It’s no secret that expensive cars, yachts, and planes can be used to disguise illegal funds.
High-value dealers. A high-value dealer is any business or sole trader that accepts or makes cash payments above a certain threshold. Among countries that adopt this categorization of vehicle dealers are the UK and Australia.
Non-bank financial institutions (US). Any business engaged in the sale of cars, planes, or boats is classified as non-bank financial institutions. This means they must follow AML compliance requirements on par with banks.
Non-financial businesses (Europe). Individuals trading in goods belong to “non-financial businesses” and must comply with European Anti-Money Laundering Directives when they receive payments in cash over €10,000.
All these categories must follow AML requirements, including customer due diligence, suspicious activity reporting, and record-keeping. However, the extent of their AML compliance may differ. To find the exact requirements, dealers can refer to the AML guidance on the website of their regulator.
Why luxury transport attracts criminals
Several years ago, Malaysian businessman Jho Low spent $250 million on a superyacht. However, it turned out that this money was stolen from the Malaysian Welfare Fund. Low went into hiding, and now that same yacht is on sale for 100 million dollars less than he paid for it.
But why choose yachts to launder money? We break down the factors that make vehicle purchases attractive for criminals:
Ability to launder large sums. As prices for luxury vehicles are high, criminals can legitimize significant amounts in a single transaction.
Weak regulatory oversight. Dealerships are less regulated than banks and investment firms. For instance, Canada’s AML requirements don’t even mention vehicle dealers.
Low awareness of AML requirements among dealers. According to Transparency International, high-value dealers have a poor record when it comes to following AML requirements. For instance, they rarely contact law enforcement even if they suspect money laundering.
How money is laundered
The process of laundering money through vehicle sales can sometimes be quite straightforward: criminals simply buy a yacht with illegal funds in a jurisdiction with weak AML controls and sell it as a legitimate asset in another country.
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FATF 40 recommendations
USA PATRIOT ACT
International AML Policy & Procedures
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