Why do people buy huge canvases with a few dots on from an arts unheard of for millions? I know it’s commonly used to launder money. Can someone explain how the process works?
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In a basic way, a lot of it is like this – say I sell you a painting for 10m, then you go one to sell that painting again (for really any price) – so the money I used to buy it is now “legal” as it was a legit business deal. When asked where I got 10 million, its that I sold the painting
People don’t buy the art for millions. There are a few different things people do. To launder money they sell the art for a few thousand, but tell them IRS they sold if for millions, and use illegal money to make up the difference. Another thing they can do is tax evasion. If they buy art for a few thousand, then an art appraiser says it’s worth millions, they can donate the art to some charity and get that fake value in tax deductions.
A bad guy (let’s call him Mr. Burns) wants to pay you $10 million to do something illegal.
If Mr. Burns writes you a check for $10 million, the banking and tax people might say, “Why’s Mr. Burns paying this random dude $10 million? We should investigate both of you.”
On the other hand, if you buy a painting somewhere for $1 million, then sell it to Mr. Burns for $11 million, on paper it’s simply a profitable investment. There’s no accounting formula that will tell you what the painting’s truly worth, that Mr. Burns vastly overpaid you. Beauty is in the eye of the beholder.
So Im going to give a broader perspective of what have being said, laundering money means “move through legal transctions ilegal money” so laundering per se its not that hard, you sell drugs and go buy to Walmart and you are succesfuly laundering money.
So that answers your question but I suspect you were going to another direction, more about “why is so often used for laundering” rather than laundering itself, and that is a really good topic.
You see often times governments have some mechanism that allow goods to have some price limits or at least some price references i.e. real state in most countries need a certification that says your property is *around* some range of price, so any transaction lower and higher than that price seems really suspect for the governement (which they can or can not take action on it). The thing is, that for ages, art has being conceived as the maximum subjective economical good in the human kind history, this means that while of course there are official art appraisals, there is a lot (A LOT) of room for a subjective appraisal (the most common example being a blank canvas going for millions) and somehow governments have been satisfied by this systems.
So generally money launders actually buy at high prices (thats when news report stupidly high prices) and then quietly sell at lower ones (not necesarelly) just to launder money quickly.
As others have pointed out, the value of art is so subjective that you can easily agree an arbitrary price with other parties without raising much suspicion. Say you owe someone $5 million for a cocaine shipment – simply transferring the money might attract attention from the authorities, because they’ll want to know what it was for, but if you instead agree to buy a random painting from them for its expected sale price + $5 million, then it looks less suspicious.
But another big factor is that art is very easy to move around and smuggle. A painting can be worth far more than the equivalent volume or weight of gold or cash, and even if someone notices it they won’t necessarily suspect that it’s particularly valuable. Lots of people have cheap paintings hung on their walls, and lots of people buy paintings as holiday souvenirs and transport them home on the plane. You really have to know a lot about art to be able to pick out the rare super-expensive pieces from the rest.
> Why do people buy huge canvases with a few dots on from an arts unheard of for millions?
That isn’t *necessarily* money laundering though. Lots of wealthy people enjoy collecting pieces of art as status symbols. They might get into bidding wars over pieces by particularly sought-after artists, and when it comes to status symbols things can be considered valuable *because* they cost a lot of money. In other words, they may not even particularly like the art itself, they just like being able to say they bought it for millions.
Also the artists and art dealers themselves obviously benefit from inflating the price of artworks.
Having said that, lots of people legitimately enjoy contemporary art that can be reductively described as “a few dots”. It’s weird that people spend millions on it, but it’s not necessarily weird that people like it.
You can launder money all sorts of different ways with anything that is expected to trade hands at high prices. Like art, collectible cars, etc. My friend has to launder all his income bc he sells weed legally in a state where it’s legal, but federally it’s illegal so he can’t report that income as taxable or put the money in a bank because both are federally governed. He does things like:
Have a friend he knows in the car industry write him a loan for a collectible car, something like $100,000. He pays the guy cash so the loan is bogus. After a few years, he sells the car for whatever, say $120000. Now that money goes in the bank, and he reports a $20,000 gain and pays taxes on that. If anyone looks around a bit, they see he bought the car, had a valid title and financing, “made payments” and sold it legally. Clean purchase and sale, doesn’t raise suspicions at the bank for why he’s getting wired $120,000.
Same with art. He buys a painting for $10,000. Sells it a year later to a friend for 100,000, but in reality gives him the 100,000 cash and the painting. Friend wires him 100,000 back. Friend gets a painting, he gets 100,000 cleanly wired into his account with a bill of sale, and 90,000 “profit” so he can pay some taxes.
In reality, if anyone looked around under the hood, they would immediately know he is laundering money. The point is to just pass the basic sanity check test, and no one really gives a fuck.
There’s no good way to value most pieces of art. Some art is sold at very inflated prices as a means of transferring or laundering money.
You pay an artist to paint you a great painting. Lets say you pay 20 000$.
Then your “friend” appraises it and says its worth 1 million dollars. Then you donate this painting and write it off as tax deductions. It was at most worth around 20 000$ but it is “valued” at a million
Fraud investigator here, this is why the government can always charge you with money laundering. Money laundering is “converting illegal value into another form.” Examples include, steal a car and trade it for drugs = money laundering. Rob a liquor store and then use the money to buy anything = money laundering. Period. Once you get over a arguable value of $10,000 it becomes its own felony. I say it that way because prosecutors will find a way to argue a higher value to get a felony. Let’s say you steal a car and sell it for $5k, if they say the car was worth $10k then it’s a felony. Pay someone to kill someone, it’s also money laundering etc.
What is the point? Three main reasons, one: charges like this will be used to bump state crimes up to Federal crimes, two, they can be used to increase sentences or pleas when bundled with other crimes, three, it it really hard to be found not guilty of money laundering because it is so basic, so if you get aquitted of other charges, they still got something to put you in jail on.
Also, if you declare assets to in any way being involved in money laundering then you can seize all of the assets, so you can seize assets, sometimes only for the purpose of putting more pressure on people.
TLDR: It’s a catch all like tax evasion or postal mail fraud, they can almost always find a way to tie in a charge.
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