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Keep it clean

This year sees the implementation of the Fourth EU Money Laundering Directive designed to bolster defences against money laundering and counter terrorist finance. As institutions revisit their current practices and make sure they’re ready for the requirements of the new Directive, we answer some of your questions about money laundering from a car finance perspective. 

Why be concerned about money laundering?

Money laundering is used by criminals to disguise funds obtained from illegal activity. Often the funds will be used to facilitate further crime or even fund terrorism. Lenders and motor dealers have legal obligations to prevent money laundering and need to work together to achieve this.

What to look out for?

Look out for potential indicators, including customers making large deposits or customers buying and then reselling a vehicle in a short space of time. Whilst it’s not to say that customers in these situations are anything other than entirely legitimate, lenders and dealers need to be sure.

Taking deposits as an example, any deposit of €15,000 or more (including deposits where the total is broken down into smaller payments) must come directly from the customer and not from a third party. Reducing to €10,000 under the new regulations, this means that cheques, debit or credit card and bank transfers must be in the customer’s own name. Equally, where a vehicle is used as part-exchange, it’s important to have proof of ownership.

How can dealers help?

Money Laundering Regulations make the identity of the customer key. So, before entering into a relationship with a new customer, it’s essential to get evidence of the customer’s identity and residency, usually by way of a photocard driving licence and a utility bill or bank statement.

Make sure you know the source of any deposit and the source of the customer’s wealth. For example, it’s not enough to say that a deposit is coming from a customer’s bank account, you need to know how the customer acquired the money.

Also, if the customer is a corporate borrower, it’s important to identify who the beneficial owner of the asset will be by obtaining identity documents for the individuals who own more than 25% of the shares.

What if I suspect money laundering?

If you work for a lender or dealer and suspect a customer is involved in illegal activity, you must report your suspicions to your employer’s Money Laundering Reporting Officer. They, in turn, will inform the National Crime Agency. Failure to report suspicious activity carries penalties of up to five years in prison and unlimited fines.

By working together, we will help to prevent money laundering whilst also fulfilling our regulatory and legal obligations.

30 January 2017

Paragon Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England number 05390593. Registered office 51 Homer Road, Solihull, West Midlands B91 3QJ. Paragon Bank PLC is registered on the Financial Services Register under the firm reference number 604551