US Lawmakers Target Art Market’s Shadowy Role in Money Laundering with New Bill
📷 Image source: media.icij.org
A proposed U.S. bill could force the secretive art world to finally open its books. The draft legislation, quietly circulating in Congress, aims to dismantle a favored tool of money launderers and oligarchs: multi-million dollar art purchases made with near-total anonymity.
The Art of Hiding Wealth
For decades, high-value art transactions have operated under a patchwork of lax regulations. Unlike real estate or securities, art buyers in major markets like New York can routinely purchase eight-figure paintings through shell companies without disclosing beneficial ownership. This loophole has turned galleries and auction houses into unwitting laundromats for illicit cash.
How the System Works
The scheme is deceptively simple. A buyer acquires a $50 million Basquiat using an offshore entity, stores it in a freeport warehouse, then "sells" it to another shell company they control at an inflated price. The transaction creates clean proceeds from dirty money—all while avoiding the scrutiny applied to bank transfers.
The Scale of the Problem
While precise figures are elusive, a 2024 Treasury Department analysis estimated $3 billion in suspicious art flows annually. The true amount could be higher, given that 30% of high-end sales involve private transactions with no public records.
The Bill’s Teeth
The proposed legislation would treat art dealers like financial institutions under the Bank Secrecy Act. Key provisions include:
Mandatory Ownership Disclosure
Any transaction above $10,000 would require identifying the ultimate beneficiary—a threshold far lower than current anti-money laundering (AML) rules for art, which only kick in at $200,000 for cash payments.
Enhanced Due Diligence
Auction houses and galleries would need to verify client identities and report suspicious activity, mirroring requirements long imposed on casinos and precious metal dealers.
Pushback from the Art World
Trade groups are mobilizing against what they call "unworkable burdens." The Art Dealers Association of America argues that small galleries lack resources for compliance, while Christie’s and Sotheby’s privately warn the rules could drive business to less regulated markets like Hong Kong.
Yet enforcement experts counter that similar fears preceded real estate transparency laws in 2021—measures that ultimately exposed $2.3 billion in suspicious property purchases without crashing markets.
Global Ripples
If passed, the U.S. action could pressure the EU and UK to follow suit. London’s art market, second only to New York’s, currently requires ownership disclosure only for transactions exceeding €10,000—a threshold critics call laughably high.
The bill’s fate remains uncertain, but its mere introduction signals a turning point. As one Senate staffer put it: "When terrorists start using Picassos instead of wire transfers, it’s time to close the gap."
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