HomeNewsAs NFTs Thrive, US Treasury Sounds The Alarm About Money Laundering In...

As NFTs Thrive, US Treasury Sounds The Alarm About Money Laundering In Art

A visitor takes a photo for a video installation Glows in the Night by Chinese contemporary artist Yang Yongliang, which will be converted into NFTs and auctioned online at Sothebys, at the Digital Art Fair, in Hong Kong, China on September 30, 2021 — Reuters/File
A visitor takes a photo for a video installation “Glows in the Night” by Chinese contemporary artist Yang Yongliang, which will be converted into NFTs and auctioned online at Sotheby’s, at the Digital Art Fair, in Hong Kong, China on 30 September , 2021. — Reuters/File
  • The US Treasury Department is making a series of recommendations to combat illegal financing in the high-end art market.
  • Asset-based loans “can be used to disguise the original source of money and provide liquidity to criminals,” Treasury says.
  • “The next steps include involving stakeholders, such as those in Congress or industry, to get their feedback,” the official said.

WASHINGTON: The US Treasury Department issued a series of recommendations Friday to combat illicit financing in the high-value art market, warning that the emerging digital art market, such as non-fungible tokens (NFTs), could pose new risks.

In a study published Friday, the Treasury found that there is some evidence of money laundering risks in the high-end art market, but limited evidence of terrorist financing risk, the Treasury said in a statement.

It said the most vulnerable companies on the market are those that offer financial services that are not subject to anti-money laundering or anti-terrorist financing obligations, and warned that asset-based lending “can be used to identify the original source.” of funds and provide liquidity to criminals.”

A senior Treasury official told reporters the next steps include getting stakeholders like those in Congress or industry to get their feedback, adding that the Treasury hopes the research will encourage industries to take additional steps. to make it more difficult to launder illegal proceeds through the art market. The Treasury Department will continue to consider whether additional regulatory steps are needed in this market, the official said.

The study also said that depending on its structure and market incentives, the digital art market, such as NFTs, may pose new risks, as the characteristics of digital art make it vulnerable to money laundering.

NFTs are a form of crypto asset that exploded in popularity last year. All kinds of digital objects – from art to videos and even tweets – can be bought and sold as NFTs, which use unique digital signatures to ensure they are unique.

The study recommended that various options be considered to address the risks, including updating law and customs enforcement training, improving information sharing in the private sector and combating money laundering and terrorist financing for certain participants in the art market.

But it said the multi-billion dollar industry, compared to other sectors that pose terrorist financing and money laundering risks, should not be an immediate focus for imposing requirements to fight illegal financing.

Most participants in the art market are currently not subject to anti-money laundering or anti-terrorist financing requirements, although the study said several qualities inherent in art and its high-value market make it attractive for money laundering.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Must Read