Quora Answer: Why Do Criminals Use Luxury Goods to Launder Money?

The following is my answer to a Quora question: “Why do criminals use luxury goods to launder money?”

Money laundering is the process of legitimising the proceeds of criminal or illegal activities.  There are many methods, but they all involve the creation of transaction history.  Luxury goods are useful because of two reasons.

The first reason is that they have a high value, meaning that less transactions are needed to justify the existence of the funds in the placement and layering part of money laundering.  A single painting could be valued at $1 million.  How many bottles of orange juice do I have to claim to sell to put that equivalent on the books?

The second reason is that luxury goods have variable value, according to demand and scarcity, and appreciate significantly in a short period of time.  For example, that $1 million worth of bottles of orange juice will likely decrease in value with time due to depreciation, and shelf life.  That same painting could be appraised at a higher value than when it is bought.  This discrepancy in book value and appraised value can be played around with.