In September this year supercar enthusiasts from around the world gathered at a quiet former monastery in Switzerland for a unique opportunity.
Twenty-five supercars, including Ferraris, Maseratis and Lamborghinis were all up for auction – but what made this unusual was that they were all from a single collection.
The owner – Vice President of Equatorial Guinea, Teodoro Nguema Obiang Mangue – wasn’t there to enjoy the event.
And he won’t be enjoying the $18 million proceeds from the sale of the vehicles either.
Teodoro Obiang is also the son of the country’s dictatorial president, Teodoro Obiang Nguema Mbasogo, whose regime has been accused of corruption and abuse of power. In particular, the government has allegedly been syphoning profits from Equatorial Guinea’s plentiful oil reserves to fund the lavish lifestyle of the president and his family.
As well as the supercars, the vice-president owns several luxury properties, movie memorabilia such as the Batmobile and a private jet. In contrast, 76% of citizens in Equatorial Guinea live in poverty, with many surviving on less than a dollar a day.
Teodoro Obiang doesn’t attempt to hide this. His Instagram account (teddynguema) has over 90,000 followers and regularly features pictures of him showing off his lifestyle.
However, his conspicuous wealth began to draw international attention, and European authorities, as well as anti-corruption groups Transparency International France and Sherpa began to take action.
In 2012, French authorities seized $100m in assets from him, while similar action in Switzerland during 2016 resulted in the vehicles in this sale being seized.
In 2017, Transparency International France and Sherpa prosecuted Teodoro Obiang, and a Paris court convicted him of syphoning public money to buy property in France.
In particular, he was found to have spent more than 1,000 times his official annual salary on assets including property, cars and art and was sentenced to a three-year suspended sentence and a €30m fine.
Money Laundering: A Criminal Lifeline
The case of Teodoro Obiang highlights the way that corrupt government officials use luxury cars as a means to legitimise suspicious wealth.
Of course, the practice isn’t just limited to corrupt governments; money laundering underpins almost all organised crime or terrorism, but it can only happen if certain professions are complacent or complicit in the transfer of suspicious wealth.
In a bid to suffocate the lifeline of these transgressors, governments around the world have been tightening up the regulations that govern professions such as lawyers, accountants, and sellers of high-value luxury items, such as cars.
A growing understanding of the impact of money laundering has resulted in new and updated legislation being put in place. Since 2017 we’ve had:
- The Fourth Anti-Money Laundering Directive (AMLD4).
- The Money Laundering, Terrorist Financing and Transfer of Funds Regulations.
- Criminal Finances Act.
Now, the Fifth Anti-Money Laundering Directive (AMLD5) is expected to be incorporated into UK legislation in early 2020.
These new regulations mainly put the onus on lawyers and accountants to submit reports. However, the trail will often lead back to the company involved in the transaction, so it is critical that car dealerships understand the risk of money laundering and how to manage it.
High Value, High Risk
Car dealers can be particularly prone to money launderers as there are no regulations that specifically address car dealerships.
Instead, they are classed as ‘high-value dealers’ and are supervised by HMRC. This status requires that AML checks are carried out on any payments over €10,000.
But cash is rarely used or accepted, meaning very few dealerships carry out checks which makes them easy targets for money laundering.
However, dealerships can still be held criminally liable for failing to disclose suspicious activity, and there are civil penalties for not being compliant with regulations. It is, therefore, important for them to ensure that they have suitable protections and procedures in place.
Here is a quick overview of what car dealerships and other dealers of high-value products can do to ensure they remain compliant:
Register with HMRC
You only need to register with HMRC if you accept cash payments over €10,000. There are several small charges involved in registering.
Establish Policies and Procedures
One of the best protections from money laundering is to have policies and procedures in place and ensure that they are followed. These should cover:
- Customer due diligence
- Risk assessment and management
- The monitoring and management of compliance
- Record keeping
- Internal control
- The internal communication of these policies and procedures
Records of customer identity should be kept for seven years and a business should be able to rapidly respond to a request from authorities investigating a customer or former customer.
Appoint a Money Laundering Nominated Officer (MLNO)
The MLNO’s job is to be responsible for establishing AML procedures, ensuring compliance and reviewing and passing on reports of suspicious activity.
Report Suspicious Activity
Any suspicious transactions should be reported to the National Crime Agency before they are completed. More information on Suspicious Activity Reports (SARs) can be found here.
Staff should be made aware of the law around money laundering and terrorist financing and understand how to recognise and deal with suspicious transactions.
Remain Vigilant With Red Flag Alert
To help high-value dealers navigate these regulations, we’ve developed an AML service that provides a comprehensive solution.
- Full range of risk level checking
- Unbeatable match rates
- ID verification
- Enhanced due diligence
- Sanctions and PEPs real-time screening
- Monitoring alerts
- Simple interface
- Secure audit trail
For current users, you can add this service to your current Red Flag Alert subscription with no set-up – and our expert team are available to make sure you’re heading in the right direction.
The risk posed by money laundering to both your livelihood and your reputation can be intimidating; Red Flag Alert provides you with peace of mind that your business will remain compliant and on the right side of the law.
To speak to one of our team in more detail about how to set up this feature, please get in touch with Geoff Charlwood on firstname.lastname@example.org or 0344 412 6699.