Last month, this blog wrote about several forfeiture complaints recently filed by the United States Department of Justice seeking to recover the illicit proceeds of the 1MDB scandal.  The complaints sought, among other things, the recovery of several high value works of art that had allegedly been used to launder the misappropriated 1MDB funds.  We noted that “[t]hese forfeiture complaints serve as a reminder that high-end art transactions are often viewed by white collar criminals as an effective method of money laundering.”  And now, a recently-released Senate report shows that Congress is taking these concerns very seriously and may soon take up legislation cracking down on money laundering in the art world. 

An ongoing challenge for art dealers, galleries, and auction houses, is guarding against the use of art transactions as a means of laundering the proceeds of criminal activity.  Money laundering is a federal crime that involves disguising the proceeds of a crime by integrating those proceeds into the legitimate financial system, often through a series of complex and confusing transactions designed to conceal the origin, source and ownership of the funds.  When money laundering is successful, it becomes difficult to distinguish illicit proceeds from legitimate financial resources, thus permitting funds to be used by criminals without detection.  Purchasing art is one way to conceal the source of illicit funds.  Several recently filed civil forfeiture complaints from the U.S. Department of Justice highlight the ongoing need to remain vigilant about money laundering in the context of art transactions.