Anti Money Laundering for dealers - What’s your responsibility?
Published Tuesday 1 October 2019
Cars, boats, art, bullion, cultural artefacts, jewellery…
Buying and selling expensive items like these have been used as a way of moving money around for hundreds of years, so anyone who trades in these items on a regular basis may have to comply with a few AML (Anti Money Laundering) rules. Whilst that might sound daunting, even if you are captured (meaning your buying and selling activity is included in the AML laws) your obligations are very light, so don’t worry too much!
Nonetheless, here are a few tips from those who have gone before about getting yourself sorted. Start with a couple of questions about whether you’re in the regime at all:
Is your type of business required to comply? In short, if you buy or sell high-value goods regularly, then most likely yes. The phrase used is ‘in the ordinary course of business’. A carefully crafted excuse won’t let you off - look at the guide noted below and be honest with yourself. The regulators don’t have much patience for firms that think they can skirt the rules.
Is the specific transaction captured? There has been a lot of focus on the cash threshold ($10,000+). But be careful with that word cash: it includes all cheques (yes, bank cheques).If there is no cash, then the Department of Internal Affairs (DIA) has said you are in the clear (for the moment). And it applies to cash received or paid out. So if you pay by cash or cheque for stock, you are captured.
To make this easier, you can go to the DIA guideline and work through the ‘Am I Captured’ flowchart on page 3. Here’s the list of high-value goods (which includes Motor Vehicles as of 3 October 2019).
This legislation isn’t designed to catch you out selling that watch your grandad left you, but you need to be upfront, and if you think you don’t need to comply make a careful note and show that you review it from time to time.
There’s a ‘gotcha’ here to keep in mind. If someone structures a transaction to avoid the AML rules (aiding concealment) they are committing a criminal offence. This can mean things like splitting it into smaller amounts, and could also include taking a deposit on behalf - so look out for people (and even staff) who accept a cash deposit into their personal account, and then transfer it electronically. That can be smurfing and it’s a bad look.
If you do need to accept cash on-site, get on with sorting it out. Here are a few mistakes we see:
Don’t delay: appoint someone to be responsible for this and register for GoAML. This is the Police system for filing transaction reports. It’s a big clue if DIA sees a firm that looks like they should be registered and aren’t.
Understand that it’s not entirely about identity verification. Identity verification providers will be selling hard to you, and unfortunately, a lot of their marketing omits to mention that they don’t help with reporting.
Simply saying “we won’t accept cash or cheques” isn’t good enough: instead, say “our policy is to send customers to the bank to deposit cash or cheques” (where they will have to provide ID). And understand that there is a risk if customers are insistent, it’s a big red flag.
Above all else, don’t fall into the trap of denial: many tried to ignore their responsibilities, often by managing their scope. It’s a part of life nowadays, it’s far better to approach it positively - after all, it is genuinely about keeping our money as clean as our country.
Adam Hunt runs The TIC Company which provides outsourced AML services to all types of reporting entities. He still had hair when he started fighting financial crime professionally, including with the Financial Markets Authority and Inland Revenue.