Money laundering and the art world
Illegal money pumped through art dealers and auction houses is said to contribute to the rise in the value of fine art.
Akhbar Satar, Free Malaysia Today
One of the ways of turning dirty or black money into legitimate money is through money laundering. The money is smartly cleaned in order to hide its criminal origin and to make it appear as if it was derived from a legitimate source. Often enough, the dirty money is obtained through corruption, fraud, embezzlement and other forms of financial crime.
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.
In Malaysia, the Commercial Crime Department of the Royal Malaysian Police has reported that “organised crime and financial crime together costs Malaysia between RM15 billion and RM25 billion per annum.” It also said, “Any criminal activity that generates significant profit creates a need for money laundering.”
It is interesting to note that the first person prosecuted for money laundering in Malaysia was a woman. Hamimah Idruss, a former director of Syarikat Safire Pharmaceuticals Sdn Bhd, who was charged under the Anti-Money Laundering Act of 2001 for receiving RM41.3 million in illegal gains between June 3 and June 10, 2003. She was sentenced to 38 years in prison and fined RM6.39 million for eight counts of money laundering and 10 counts of abetting in the crime.
In order for dirty money to be fully cleaned, three steps are involved. The first step is placement and this is the most difficult step. The money launderers will try to place the ill-gotten proceeds into legitimate financial institutions and systems.
The next step is called layering. The money launderers create complex layers of financial transactions. This is to make sure the links between the money launderers and the money are not be easily seen or traced. They will make many bank-to-bank transfers, especially to different accounts in different names and in different countries.
The final step is known as integration. This is when money is entered into financial systems and placed back in the economy as clean and legally-earned funds. At this stage, it is difficult to differentiate between legal and illegal money and wealth. The money launderers will purchase expensive houses, hotels, apartments, diamonds and art work.
