Financial Intelligence Center Says SA Car Dealers Are at High Risk of Money Laundering

The Financial Intelligence Centre (FIC) has said that SA’s motor vehicle dealers are at a high risk of becoming victims of money laundering through cash transactions.

In its latest motor vehicle dealers’ risk assessment report, the Financial Intelligence Centre (FIC) stated that clients who use cash to buy vehicles bring the threat of money laundering to SA’s car dealers.

In 2019, the FIC carried out a preliminary risk assessment of the inherent money laundering and terrorist financing risks affecting SA’s automotive sector. Motor vehicle dealers were surveyed to ascertain their views on the sector’s vulnerability to money laundering and terrorist financing.

The recently released report defines money laundering “as the process whereby criminals attempt to conceal the proceeds of their criminal activities from the actual crime thereby giving the funds derived from criminal activities an appearance of legitimacy”.

This may be done by investing in different immovable and movable assets.

“Dealers in high-value goods, which include motor vehicle dealers, have been identified by the international anti-money laundering community as being potentially vulnerable for money laundering.”

The report defines terrorist financing, which is considered low risk in SA, as the process by which individual terrorists and terrorist organizations obtain funds to commit acts of terrorism.

“The ease of purchasing a vehicle, the extensive and prevalent use of cash and the fact that motor vehicle dealers are not subject to all FIC Act compliance obligations contribute to the sector being at high risk for money laundering.

“Although most dealers and importers of new vehicles are subject to operating standards and entry-level requirements imposed by their franchisors, they are not subject to statutory licensing requirements,” the report states.

It said with SA’s large independent pre-owned dealership environment where standards are largely dictated by the owners themselves “there is often a high penetration of cash purchases which raises the risk for money laundering”.

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