Phony Profit

As Global Art Market Booms, Dubious Dollars, Dodgy Dealers Move In

  • Why it matters

    Why it matters

    The global art market is still reeling from a scandal in Germany, which saw dealer Wolfgang Beltracchi and his accomplices forge and sell hundreds of fake paintings to collectors and dealers. Experts say that unless the art market implements proper regulations, it will become a target for forgers and money launders.

  • Facts


    • Dubious money is distorting the art market and driving prices ever higher.
    • Many dealers say the art market needs better regulation to survive.
    • Colombian drug ring the Cali Cartel once used paintings by Rubens and Picasso for money laundering.
  • Audio


  • Pdf

A visitor to Mexico City's Bellas Artes Museum walks between two Andy Warhol "Dollar Sign" paintings.  Source: Reuters
A visitor to Mexico City's Bellas Artes Museum walks between two Andy Warhol "Dollar Sign" paintings. Source: Reuters


When can we begin to speak about art again without talking of fraud, deceit and embezzlement?

Perhaps when inside galleries and auction houses, we speak first of the impact and aesthetic of an artwork, instead of its price. Martin Roth, a museum director who worked in the eastern German city of Dresden and is now based in London, told Die Zeit that the entire art world now revolves around money.  But it’s far worse than that.

“The business has become dirty, really dirty,” he said. One could think this is just one museum man’s view of his discredited industry, however, it’s not so simple. Many gallery owners and auctioneers also complain about the rumors, the absurd prices and the self-importance of the industry.

“The system is screwed,” Bruno Brunner of the Gallery of Contemporary Fine Arts in Berlin recently told Monopol, a German art magazine.

One well-respected New York collector going by the pseudonym Elliott King recently went on art buying tour in Berlin and said it was clear the art market must reform itself or it will die a protracted death.

He said the system is breaking down, now that art is becoming a business. Deals lack transparency. Money obtained by unsavory means is going into art works, and once honest dealers and curators are acting like fraudsters. This money is distorting the market and driving prices ever higher.

Experts such as Swiss lawyer Andrea Racher say that tighter controls in the finance industry have made the art market a more attractive target for money launderers. Artworks can be bought for an inflated price, to launder vast sums of money, in complex deals that can be very hard for investigating authorities to control.

As another Swiss lawyer, Monika Roth, wrote in her article “Money Laundering in the Art World” for Art & Law this year, there is often a conflict of interest. Art dealers are meant to be agents for the buyer, but in reality they often end up taking commissions from both sides. There is also rarely direct contact between a buyer and a seller, which makes these deals hard to trace and makes it almost impossible to create a comprehensive paper trail to verify the authenticity of a work of art.

Through offshore companies in the Bahamas or the British Virgin Islands, businessmen can pretend to be art buyers to avoid taxes and bypass regulations. Offshore companies have no legal obligation to keep proper records, and can remain totally opaque.

In her article, Ms. Roth exposed a long list of Swiss banks that had used illegal art deals for money laundering purposes. Outgoing government officials would often steal artworks from their embassies, sell them through Swiss accounts and keep the illegally gained profits in Swiss banks.

Want to keep reading?

Subscribe now or log in to read our coverage of Europe’s leading economy.