Welcome to the WC, where you’re trapped in my mind for eight to twelve minutes a week.
Today, you’re going to learn about money laundering. Next week, you’ll learn how to create an alternative asset portfolio that avoids laundering money (assuming that’s what you want).
While global financial institutions have spent the past decade implementing increasingly sophisticated anti-money laundering controls, savvy criminals haven’t abandoned their efforts—they’ve simply redirected them. The new frontier of financial crime exists in a realm many high-net-worth investors find deeply familiar: alternative assets.
That Patek Philippe timepiece you’ve coveted might be more than just a horological masterpiece—it could be a highly efficient vehicle for washing illicit funds. Even the vintage Bordeaux in your cellar represents an asset class that criminals have learned to exploit with remarkable efficiency.
As your portfolio diversifies beyond traditional investments into luxury collectibles, rare commodities, and other assets, you’re inadvertently stepping into the same markets that have become havens for those seeking to obscure the origins of ill-gotten gains.
The concerning reality is that many of the alternative investments most attractive to sophisticated investors—those offering privacy, portability, and potential appreciation—possess the exact characteristics money launderers covet.
This isn’t merely an academic concern. When laundered assets infiltrate legitimate markets, they distort valuations, undermine market integrity, and create legal exposure for unwitting participants. Even the most scrupulous investor risks purchasing an asset with problematic origins or selling to a buyer whose funds deserve scrutiny.
In this first installment of our two-part series, we’ll reveal which alternative asset classes face the highest money laundering risks, why certain investments have become preferred vehicles for financial crime, and which specific red flags should prompt immediate caution.
Far from discouraging alternative investment, our goal is to equip you with the knowledge to pursue these opportunities with confidence, distinguishing legitimate transactions from those designed to cleanse criminal proceeds.
The landscape of financial crime is evolving rapidly, but with proper understanding, you can protect both your portfolio and your reputation while navigating these increasingly complex markets.
Nothing here is investment advice. Do your own research. Please.
Let’s go.
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Table of Contents
A New Frontline in Illicit Finance
For decades, the financial crime drama played out in the well-lit lobby of your local bank—suspicious transaction reports, mandatory KYC, armored trucks full of documentation.
But as banks beefed up their defenses, criminals did what any halfway competent crook does when faced with a locked door: they looked for an open window.
That window? Alternative assets.
It turns out you don’t need to hide your dirty money in numbered accounts when you can tuck it into a Warhol, a Rolex, or an especially aggressive NFT. As institutional investors dip their toes into tangible assets and crypto enthusiasts chase alpha across decentralized landscapes, the world of collectibles, luxury goods, and digital tokens has become a sprawling bazaar—not just for investors, but for the world’s laundromats in human form.
The implications for the modern investor are uncomfortable. Many of the asset classes praised for their resilience, scarcity, and uncorrelated returns are also prime vehicles for laundering illicit funds.
It’s a new kind of risk, less about volatility, more about unknowingly becoming the bagholder for someone else’s crime spree.
How Dirty Money Picks Its Playground
Launderers aren’t random. They’re methodical. They need three things: portability, anonymity, and subjective valuation. When an asset ticks all three boxes, it becomes a laundering trifecta.
Let’s unpack that.
Portability matters because nobody wants to stuff cash into duffel bags when a few diamonds or gold coins can do the job better. Art? You can roll a $10 million painting into a tube. Watches? A few million in resale value can sit comfortably on your wrist at dinner.
Anonymity is increasingly rare in finance, but still thrives in alternative asset markets. Art sales frequently occur via intermediaries. Crypto wallets don’t demand passports. A shell company buying a Patek through an auction house rarely raises an eyebrow.
Subjective valuation is the cherry on top. When you can’t say with certainty what something is worth—whether it’s a Basquiat or a Bored Ape—it becomes very easy to launder money by overpaying, underpaying, or flipping the same item back and forth among “collectors” who all share the same last name.
This is the dark mirror of alternative investing. The same features that make these assets attractive—scarcity, mystique, market opacity—are what make them so appealing to criminals.
The Five Asset Classes That Should Keep You Up at Night
Let’s name names.
Crypto & NFTs are the apex predators here. The DeFi space in particular offers anonymity at scale—peer-to-peer transactions, decentralized exchanges, and privacy coins like Monero mean your ETH can go on quite the laundering vacation before making its way back as a “clean” stablecoin.
Diamonds & Precious Stones have been laundering vehicles since long before crypto was a glimmer in Satoshi’s eye. They’re small, hard, shiny, and not governed by any universal registry. And as the diamond market becomes increasingly retail-facing (hello, lab-grown), the paper trail gets even murkier.
Rare Coins & Historical Currency offer a special kind of vintage anonymity. The coin trade has a devoted enthusiast base, but also a long history of overpricing, fake provenance, and rapid flips between associated buyers.
Fine Art is the OG laundering asset. It’s opaque, easy to overvalue, and often stored in freeports where neither customs nor conscience tends to tread. Even major auction houses, now under increasing pressure from AML, have long turned a blind eye to shell companies bidding against themselves.
Luxury Watches, meanwhile, are hiding in plain sight. The secondary market is booming, often anonymous, and global. A Richard Mille can go from Dubai to Geneva to Miami without raising an eyebrow.
Due Diligence or Due Disaster
In a market built on stories—where a watch can gain $20,000 in value simply because Paul Newman once glanced at it—the line between passion and peril is vanishingly thin. But if you’re spending serious capital on alternative assets, due diligence isn’t a formality. It’s your firewall.
Let’s start with the basics. Provenance, for instance, isn’t just a nice-to-have—it’s the entire backbone of legitimacy for physical assets. If a painting’s chain of ownership skips from “private European collection” to “current seller,” that’s a red flag, not a charming mystery.
Legitimate provenance includes purchase receipts, export licenses, customs declarations, and ideally, third-party appraisals. Anything less and you’re in a fog.
The same applies to high-value watches and jewelry. A luxury watch without papers is like a car without a VIN—it may still function, but good luck proving it’s yours.
And in a secondary market awash with grey-market resellers and “dealers” whose credentials amount to an Instagram account and a PO Box, relying on reputation alone is gambling at best.
What many investors don’t realize is that laundering schemes often exploit precisely the kind of casual transactions collectors love. Think of the dealer who says, “We do things the old-fashioned way—cash only, no questions asked.” That isn’t quaint; it’s a compliance hazard dressed up in nostalgia.
Even real-world institutions can get it wrong. Museums have had to return looted antiquities. Blue-chip auction houses have sold forgeries with Hollywood-level backstories.
Unless your name is carved above the entrance of a major cultural institution, assume that due diligence is your responsibility—and that mistakes carry real costs.
Due diligence isn’t just about paper. It’s behavioral. Be suspicious of sellers who:
- Are eager to close the deal quickly, especially if you’re paying in full.
- Use intermediaries or shell companies with no clear role beyond obfuscation.
- Push for private sales over auctions, especially for items that would command high visibility.
And if the seller balks when you ask for basic documentation? That’s your cue to walk away, no matter how rare the opportunity or how charming the backstory.
Because in the world of alternative assets, “one-of-a-kind” is only a virtue when you’re not describing a lawsuit.
When Good Investments Go Bad: Legal Implications
There’s a peculiar irony to alternative assets: they can make you feel rich and riskless right up until the moment someone knocks on your door with a court order.
Asset forfeiture is the big, ugly stick authorities wield when they believe an asset was used in or purchased with the proceeds of a crime.
And in many jurisdictions, that stick swings first and asks questions later. You don’t have to be guilty to lose an asset. You just have to be holding it when the music stops.
Take luxury watches. If a cartel associate bought a dozen Pateks and laundered them through third-party resellers, and one of them ends up in your collection—well, guess what? You might find yourself in court arguing about your innocence while your $300,000 timepiece sits in an evidence locker.
In art and antiquities, this happens more often than you’d think. A forged or stolen artwork—especially one with disputed provenance or illicit export history—can trigger international claims, customs seizures, and endless litigation. Even if you “bought it in good faith,” that’s not always a shield. The legal system often expects you to have exercised diligence, and failure to do so can be interpreted as willful blindness.
The “innocent owner” defense is notoriously fickle. In the U.S., it depends on whether you took “reasonable steps” to verify the asset wasn’t tainted. In Europe, the rules vary by country, but the principle is the same: good intentions don’t count for much if your due diligence doesn’t exist on paper.
And let’s not forget insurance. If you can’t prove a clean title or origin, your insurer might decline to pay out for theft or loss. No provenance, no policy. Some insurers are now requiring due diligence audits for policies on assets over a certain value, because even they know how murky this market can be.
Recovery, meanwhile, is its own saga. If your watch or artwork is seized, you may be able to petition for its return—but be prepared for years of court filings, legal fees, and cross-border headaches. And even if you win? The item’s value may have depreciated, or worse, its reputation may have become toxic in the market.
The bottom line? In the realm of alternative assets, the real risk isn’t just losing money. It’s losing your asset, your reputation, and any legal recourse—all in one stroke.
Check in next week, where I’ll show you how to build a world-class portfolio without laundering someone else’s money.
Don’t want to do it yourself? Join Altea, and we’ll do it for you.
That’s all for this week; I hope you enjoyed it.
Cheers,
Wyatt
Disclosures
- I’ve never laundered anyone’s money.
