Art dealers and money laundering

The art world is particularly vulnerable to money laundering due to a combination of factors; high-value artworks are easily portable across borders, allowing large sums of money to be moved discreetly.

Prices in the art market are often subjective and variable, enabling criminals to manipulate values to disguise illegal funds and the anonymity afforded by private sales, intermediaries, and complex ownership structures makes it difficult to identify the true parties involved.

Historically, art dealers have operated with limited regulatory oversight compared to other financial sectors; this, combined with the sheer size and scope of the market - according to Art Basel and UBS Global Art Market Report 2025, international art sales reached $57.5bn in 2024 – means the art market is a very attractive target for money launderers.

What is art money laundering

Money is laundered through art through the buying and selling of arts and antiquities, often at deliberately inflated prices, in order to obscure the illicit origin of funds and enable the money to be integrated into the economy. Traditionally, money laundering within the art world has been through the purchase and sale of fine art, but there are now a number of emerging risks. These include non-fungible tokens (NFTs), which can be exploited due to their easily transferable ownership, anonymity, and highly subjective valuations, and the exploitation of cultural objects and antiques – especially by corrupt governments.

Why is the art world at risk?

There are lots of different reasons why the art world is particularly vulnerable to money laundering – below are the key factors:

High value, easy to move
Artworks can be worth millions but are easy to move across borders, making them ideal for transferring large sums of money discreetly. Art is also often used as collateral for loans or as an investment vehicle, making it easier for illicit funds to enter the legitimate economy.

Subjective values and lack of transparency on pricing
Art prices are subjective and can vary greatly depending on the circumstances i.e. the buyer, the seller and the market conditions – and this makes it easy over- or under-invoice to disguise illicit funds.

Anonymity of buyers and sellers
A huge proportion of art sales are done privately using agents and intermediaries, and often, buyers and sellers will use shell companies in tax havens, trusts and other financial vehicles to hide their identities making it difficult to see who is involved in a sale. It can also be difficult to trace the history of ownership (provenance) which makes it easier to obscure where the funds initially came from.

Historically poor regulation
Up until recently, regulation in the art world had been fairly poor. In many countries, art dealers were not under the same scrutiny as other sectors, meaning there were few or no compliance requirements.

Art financing terrorism

Money laundering is not only a crime in itself, but an enabler of much more serious crimes such as drug trafficking, people trafficking and terrorism – you can read more about the wider social and economic effects of money laundering in our Whitepaper - The real-world impact of Money Laundering.

This link between terrorism and art money laundering in particular was highlighted in a recent report from the Financial Action Task Force (FATF) which found that ISIL, Al-Qaeda and its affiliates has been exploiting antiquities since 2016.

The report notes “during its height, ISIL controlled territory in Syria and Iraq where more than 5,000 archaeological sites were located, many of which were listed as UNESCO World Heritage sites, such as the grand palace of Assyrian King Ashurbanipal II. In addition, it controlled territory containing numerous museums, libraries, and archives. This provided ISIL with an expansive supply of precious antiquities and cultural objects, as well as an important source of funding…..ISIL, ANF and other individuals, groups, undertakings and entities associated with Al Qaida, are generating income from engaging directly or indirectly in the looting and smuggling of cultural heritage items.”

Proof of the risk

As mentioned above, up until recently, the art world was not regulated in the same way as other financial or high value sectors. In Mexico, the implementation of anti-money laundering rules in 2012 had an almost immediate impact on the art world. The law – which aimed to limit the use of cash and require vulnerable industries – including casinos, jewellery stores and art galleries – to give more information about their customers to the Government – resulted a huge decline in sales.

Gallery owners reported an immediate 25% to 30% decline in business, proving that their businesses had been targeted by money launderers.

In the EU, the 5th Anti-Money Laundering Directive (5MLD) came into effect in 2020 and required art businesses within EU member states – including agents, dealers, galleries, auction houses, warehouses, and any other individual or firm involved in the buying, selling, or storing of art – to implement AML rules.

In the UK, art market participants (AMPs), including art dealers and auction houses, only became regulated under the Money Laundering Regulations (MLRs) in 2020 when the EU’s 5AMLD was adopted. Up until then the only way an art dealer or auction house was likely to fall within the scope of the regulations was as a so-called "high value dealer” which was defined as a single transaction of at least €10,000.

In Canada, the luxury goods sector – including art and antiques – came under AML laws in 2019, and in the US, art and antiquities dealers, including auction houses, only became regulated in 2021 through an amendment to their existing rules.

And as more and more rules have come into place across the world, art sales have dropped; global art sales hit $67.8bn in 2022, fell 4% to $65bn in 2023 before dropping 12% last year to $57.5bn. And while there are likely to be a number of reasons for this decline, stricter AML rules could well be a major factor, especially given it is only the high-value dealers (those with sales over $10million) that have actually reported a drop in sales.

The challenges for art dealers

Despite the fact that there are now regulations in place, the nature of the art market means it can be quite difficult to implement them, and even when there is a good AML programme in place, it can still be difficult to distinguish legitimate business from illicit activity. Some of the key challenges for those working in the art world include many of the reasons why it remains such a popular target for money launderers:

• Forgeries and fakes – it can be very difficult to identify a forgery or fake, and these are the types of works most likely to be involved in illicit sales, especially in the secondary market where the original artists are not present during the sale. They are also often used by criminals as collateral so they can borrow large sums of money based on essentially worthless artworks.

• Inconsistent regulations – the level of scrutiny varies greatly from country to country, and given the fact that art sales are global, this can mean that while an UK art dealer is ensuring all proper checks are done, a buyer or seller in another jurisdiction is not, which brings risk back into the transaction.
  
  

• Pricing inconsistencies – unlike other goods and services, the value of a piece of art is subjective, as it depends on what a buyer is willing to pay, making it difficult for those running checks to know if the inflated price is genuinely seen by the buyer as the value of the art, or if the price has been deliberately inflated to enable laundering to occur.

• Anonymity – anonymity in the art world is commonplace, and while it is seen as a positive i.e. it helps prevent bias in the bidding process – it can also make it difficult to trace funds.
  

How to mitigate the risks of art money laundering

Because they are now subject to AML laws, art dealers – like all other regulated businesses - must carry out certain day-to-day tasks as part of their compliance requirements. The main requirement is conducting proper Customer Due Diligence and performing risk assessments of their operations.

To ensure they are meeting their obligations, art dealers must perform the following checks on their buyers and sellers:

• Identity verification – to check the person is who they say they are, they need to see a photo ID and verifying that it matches the individual.

• Ultimate Beneficial Owner (UBO) checks – this is particularly important in the art world because, due to the clandestine nature of the market, the actual buyer or seller is often not involved in the sale. Criminals will do anything they can to hide ownership, so identifying the UBO is vital to ensure transparency.

• Sanctions and Politically Exposed Person (PEP) screening – this involved checking that the individual is not at high risk (a PEP or PEP associate) as they are at higher risk of bribery and fraud, and also that they are not sanctioned as this means it is illegal to do business with them.
  
  

• Enhanced due diligence (EDD) - EDD must be carried out if the verification and screening process identified a potential risk. It means digging further to assess the actual risk of the individual.

• Source of Funds checks – again, this is very important in the art world as often huge sums of money are exchanging hands, often through numerous different businesses and entities, so it is vital that the original source of the funds is checked to confirm the money is legitimate and not tied to illicit activity.

• Suspicious Activity Reporting – if when the checks are being run anything unusual or suspicious is identified, it must be reported to the relevant authorities via a Suspicious Activity Report (SAR), so that it can be investigated.

• Ongoing monitoring and data hosting – art dealers tend to deal with the same customers again and again, so it is important that due diligence doesn’t end after initial checks. Customer records must be stored and regularly reviewed for changes in case the risk level changes and puts the business at danger.
  

How can SmartSearch help?

The easiest, cheapest and most reliable process for running all the checks above is to use a digital compliance solution. SmartSearch’s powerful platform delivers fast, comprehensive anti-money laundering (AML) checks—all from a single solution. It combines cutting-edge technology with global data coverage to streamline your compliance process.

• Identification, verification and automatic screening - Verify individuals and businesses—including UBOs—in seconds using biometric facial recognition, selfie liveness checks, document analysis, and data from all three major credit bureaus. Automated screening against global watchlists ensures robust protection.

• Enhanced due diligence - When potential matches are found, SmartSearch conducts deeper investigations, including adverse media checks and profiling for PEPs, SIPs (Special Interest Person), RCAs (Relatives and Close Associates), and sanctioned individuals.
  
  

• Source of Funds Checks - SmartSearch leverages open banking to instantly analyse bank statements and confirm the origin of customer funds, supporting faster, more reliable SOF verification.

• Automatic record keeping and ongoing monitoring - All checks are securely stored, fully auditable, and continuously monitored. Nightly updates against global watchlists trigger alerts to help you stay ahead of any risk changes.
  
  

As outlined in this paper, thanks to complex ownership structures, high-value transactions, and increasing global scrutiny, money laundering within the art world is a real – and significant – risk.

And that is why effective AML processes are critical. SmartSearch offers a seamless, all-in-one solution for those working in the art world to stay compliant, protect their reputation, and help preserve the integrity of the global art trade.