The Use of Artworks in Money Launderung Schemes and the Role of Freeports

How artworks and freeports can conceal criminal proceeds

The art market combines high-value assets with limited price transparency, private negotiations, intermediaries and complex ownership arrangements. These features do not make legitimate art trading inherently suspicious, but they create conditions that can be exploited to conceal the proceeds of crime.

Unlike securities or commodities traded on transparent exchanges, artworks rarely have an objectively verifiable market price. Value may depend on the artist’s reputation, provenance, condition, rarity, market trends and the identity of the buyer. This subjectivity creates room for deliberate overvaluation or undervaluation. A manipulated price can disguise a transfer of wealth, reduce a tax liability or make an illicit gain appear to be a legitimate investment return.

Artworks are also portable and can store substantial value in a relatively small physical object. This makes them useful for moving or holding wealth outside conventional financial channels. A work can be acquired with criminal proceeds, transferred through several entities or intermediaries, retained for years and later sold as an apparently lawful asset. The physical object may remain unchanged while its legal ownership, economic control and declared value change repeatedly.

The predicate offense remains central

Money laundering cannot be separated from the criminal conduct that generates the property or funds. The predicate offense may include corruption, fraud, drug trafficking, smuggling, tax crime, embezzlement, sanctions evasion or other forms of organised crime. Artworks can be used to launder proceeds from such offenses, but they can also be the direct object of the underlying crime.

Cultural property may be stolen from museums or private collections, looted from archaeological sites, illegally excavated or smuggled across borders. In conflict zones, the trafficking of antiquities can generate revenue for criminal networks and, in some circumstances, armed groups. The artwork or antiquity is therefore both the subject of a cultural-property offense and a potential vehicle for laundering the resulting proceeds.

This creates two related forms of abuse. In one, legally acquired art is used to conceal or integrate money generated by another offense. In the other, an illegally obtained artwork is introduced into the legitimate market through false provenance, incomplete records or successive transactions. Over time, the object may acquire an appearance of legitimacy, while the proceeds from its sale enter the formal economy.

Bastian Schwind-Wagner _Follow

"The art market’s opacity, subjective valuations and frequent use of private transactions create opportunities to conceal proceeds from fraud, corruption, smuggling, tax crime and other predicate offenses. Artworks can be bought, transferred, pledged or resold in ways that make illicit wealth appear to be a legitimate investment return.

Freeports may intensify these risks by allowing high-value artworks to remain in secure storage while ownership, financing and control change through documents rather than physical movement. Effective prevention requires transparent beneficial ownership, rigorous provenance and source-of-funds checks, stronger oversight of storage facilities and close cooperation among tax, customs, financial intelligence and law enforcement authorities."

How laundering schemes use artworks

The first stage may involve the purchase of an artwork with proceeds from a predicate offense. The transaction can be structured through a dealer, adviser, company, trust or offshore entity, making it difficult to identify the person who ultimately supplied the funds or controls the asset.

The layering stage can involve multiple sales, jurisdictions, intermediaries and ownership transfers. Private transactions are particularly difficult to monitor because their prices and contractual terms are often confidential. An artwork may be sold between related companies, transferred to a new owner without leaving storage, or used in a transaction that has little apparent commercial rationale.

Price manipulation is another important method. An artwork can be deliberately overvalued to move a large amount of money under the appearance of a purchase price, or undervalued to reduce tax or customs obligations. Related-party transactions can make such arrangements harder to detect because the parties may have an interest in creating a particular documented value rather than reflecting a genuine market price.

Art can also be used as collateral. An owner may borrow against an artwork, obtaining apparently legitimate liquidity while retaining the asset. If the initial acquisition was funded with criminal proceeds, or if the valuation is materially inflated, the resulting financing may help integrate illicit wealth into the banking or investment system.

The final integration stage may occur when the artwork is resold, pledged, inherited, insured or included in a broader investment portfolio. The proceeds can then be presented as income from an asset sale, an investment gain, repayment of a loan or the distribution of corporate assets.

Freeports and the separation of ownership from possession

Freeports were originally established to support international trade. Goods could be stored, processed or re-exported under special customs arrangements, with duties and taxes deferred until the goods entered the domestic market. Their commercial purpose was to reduce transaction costs and facilitate the movement of goods.

Some facilities have developed into long-term storage centres for high-value assets, including artworks, jewellery and precious metals. This shift has increased their relevance to financial crime controls. A work may remain in a secure, climate-controlled facility for an extended period, while ownership changes through contracts or documents rather than through physical movement.

That separation between possession and ownership is significant. A change in beneficial ownership may occur without a customs event, a public sale or an obvious cross-border movement. The asset can remain in the same location while the parties, financing arrangements and declared value change. This can complicate the work of customs authorities, tax administrations, financial intelligence units and investigators seeking to reconstruct the transaction history.

Warehouse receipts and similar documents can further support this process. Where the legal system treats such documents as evidence of title or as negotiable instruments, rights in the stored asset may be transferred without moving the underlying object. In legitimate commerce, this can support secured lending and efficient asset management. In a criminal scheme, it can make an artwork function like a financial claim while reducing visibility of the asset’s physical and economic movement.

Tax fraud and regulatory arbitrage

Freeport arrangements may allow import duties or value-added tax to be deferred until an artwork enters the relevant customs territory. Deferral is not automatically unlawful. The risk arises when the facility is used for indefinite storage, concealed ownership, false declarations or transactions designed to evade tax rather than facilitate genuine trade.

Tax fraud may involve misstating the value, origin or destination of an artwork, concealing a sale, falsely claiming an exemption or using corporate structures to hide the person liable for tax. When tax offenses generate the funds later placed into the art market, tax crime can also serve as the predicate offense for money laundering.

The cross-border nature of the market creates further opportunities for regulatory arbitrage. Different countries may apply different rules to dealers, auction houses, advisers, storage providers and corporate service providers. Enforcement capacity, beneficial ownership requirements, customs controls and reporting duties may also vary. Criminal actors can exploit these differences by moving transactions, ownership structures or documentation to jurisdictions with weaker oversight.

The problem is not fiscal decentralisation itself. The more precise concern is regulatory fragmentation: the coexistence of legal and supervisory systems that do not share information effectively or apply comparable standards. When tax authorities, customs services, financial intelligence units and law enforcement bodies cannot connect their data, complex transactions may remain below the threshold of effective scrutiny.

The Bouvier–Rybolovlev affair as a warning

The dispute involving art dealer Yves Bouvier and collector Dmitry Rybolovlev illustrates the risks created by private sales, intermediary structures, disputed valuations and cross-border transactions. Between 2002 and 2014, Rybolovlev acquired major works through arrangements involving Bouvier. Litigation and related proceedings alleged that acquisition prices were misrepresented and that the works were resold at substantially higher prices.

The case was primarily associated with allegations of fraud and valuation manipulation rather than a final finding that the transactions constituted money laundering. Nevertheless, it shows how difficult it can be to determine the true price, economic beneficiary and transactional history of high-value artworks. The use of offshore entities and freeport infrastructure also demonstrated how physical custody can be separated from contractual ownership and financial control.

For financial crime professionals, the case is relevant because the same structural weaknesses can be exploited in laundering schemes. A disputed price is not, by itself, proof of criminal conduct. However, significant unexplained price differences, related parties, opaque ownership, unexplained financing and the use of multiple jurisdictions should prompt a risk-based review.

Why conventional AML controls are insufficient

Traditional AML frameworks were designed mainly around banks and other regulated financial institutions. The art market presents different challenges. Prices are subjective, transactions may be private, counterparties may be represented by intermediaries and the asset itself may be held outside the institution handling the payment.

Beneficial ownership is a recurring weakness. A company, trust or foundation may appear as the buyer or seller while the person exercising control remains undisclosed. The use of advisers and agents can add legitimate commercial complexity, but it can also prevent regulated businesses from understanding who is funding the transaction, who benefits from it and why the structure was selected.

Threshold-based obligations may leave important activity outside scrutiny. A series of transactions below a reporting threshold may produce the same risk as one large transaction. Smaller dealers and storage operators may also have fewer compliance resources, while still handling assets of considerable value.

Provenance presents a parallel challenge. Records may be incomplete, inconsistent or based on information supplied by parties with a financial interest in the sale. A missing ownership period, an implausible export history, a sudden increase in value or a transaction involving a known source market risk should be treated as a potential warning sign.

What effective prevention requires

A credible response requires more than extending AML obligations on paper. Art market participants should apply risk-based customer and beneficial ownership checks, verify the source of funds and, where appropriate, the source of wealth. They should retain records of valuations, provenance, counterparties, intermediaries, financing arrangements and changes in ownership.

Freeport operators also need clear responsibilities. Authorities should know which assets are stored, who owns them, who controls them and how ownership changes are recorded. Storage arrangements should not become a substitute for transparency. Information about stored assets and their beneficial owners should be accessible to competent authorities under appropriate legal safeguards.

Tax and customs controls must be connected with AML supervision. An unexplained discrepancy between the declared value, insurance value, financing value and resale price may be relevant to several authorities at once. Effective information sharing can reveal patterns that are invisible when each agency examines only one part of the transaction.

Centralised records on stolen art, stronger provenance systems and interoperable beneficial ownership registers can improve detection. Technology can help identify repeated transactions, unusual price movements, common intermediaries and links between apparently unrelated entities. Its value depends on the quality, accuracy and lawful exchange of the underlying data.

International cooperation is essential because the asset, buyer, seller, payment, storage facility and beneficial owner may all be located in different countries. Without timely cooperation between financial intelligence units, customs administrations, tax authorities, regulators and police services, investigators may be unable to follow the full chain of ownership and value.

A systemic risk requiring coordinated enforcement

The misuse of artworks and freeports is not caused by the existence of art trading or customs storage facilities. The risk arises when high-value assets, subjective valuation, private transactions, opaque ownership and fragmented supervision operate together.

Artworks can serve as stores of value, collateral and instruments for transferring wealth. Freeports can preserve security and facilitate legitimate commerce, but they can also enable ownership changes and financial arrangements without corresponding physical movement. When the proceeds originate from a predicate offense, these features may assist placement, layering or integration.

The policy response should therefore treat the art market and freeports as part of the wider (anti-)financial crime system. Protecting cultural property, recovering criminal assets and preventing money laundering require the same basic foundations: clear ownership information, reliable transaction records, effective due diligence, meaningful supervision and cooperation across borders. Without them, valuable objects can remain visible while the criminal money behind them stays concealed.

Dive deeper

• Research ¦ Milica Bošković, Nenad Putnik, Radojica Lazić, 2026, The Use of Artworks in Money Launderung Schemes and the Role of Freeports, © University of Niš, Serbia, Creative Commons licence CC BY-NC-ND, Print ISSN: 0353-7919, Online ISSN: 1820-7804, https://doi.org/10.22190/TEME260119020B. ¦ Link ¦ licensed under the following terms, with no changes made: CC BY-NC-ND 4.0
• Wikipedia® ¦ Bouvier Affair ¦ Link
• ARTE ¦ Der Oligarch und der Kunsthändler [DEU], available through April 25, 2031 ¦ Link