AML/CFT Regulations In the Motor Vehicle Trade

The AML legislation very effectively supports large companies to prevent the risks of criminal infiltration. Not all for an "amnesia" of the legislature are subject to such regulatory constraints, which makes them easy predators by criminal organizations for illicit purposes.


One of the little-known sectors that produce large flows of illicit criminal money every year is the sector of buying, renting, and reselling cars, such as new or used vehicles. There are different models of cars in the international market: from sports cars like the big Italian brands to standard high-end vehicles like the German brands. In common, they contain a risk, namely the lack of or insufficient vigilance of the owners who sign contracts to purchase and rent vehicles. The world of cars is one of the sectors at high risk of fraud in the TBML (Trade-Based Money Laundering). In Europe through dealers are committed in relation to the automotive sector, many frauds in the field of tax offenses: the "carousel fraud": the transfer of the property by omitting the payment and declaration of taxes and taxes to the State of residence. 


A further risk to the TBML system can be found in two other particular criminal dynamics: 


  • 1. case: Buying a vehicle above its natural price, e.g., a higher, overvalued invoice (overbilling) compared to the real market price, which raises the suspicion that the transfer justifies the payment of further sums of illicit origin. 
  • 2. case: the purchase and rental of the vehicle are paid in undeclared cash. It is customary that some automotive companies accept payments in cryptocurrencies so that it does not allow safe, real traceability, tracking, and origin of the money. 


In the anti-money laundering legislation, as there are risks, there are also subjects who should cooperate to mitigate these risks, i.e., there are no indications of a compliance nature/audits by the dealers, retailers, and car rental companies of the verifications of their owners (usually only checks on the financial purchase of the vehicle take place), e.g., there is no data on how they got the money or what is the origin of the funds. Unfortunately, there is not even an AMRO, a person responsible for such control functions. The many European States and not only have provided for forms of limitation of the use of cash, which reduces and contributes to possible illegal uses also in the automotive sector but unfortunately does not involve specific supervisory activities by companies, dealers, retailers, or by the same specific automotive intermediaries any AML obligation. We would like to remind you that the value of a car is sometimes equated to purchasing a house: the (generally speaking) real estate or financial intermediary is obliged to comply with AML, KYC, Due Diligence, KYB, SAR's and PEP's reports. Does one wonder why the automotive industry in general and its employees are not obliged to comply with AML requirements? 


 This creates significant risks with significant regulatory and operational gaps to counter AML/CFT risks. 


Furthermore, the uses of a vehicle are many, as many as are the typologies of the vehicles: sports cars, sedans, vans, etc., who does not exclude that the purchase by an unidentified subject does not determine a criminal use, also with the finality of terrorism. In many reports of counter-terrorism, it is present as a source/instrument, deriving from the activity of collecting and using the money for the accomplishment of an act of terrorism, the possession or ownership of a vehicle, principally cars, vans or trucks, even though in the majority of cases it has been discovered that the vehicle is stolen or belongs to a family member. 


The anti-terrorism legislation of the United States and the European States, particularly States like Great Britain, Italy, and France, have provided for the constitution of essential measures of identification of the holder, (therefore, not for AML purposes, but rather for risk of terrorist activities), when they want to purchase or rent a vehicle: in particular, the constitution of a database has been provided for, which operates with the anti-terrorism computer systems to trace instantly if suspected subject purchases a car, think, for example, of the Barcelona massacre of 2017. 


In addition to these preventive measures, there are also alarm systems when a person steals special vehicles belonging to the police force, emergency medical services, fire services, vehicles intended for public service and refuse collection, and vehicles hired for committing urban terrorism.


Written by Dimitri Barberini 

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