Is the Art Market Big Enough to Launder Money?

Here’s an interesting take on international money laundering and the art market from the president of Transparency International in Malaysia. Unfortunately, it relies upon cobbling together “research” on money laundering and the art market that has appeared in a long string of flawed news reports.

Malaysia, of course, is ground zero for the 1MDB development fund scandal that is being investigated by several nations, including Singapore, Switzerland and the US. Compounding the issue has been the very visible reporting on Jho Low’s art purchases over the last several years. Low repeatedly appears among the constellation of individuals connected to the use of the 1MDB funds.

One reason to doubt the prevalence of money laundering in the art market is the lack of capacity. As the author unwittingly illustrates, the art market just isn’t big enough to accommodate much money laundering. He cites estimates that $2T in funds are laundered globally each year. A generous measure of the art market would be $75bn and that includes a huge portion of primary work that has no resale value.

So the best case argument would make the entire art market 3.75% of the global total for money laundered funds:

According to PwC’s Global Economic Crime Survey 2016, global money laundering transactions are estimated at two percent to five percent of global GDP – or roughly one to two trillion US dollars – annually. Yet, according to the United Nations Office on Drugs and Crime (UNODC), less than one percent of global illicit financial flows are currently seized by authorities.

The Art Market Report published by the European Fine Art Fair stated that transactions in fine art were worth US$75 billion in 2014. Lately, it is believed that illegal money pumped through art dealers and auction houses have contributed to the rise in the value of fine art

Money laundering and the art world  (Free Malaysia Today)