Art of Money Laundering with Non-Fungible Tokens

A myth or reality?

Abstract

As the rules for countering money laundering constantly change, criminals find new methods and platforms to launder their “dirty” money. Recently, such new platforms have included the art market and the use of crypto currencies. Subsequently, both of these sectors were added to the list of sectors susceptible to facilitate money laundering. Apart from the traditional art market, criminals may use digital art in order to facilitate their activities. The rise of the digital art market with the expansion of Non-Fungible Tokens (NFTs) is a new area of concern for law enforcement agencies. Anonymity and price volatility of NFTs create a unique and exploitable environment for criminals. The complex nature and uncertain legal status of NFTs further complicate the counter measures one can take. This paper explains what NFTs are, analyses their relation to money laundering risks and scrutinises their legal status in the EU. In doing so, it identifies gaps in the law and training needs of LEAs. Finally, the paper provides potential solutions and recommendations in relation to these gaps. The paper offers a novel study on NFTs and aims to pave the way for further comparative studies related to NFTs.