paper trail and get thus end up getting you in trouble with the law.

But suppose you "sold" something to someone for far more than it was worth?  Say, for example, you have a painting you bought for $250,000 and you decide to "auction" it.  At auction, you have a number of shill bidders and the real buyer - just to make it look legit - and the painting sells for an astounding $2M.  The buyer sends you the money, which is now legitimate income to you, and he gets an overpriced painting, which he can then "sell" to some other person in a similar sham transaction.

Sounds simple, but I wonder how that would work.  After all, Sotheby's or any other legitimate auction house isn't going to accept suitcases full of cash as payment for a priceless painting - or would they?  The Brits do seem to stay afloat by handling money for the Saudis and Russians.  Every Oligarch has a mansion in London.  Probably just a coincidence.

This site claims that fine art can be used to launder money, although frankly, I think it is a convoluted way to launder cash.  Of course, today, we have crypto-currencies and "NFTs" which some say (including myself) their sole purpose is in money laundering.  Bitcoin is useful only for transferring money across national boundaries to buy illegal things without leaving (too much) of a paper trail.  NFTs are just "fine art" without the "fine" or the "art" - just the idea of an art object.

Of course, there are more mundane ways to launder cash or transfer money.  For example, if you found a million dollars, it would be hard to spend it, unless you owned a cash business like a convenience store or a coin-op car wash or laundromat.  You just declare some extra "sales" which is easy to do, particularly in something like a car wash or laundromat.  Forensic accountants, however, could trip you up.  For example, if your convenience store books show you "sold" 500 cases of beer, but you only ordered 200, the government is going to be curious as to where the other 300 cases came from.  You'd have the same problem selling untaxed cigarettes or beer that "fell off the truck" so to speak.

I suppose a laundromat or car wash would be safer, but I presume they could even examine your water bills and determine how many loads of laundry you sold or how many car washes -  and if that didn't jibe with the income you are showing, they might claim you are laundering money.  But it is a hard case to prove and quite frankly, the IRS only cares that you paid taxes on the laundered money, which was your goal all along, in order to move illegal cash into the "legitimate" banking system.

Today, of course, many "cash" businesses accept credit cards, making these kind of schemes even harder to pull off.  Cash could disappear entirely in the next few decades.  Already, the vast majority of $100 US bills in circulation are overseas, used for illegal purposes, for the most part.  No wonder our government can get away with printing so much money - most of it is never repatriated!

Of course, proponents of crypto and whatnot argue that "freedom" from banking system regulations is the entire point of the game.  But what they are really saying is they want to do illegal shit and get away with it.  By the way, the idiots who "invest" in crypto are just a side-effect of the scam - and help "legitimize" the whole thing by presenting an ersatz "reason" for its existence (particularly since crypto has failed to materialize as a useful daily currency, do to its staggering energy costs).

So, today, there are easier ways of laundering money than in selling physical works of art. Speaking of which, what constitutes "fine art" is becoming almost laughable these days.  A guy puts a vacuum cleaner in a Plexiglas box and sells it for $4.4 million.  He didn't even put it there, but told minions to make it for him.  Laughing all the way to the bank - or just creating fake "art" for money launderers?

The image above is of a famous "Banksy" piece which sold at auction for $25M. Other "Banksy" pieces, which are just street graffiti, are scraped off the walls (for free) and sold at auction for millions.  The ultimate NFT!  No real value, but a talisman of money transfer.  Banksy acts all progressive and hip, but I wonder if him/her is keen with the idea that their "art" is possibly helping Russian Oligarchs move money around in spite of sanctions.

Funny thing, "Banksy" is in London as well.  And maybe the name itself is a play on "Banking" - who knows?

Ordinary art made by ordinary people can - and often is - better than these "fine art" pieces, particularly graffiti or vacuum-cleaners-in-a-box.  But most artists struggle to make a living at it, and if you calculated the man-hours in even a basic work of art, the artist is likely making less that minimum wage, if in fact, not losing money at it.  Most do art for the sake of art, not for a living.  Hence the term, "starving artist."

Maybe I can get in on this money-laundering gig - if I can find a buyer for one of Mark's ceramic works that will pay $3.5 Million instead of $350!