The recent case of car dealer Peter Grubisic is an extreme example of how the automotive trade can be affected by anti-money laundering legislation. A successful prosecution by the authorities revealed that he had utilised his second-hand car dealership and other business interests to launder the proceeds of his extensive criminal activities. Following action by the National Crime Agency, Grubisic has agreed to forfeit assets worth £1.14m.
I would hope that none of the dealers I know have adopted his business practices, but it is a reminder that the motor industry is regarded as being amongst the higher-risk sectors for anti-money laundering purposes.
Why are motor dealers at higher risk?
Money laundering involves disguising the illegal origin of the proceeds of crime. One of the methods to do this is to buy high-value items with cash. If we think about the average value of a car, a large amount of funds could be “cleaned” in a relatively short period of time.
Unfortunately, it is very easy for legitimate businesses like motor retailers to become part of this cycle, as you will take a customer’s enquiry to buy a vehicle at face value. It is because of this that legislation designed to prevent inadvertent, as well as intended, participation in money laundering was introduced. If the rules are broken, penalties include fines and imprisonment.
How can I protect myself and my dealership?
Most dealers make the decision that they won’t accept large amounts of cash. Large means 10,000 euros or more, and includes if a customer deposits cash directly into your bank account or if multiple smaller payments are made which appear to be linked. I had a dealer tell me they got around the rules once by driving the customer to the bank – please do not do this! I’ve also seen dealers who have received cash without them knowing because a customer had found their bank details on an invoice. If this happens then please contact me for advice!
If you take the route of not taking cash above the limit, you need to ensure that the policy is communicated to staff. One of my first questions when talking to dealers about this is ‘how do new staff members know the policy?’ It is best practice to include the details in your induction procedures.
Any businesses wanting to accept large cash payments would need to register as a high value dealer. This would involve formal registration with HMRC and implementation of procedures designed to detect suspicious transactions. These policies and procedures would cover areas such as how to establish the identity of your customer, how to report a suspicious transaction and training for all relevant staff.
As the body responsible for money laundering supervision, HMRC undertakes compliance checks to ensure businesses are meeting their obligations. If weaknesses are found they can either insist on improvements or impose penalties.
Anti-money laundering compliance is an area where we have a great deal of experience, as firms of accountants are subject to stringent rules. Coupled with our knowledge of the motor trade we are well placed to provide advice in this area so please contact me at michelle.malone@armstrongwatson.co.uk if you have any questions.
If you would like any advice please don't hesitate to contact us.
