my understanding was that you'd buy an NFT at some inflated price using cryptocurrency to be laundered, and on-sell it (having affected its perceived value with the previous inflated sale) but I could be off.
The other use I read about recently was using them as a proxy for buying some sort of illicit good or service, i.e "here's $600,000 for that wink NFT wink I wanted".
So what? Say you have an account X which holds funds from criminal operations (e.g. ransomware payments). If you cash it out directly there's no doubt you're a criminal. But if you use that money to pay yourself for an NFT, now you can possibly deny that you have any knowledge about source of X income.
Better yet send money from X through a bunch of privacy oriented tokens like monero, tumblers and mixing services, losing 20-50% in the process and consolidating the rest in account Y. Now you have plausibly clean money but you can't pay taxes yet as there's no paper trail for this income. Solution is easy, buy an NFT from yourself, declare it, pay taxes and buy a new yacht.
If buying a virtual good from oneself at any arbitrary price was easy, money laundering would be solved problem for criminals, regardless of NFTs or not, wouldn't you agree?
That's exactly what's happening right now. But before NFTs the most plausible ways were either opening a business accepting crypto (not unlike meatspace money laundering involving cash-accepting businesses) or having lucky strikes on gambling platforms (where you can play against yourself).
For a larger operation going business route is still preferable but on an individual level NFTs are much easier due to ridiculously high margins that have been normalized there.
How do you know this is exactly what's happening right now? Do you work in the sec space or with tax authorities? I'm genuinely asking, as I'm a layperson in regards to these subjects, and, in my ignorance, I don't see the difference between that and, say, Counter Strike skins selling for 15k USD.
To my understanding, all these things leave simple 1-1 paper trails that can be followed later and lead to consequences, but I might certainly be wrong.
I'm trying to separate people who simply don't like cryptocurrencies and NFTs (which might be your case, I don't know) from actually informed thoughts about what's happening.
The other use I read about recently was using them as a proxy for buying some sort of illicit good or service, i.e "here's $600,000 for that wink NFT wink I wanted".
Not my space though so might be off by a mile :')