4 ms·

You need to pay me for some illicit activity. Instead of having you pay me directly, I produce a set of minimalist pieces of art and issue NFTs for them. You bu

You need to pay me for some illicit activity. Instead of having you pay me directly, I produce a set of minimalist pieces of art and issue NFTs for them. You buy them or pay your associates to buy them. The transactions now appear as legitimate trade.

capableweb 5y ago
Since both parties have to (supposedly) declare their expenses/income (if the value is high) in their retrospective countries, this scheme is as failsafe as just sending the transaction directly between the two of them. In your example you have successfully transferred the funds between two parties, but you have not laundered anything here.
- arlcode 5y ago
  I'm not sure I can follow. The "legit" transaction (NFT<->Money) would be declared and taxes would be paid on any gains. The "real" product would be delivered off chain and without anybody knowing. From an outsiders perspective it looks like a high value art purchase.
  - capableweb 5y ago
    The purchaser can just claim they spent X on art, sure, declare away. But how do you recover the funds again? You'll need to declare that you sold art for X, and tax it so you can actually use it. Again, nothing has been washed here, you've just made a normal transfer with zero benefit.
    - arlcode 5y ago
      Oh I see. I think there are several use cases people associate with NFT. One is money laundering and that is indeed hard as you mention. The other is payment for illegal services and goods. I can't wire you money for "one assassination" but I can wire you money for "art" because who knows how much it's really worth.
    - boomlinde 5y ago
      > But how do you recover the funds again? You'll need to declare that you sold art for X, and tax it so you can actually use it. Yes, in every respect you treat it as legitimate trade, when in fact it's payment for something illegal, in order to conceal that it isn't payment for a legal service or good. That's a basically a dictionary definition of money laundering. I'm not sure what you expect of it here, or why paying taxes matters. The point is not to evade taxation, but to conceal the illegal transaction and make it appear as though it's legitimate and legal. > Again, nothing has been washed here, you've just made a normal transfer with zero benefit. Something has been washed in the sense that you've intentionally created a plausibly legitimate cover for the transaction in order to conceal the illegal goods/services the payment actually concerns.
- aj3 5y ago
  Well, you're wrong. Seller declares income and pays taxes, but they don't have a duty to track down buyers real identity and check their income sources. Thus you could easily be both buyer and seller but only declare seller part.
sabellito 5y ago
This type of money laundering has always been possible somewhat easily. Shell companies can be used for that, and look way more legitimate than paying possibly millions of euros on speculative art - I'd imagine that declaring to the tax man that those extra millions you made this year came from a few ms paint drawings would eventually get one caught. Physical art has strict laws about sell value and speculation exactly because of that, if NFTs really take off (somehow), it's easy to imagine that the same scrutiny would follow. I'm curious to understand how NFTs would be used to launder, for instance, drug cash. I often see the expression "money laundering" being used in these discussions without a real understand of how it would work.

capableweb 5y ago

Since both parties have to (supposedly) declare their expenses/income (if the value is high) in their retrospective countries, this scheme is as failsafe as just sending the transaction directly between the two of them. In your example you have successfully transferred the funds between two parties, but you have not laundered anything here.

arlcode 5y ago
I'm not sure I can follow. The "legit" transaction (NFT<->Money) would be declared and taxes would be paid on any gains. The "real" product would be delivered off chain and without anybody knowing. From an outsiders perspective it looks like a high value art purchase.
- capableweb 5y ago
  The purchaser can just claim they spent X on art, sure, declare away. But how do you recover the funds again? You'll need to declare that you sold art for X, and tax it so you can actually use it. Again, nothing has been washed here, you've just made a normal transfer with zero benefit.
  - arlcode 5y ago
    Oh I see. I think there are several use cases people associate with NFT. One is money laundering and that is indeed hard as you mention. The other is payment for illegal services and goods. I can't wire you money for "one assassination" but I can wire you money for "art" because who knows how much it's really worth.
  - boomlinde 5y ago
    > But how do you recover the funds again? You'll need to declare that you sold art for X, and tax it so you can actually use it. Yes, in every respect you treat it as legitimate trade, when in fact it's payment for something illegal, in order to conceal that it isn't payment for a legal service or good. That's a basically a dictionary definition of money laundering. I'm not sure what you expect of it here, or why paying taxes matters. The point is not to evade taxation, but to conceal the illegal transaction and make it appear as though it's legitimate and legal. > Again, nothing has been washed here, you've just made a normal transfer with zero benefit. Something has been washed in the sense that you've intentionally created a plausibly legitimate cover for the transaction in order to conceal the illegal goods/services the payment actually concerns.
aj3 5y ago
Well, you're wrong. Seller declares income and pays taxes, but they don't have a duty to track down buyers real identity and check their income sources. Thus you could easily be both buyer and seller but only declare seller part.

sabellito 5y ago

This type of money laundering has always been possible somewhat easily. Shell companies can be used for that, and look way more legitimate than paying possibly millions of euros on speculative art - I'd imagine that declaring to the tax man that those extra millions you made this year came from a few ms paint drawings would eventually get one caught. Physical art has strict laws about sell value and speculation exactly because of that, if NFTs really take off (somehow), it's easy to imagine that the same scrutiny would follow. I'm curious to understand how NFTs would be used to launder, for instance, drug cash. I often see the expression "money laundering" being used in these discussions without a real understand of how it would work.