As NFTs flourish, US Treasury raises alarm over money laundering in art



2022-02-05 19:37:00

A customer takes a photograph in entrance of a video set up “Glows in the Night” by Chinese language modern artist Yang Yongliang, which can be transformed into NFTs and auctioned on-line at Sotheby’s, on the Digital Art Truthful, in Hong Kong, China on September 30, 2021. — Reuters/File 
  • US Treasury Division points set of suggestions to fight illicit finance in the high-value art market.
  • Asset-based lending “can be used to disguise the original source of funds and provide liquidity to criminals,” says Treasury.
  • “Next steps include engaging stakeholders such as those in Congress or in the industry to get their feedback,” says official.

WASHINGTON: The US Treasury Department on Friday issued a set of recommendations to combat illicit finance in the high-value art market and warned that the emerging digital art market, such as non-fungible tokens (NFTs), may present new risks.

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

It said that those most vulnerable in the market are businesses offering financial services that are not subject to anti-money laundering or countering terrorism financing obligations, warning that asset-based lending “can be used to disguise the original source of funds and provide liquidity to criminals.”

A senior Treasury official instructed reporters subsequent steps embrace partaking stakeholders comparable to these in Congress or in the business to get their suggestions, including that the Treasury hopes the research will encourage industries to take further steps to make it tougher to launder illicit proceeds by the art market. The Treasury will give additional thought as as to whether further regulatory steps are wanted in this market, the official mentioned.

The research additionally mentioned that relying on the construction and market incentives, the digital art market, comparable to NFTs, might current new dangers, because the traits of digital art make it weak to money laundering.

NFTs are a type of crypto asset which exploded in recognition final yr. All types of digital objects — from art to movies and even tweets — could be purchased and offered as NFTs, which use distinctive digital signatures to make sure they’re one-of-a-kind.

The research really helpful the consideration of a number of choices to deal with the dangers, together with updating coaching for legislation and customs enforcement, enhancing non-public sector information-sharing and making use of anti-money laundering and countering terrorism financing necessities to sure individuals in the art market.

Nevertheless it mentioned that the multi-billion-dollar business, in comparison with different sectors that pose terrorist financing and money laundering threat, shouldn’t be an instantaneous focus for the imposition of necessities to fight illicit financing.

Most art market individuals are presently not topic to anti-money laundering or counter terrorism financing necessities, although the research mentioned that a number of qualities inherent to art and the high-value market make it enticing for money laundering.

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