MLR3C10225 - High Value Dealers: HVDs and Money Laundering Risks

Serious and organised criminals can make use of HVDs to convert and transfer cash. This can involve disposing of cash for high value goods that can be easily sold on (possibly at a loss) for “clean money” or returning high value paid for in cash goods and getting a refund in the form of a cheque.

The following risks (not necessarily in order of importance) are risks that apply in the HVD sector.

  • HVD may have made or received HVPs before being registered with HMRC due to ignorance.
  • HVD with multiple sites may have sites that aren’t registered but which have made or accepted HVPs due to staff ignorance
  • HVD may deal with HVPs so infrequently that the staff are not aware of the procedures for handling relevant transactions.
  • Businesses may receive remote payments from couriers, intermediaries or persons that pay for goods overseas through a cash deposit without checking their identity.
  • HVD may receive payment where the goods purchased and/or the payment arrangements are not consistent with the normal practice for the type of business concerned.
  • HVD may be unclear about what “relevant transactions” are and may not ask for ID when it is appropriate. For example a HVP paid in instalments may not be treated as a relevant transaction when in fact it is.
  • HVD receives a HVP from a customer where it does not make geographical sense in comparison to their location
  • The records kept by the HVD fail to distinguish cash sales and sales with other payment methods.
  • Businesses may accept cash for “off the record” sales with a view to evading tax liabilities and the payments are not therefore shown in the records.
  • Businesses may accept HVPs where large numbers of Scottish banknotes are included in the payments (large numbers of Scottish notes are often linked to cash seizures in drugs investigations)
  • Businesses may ask customers who are paying in cash above the €10,000 threshold to pay it directly into their business bank account. This is a HVD transaction and the business is therefore required to register.
  • Customer may have deliberately broken down transaction sizes to avoid ID checks.
  • Non UK customer pays in cash in sterling without a valid commercial reason
  • HVD accepts cash without a valid commercial reason and acceptance of cash does not make sense. For example the HVD is a broker who essentially acts as a cash courier between his supplier and his customer when they could trade directly.
  • HVD accepts cash without establishing the motive for the cash payment and the source of the cash.
  • HVPs are accepted off premises and or in high risk situations for example when the business is closed and cash is handled at motorway service stations, hotel lobbies or at residential premises without regard to personal safety.
  • Cash is not banked and therefore does not “hit the business”. Instead it is used to pay suppliers and there is no audit trail. Business cannot identify or quantify relevant business.

The last five risks listed above are often found to be present in businesses dealing in duty suspended alcohol products.