Art, luxury goods like jewellery or designer items, and gambling continue to draw scrutiny from regulators for their role in facilitating financial crime. These sectors share characteristics that make oversight difficult, including anonymity, subjective valuations, and uneven regulations across jurisdictions.

Such traits make them appealing at every stage of money laundering, from placement to layering and integration. While these sectors have long been recognised as high-risk, the red flags are evolving. 

With increasing regulatory focus, financial institutions play a crucial role in detecting and disrupting illicit activity in art, luxury goods, and gambling.

Artwork

The global art market has long been viewed as a high-risk sector for money laundering due to its opacity, high-value transactions, and lack of consistent regulation. Criminals exploit these vulnerabilities to obscure illicit funds through artwork purchases, resale schemes, and offshore storage. Financial institutions are increasingly expected to detect red flags related to suspicious art transactions, especially in jurisdictions with tightening AML regulations.

With digital art and NFTs entering the mainstream, regulatory scrutiny is expanding to cover these newer asset classes. The challenge for compliance teams lies in adapting controls to account for both traditional and digital artwork, ensuring effective beneficial ownership checks, transaction monitoring, and sanctions screening. As enforcement grows more aggressive, especially in the UK and US, firms operating in or adjacent to the art market must enhance their due diligence and KYC processes.

Why the art market is vulnerable to financial crime

The global art market saw an estimated $57.5 billion in sales in 2024 a scale that continues to attract bad actors. The sector’s opacity, combined with inconsistent regulation and high-value, portable assets, makes it a prime vehicle for money laundering and sanctions evasion.

Transactions are often private, and true ownership is frequently hidden behind legal structures like offshore trusts or shell companies. These arrangements, along with intermediaries such as brokers or dealers representing unnamed clients, make it difficult to verify beneficial ownership or the source of funds. In addition to concealing ownership, criminals may manipulate prices through straw bids or transactions involving affiliated parties to obscure illicit transfers.

Once acquired, artworks can be stored in secure facilities, such as freeports, private warehouses, or gallery vaults, shielding wealth from scrutiny as it appreciates in value. The UK’s National Crime Agency has identified this as a red flag for sanctions evasion, cultural property trafficking, and money laundering, citing lax Know Your Customer (KYC) and fragmented due diligence practices across the industry.

Amid these concerns, the UK’s Office of Financial Sanctions Implementation (OFSI) has urged greater transparency around beneficial ownership in the art sector. Enforcement has also stepped up, with several high-profile galleries fined for anti-money laundering (AML) breaches.

Digital art and non-fungible tokens (NFTs) add further complexity. Traded online and often via peer-to-peer platforms, these assets can change hands rapidly across borders and create compliance blind spots.

Red flags financial institutions should watch for

Financial institutions should be alert to potential indicators of money laundering involving artwork. 

Red flags may include:

• Use of shell companies, trusts, or third-party intermediaries, such as art dealers, brokers, advisers, or interior designers, to buy, hold, or sell artwork, especially when acting on behalf of undisclosed parties.

• Transactions involving politically exposed persons (PEPs), their relatives or close associates.

• Links to persons or entities suspected of or tied to the trafficking of cultural property or other illicit activity connected to the art trade.

A 2025 case illustrates some of these risks. A UK art dealer was jailed for secretly selling nearly £140,000 in artworks to a sanctioned Hezbollah financier, deliberately omitting the buyer’s name from records to avoid detection. Authorities later seized 23 high-value pieces, including works by Picasso and Warhol, from storage facilities in London. Another example illustrates how sanctioned Russian oligarchs used shell companies to purchase art worth over $18 million through US auction houses, evading detection.

Luxury goods

Luxury assets, such as designer fashion, high-end watches, fine jewellery, and rare collectibles, represent an increasingly scrutinised area in anti-money laundering compliance. These items are portable, easily resold, and often purchased in cash or through intermediaries, making them ideal vehicles for concealing the origin of illicit wealth. Whether through auction houses, luxury dealerships, or peer-to-peer marketplaces, criminals use these assets to launder funds across borders and reintroduce them into the legitimate financial system.

Regulators in the EU and UK now require high-value dealers to adhere to stringent AML compliance standards, yet enforcement gaps persist, particularly in secondary markets and online resale platforms. Financial institutions involved in luxury-related payments, credit lines, or cross-border transfers must implement robust transaction monitoring and enhanced due diligence procedures to identify and mitigate exposure to financial crime in the luxury sector.

Why luxury assets are vulnerable to money laundering

High-value luxury items, including watches, jewellery, and designer fashion, are used to conceal the origins of illicit wealth. Assets like yachts have been linked to sanctions evasion, with ownership that is often hidden behind offshore entities and layered shell structures. Used to store wealth discreetly, they pose due diligence and sanctions screening challenges for financial institutions. 

One high-profile example is the superyacht Amadea, with links to a sanctioned Russian oligarch through a web of shell companies. Ongoing US dollar payments for its upkeep led to an enforcement action for sanctions violations.

As with artwork, the portability, resale potential, and subjective pricing of luxury goods make them attractive vehicles for money laundering. Criminals may purchase these assets with illicit funds, then move them across borders or resell them through peer-to-peer marketplaces or loosely regulated online resale platforms to reintroduce those funds into the financial system. With limited oversight and minimal identity checks, these channels are frequently exploited during the layering stage.

To address these risks, both the EU and UK require high-value dealers to comply with AML obligations, including customer due diligence, recordkeeping, and reporting, on transactions over €10,000 (or £10,000), even when split into smaller payments. 

But gaps in enforcement and limited oversight of informal markets mean financial institutions remain exposed, especially in secondary-market activity and cross-border transfers.

Red flags for financial institutions to watch for

Financial institutions should be alert to potential indicators of money laundering through luxury items.

Red flags may include: 

• High-value transactions that appear inconsistent with the customer’s expected activity, based on stated occupation or income.

• Multiple small-value payments designed to avoid thresholds, potentially indicating structuring or smurfing.

A major investigation in Singapore illustrates these money laundering risks. Authorities uncovered approximately $1 billion in cash and assets, including designer bags and rare luxury watches. Many of the seized items were acquired through informal or secondary markets with limited traceability highlighting how such channels can be exploited to conceal illicit wealth.

Gambling

The gambling sector, particularly online platforms, poses significant financial crime risks due to its fast-moving transactions, high liquidity, and frequent use of anonymous payment channels. Online casinos and sports betting platforms have become attractive tools for layering and integrating illicit funds, especially where regulatory oversight is inconsistent or insufficient. Criminals exploit loopholes by funding accounts with illegal proceeds, engaging minimally in gambling, and withdrawing the “cleaned” money.

Cryptocurrencies further compound the risks, enabling anonymous transactions across jurisdictions without the traditional friction of banking systems. To reduce exposure, financial institutions must enhance their monitoring of gambling-related transactions, looking for suspicious patterns such as rapid deposit/withdrawal cycles, structuring, and use of multiple payment sources. As global regulation evolves, institutions must align their controls to meet rising expectations and manage growing compliance risk in this sector.

Why gambling is vulnerable to money laundering

The gambling industry is steadily growing, with the online market alone projected to reach $154 billion by 2030. Online betting platforms are fast-moving environments, characterised by high-volume financial flows, cross-border accessibility, and increasing use of cryptocurrency and anonymous payment methods.

These features make them attractive at every stage of the money laundering cycle, particularly where KYC requirements are weak or regulatory oversight is fragmented. 

Common techniques include cash-in, cash-out methods, where funds are deposited, barely wagered, and then quickly withdrawn to make illicit proceeds appear legitimate. Stolen or synthetic identities may be used to open accounts and obscure the true origin of the funds. Structuring or smurfing, breaking up  large sums into smaller deposits across one or more accounts, is another method used to avoid detection thresholds. 

To integrate funds, some actors manipulate peer-to-peer gaming features, deliberately losing to conspirators to transfer value under the guise of gameplay. Others open multiple accounts under different names to increase obfuscation.

Red flags financial institutions should watch for

Financial institutions should be alert to potential indicators of money laundering through gambling.

Red flags may include:

• Rapid deposits and withdrawals from gambling merchants in a short timeframe.

• Use of multiple funding sources, such as cards, prepaid accounts, or e-wallets, tied to the same customer.

• Discrepancies between customer identity and payment methods, or mismatches with KYC data.

Research by the Royal United Services Institute (RUSI) highlights how North Korean actors use gambling to evade sanctions, relying on a mix of junket-linked casinos, front companies, and crypto-based online platforms. These operations often bypass traditional KYC checks and shield beneficial ownership, creating blind spots for both regulators and financial institutions.

Strengthening Defences in High-Risk Sectors

The art, luxury, and gambling markets continue to expose vulnerabilities in financial crime compliance, making them a growing area of focus for financial institutions. 

Facctum helps firms detect and respond to risk in these sectors through intelligent customer screening, advanced transaction monitoring, and real-time sanctions and watchlist management.

Contact us to learn how Facctum can strengthen your financial crime compliance strategy in high-risk sectors.