By Chris Vedelago and Marta Pascual Juanola
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The tale of the Picasso painting looted from Saddam Hussein’s palace had enough of a ring of truth to convince the ruthless Melbourne underworld figure to hand over $500,000 in a wild bid to launder his drug money.
The cubist portrait of a woman dressed in blue had supposedly been stolen by Australian soldiers occupying one of the dictator’s opulent homes after the fall of Baghdad in 2003. Not only was it signed by Pablo Picasso, but the frame still had a decades-old label from a Parisian gallery that had once possessed it.
A painting claimed to be by Pablo Picasso was at the centre of a notorious drug kingpin’s attempt to launder money
Smuggled back to Australia, the painting had been kept hidden until a buyer could be found that was willing to risk an investment of hundreds of thousands of dollars to potentially one day reap a windfall of millions if it could be authenticated and then traded in the legitimate art market.
The kingpin, who cannot be named for legal reasons because he is currently facing criminal charges over a large-scale drug trafficking operation, had so much dirty money in need of a wash that he considered the dubious Picasso “investment” worth the risk.
Ultimately, the broker disappeared with the $500,000 as the Picasso was set to be smuggled to France to be authenticated. Experts who viewed a photograph of the painting obtained by The Age suggested strongly it was a fake.
But this didn’t stop the erstwhile underworld investor, who would try again when offered long-shot chances to conceal his criminal profits using other paintings by Picasso and French master Henri Matisse, which also had distinctly dubious origins.
“You can’t send a million dollars using DHL. The artwork gives them massive amounts of money in a DHL parcel,” an underworld source involved in the art trade said. “[These paintings can be] sent overseas in carry-on luggage. [A painting is] better than Bitcoin.”
The shadowy nature of the art market has left it ripe for exploitation by organised criminals, who have added paintings, sculptures and non-fungible tokens (NFTs) to their list of underworld currency and laundering tools, much like property, jewels, cars, luxury goods, casinos and cryptocurrencies.
“These groups are always looking for new ways to try and conceal this money,” Detective Inspector Jennifer Locke from Victoria Police’s Criminal Proceeds Squad said.
“We regularly see syndicates where those involved have purchased designer clothing and accessories or expensive jewellery, and artworks just provide another option for offenders.”
“These criminal syndicates are run like businesses and artworks represent a business investment.”
‘An ideal way to hide money’
When Victoria Police and federal law enforcement authorities dismantled the drug empire of the Melbourne-based Notorious Crime Family last year, investigators uncovered signs that the gang was also running a sophisticated sideline in the art trade.
George Marrogi was the leader of the Notorious Crime Family
Five artworks by well-known Australian artists Brett Whiteley, Adam Cullen, Ben Quilty and Fred Williams – worth nearly $900,000 – were found among a more than $47 million portfolio of ill-gotten assets that also included numerous properties, Rolex watches and a yacht.
Police suspect the NCF drug syndicate was using “cleanskins” – associates without prior criminal convictions – as intermediaries to allegedly convert drug profits into high-value artworks purchased from a legitimate Melbourne art gallery.
Organised crime is attracted to art dealing because it is a largely unregulated market where high-value assets can be traded between anonymous parties and paid for in large sums of cash.
Paintings are also harder to identify as proceeds of crime by law enforcement. A painting found hanging inside a home or professionally wrapped and stored could be an investment or inherited from a relative.
“It’s an ideal way to hide money, to sit on it. Art is easily hidden, easily traded but hard to trace,” said a detective who specialises in investigating organised crime, who cannot be identified speaking about police operations.
“The art market can be easily infiltrated by organised criminals yet is a lot more respectable than crypto and subtler than amassing huge piles of unexplainable cash or boats and cars.”
Convicted murderer George Marrogi, the founder of the collapsed NCF syndicate, is suspected to have paid for the artworks in cash through an art dealer and a lawyer, keeping his identity as the buyer hidden.
Current money laundering and terrorism financing laws do not regulate art dealers and auction houses, despite a recommendation to expand the legislation to include high-value dealers as part of a statutory review 10 years ago.
“No one can sell a house without it being properly documented. Same with a car. But for a painting, anyone can say anything about a painting,” art market and forgery expert Professor Robyn Sloggett said.
“The law is so thin in this area, so ineffective. It’s perfect for money laundering because there are no checks and balances, no regulations around records, no regulation around the veracity of information.”
Criminal infiltration of the legitimate art industry sometimes extends to the corruption of dealers, who have been found running sophisticated international money laundering operations, according to former Australian Federal Police officer and money laundering expert Chris Douglas, of Malkara Consulting.
“The important characteristic of art is the value is in the eye of the beholder. There is no comparable market value.”
Douglas said one method was for criminals to pay above the odds for a piece of art to an accomplice dealer, who banks the cash along with funds from other legitimate sales and then transfers the money internationally under the rubric of buying more art for their gallery.
“The money’s offshore and you’ve got an alibi about why. Finding the painting is easy. But if they’re laundering by co-mingling of funds, it’s very, very hard to detect.”
69 kilograms of drugs seized by police from the Notorious Crime Family
While Australia had had its fair share of art “cowboys” in the past, art adviser and valuer Catherine Asquith, a former Melbourne gallerist, said that contrary to popular belief, the art market wasn’t totally unregulated or ignorant of the risks and how to manage them.
“This is not the Wild West and you will be caught out if you do the wrong thing,” she said. “We’re a small market and not much can transpire without being subjected to some level of scrutiny.”
She said other markets around the world, including New York and London, were mulling anti-money laundering measures to protect the market, but no meaningful steps had been taken in Australia.
“I think we do need to consider that at some point,” Asquith said. “Part of your due diligence should be checking where the funds are coming from if the client is not known to you and you don’t have a long-standing client relationship with them.”
But barrister Edward Greaves, who specialises in proceeds of crime actions, said expanding the legislation to include art dealers wouldn’t necessarily be effective in protecting the market, especially when deals can easily be conducted privately.
“Art will always be attractive to organised crime, who typically enjoy conspicuous consumption,” said Greaves.
“You’ve got to remember that someone who’s got a million dollars of dirty money will be quite happy to spend some of it to be able to keep the balance in a way that makes it look legitimate.”
Fake it ’til you make it
With the risks criminals are prepared to take to clean massive volumes of dirty money, it’s no surprise they are also susceptible to fake artworks.
The international and Australian art markets are riddled with fakes, from the work of the old European masters to local up-and-coming artists.
Forgery expert Sloggett said entrapping buyers with a fake artwork involves crafting a convincing story that could be partially fact-checked.
“All successful ruses have a grain of truth in them. Something that can be found in the public domain that’s a bit off centre. Something that has the aura that it must be insider knowledge. People get tantalised by the idea they’ve got inside information,” Sloggett said.
An ornate room Australian troops occupied one of Saddam Hussein’s former palaces during the Iraq war. The occupation was used to concoct a backstory explaining ‘discovery’ of a Picasso painting that was offered for sale to a Melbourne drug traffickerCredit: David Dare Parker / © Australian War Memorial
As for Saddam Hussein’s Picasso, the believability of the story hinged on exploiting two facts that could be used to spin out the tale.
The first was that Picasso was famously prolific, creating something like 13,500 paintings and 100,000 prints and engravings by the time of his death at 91 in 1973.
The second was that Australian troops had occupied one of Hussein’s palaces in Baghdad following the fall of the regime in 2003, at a time when the chaos of the invasion had seen widespread looting of Saddam’s network of luxurious palaces and Iraqi museums and cultural institutions.
Adding to the lustre of the story was that other reputed Picassos had been “discovered” or “recovered” in Iraq under murky circumstances on at least two occasions – the latest during a police drug raid near the border with Iran last year.
“Forgers, or people who work with forgers to pass forged works, can be pretty sophisticated at one level and pretty easy to unpick and pretty dumb at another level,” Sloggett said. “They come unstuck when they try to pass [the forgeries] to the next party without securing a story about provenance.”
Provenance is the ownership history of an artwork, from the studio of the artist who created it to its current holder (whether that might be a museum, gallery, auction house or private investor).
It determines the “pedigree” of an artwork – and how much it might sell for in the market – but there is currently no register or database that accredits the ownership of art pieces.
For example, Hussein’s Picasso came with a label on the back of the frame that purported to show it once passed through the hands of a Paris art gallery.
An alleged 1943 Matisse the Melbourne drug kingpin was also attempting to authenticate included accompanying documents emblazoned with Iranian government emblems, university stamps and the logo for a children’s cancer charity.
It remains unknown whether anything that passed through the hands of this gangland player was legitimate.
“When it comes to money, people want to believe,” an underworld source said.
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