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Can You Recognize the Signs of Money Laundering?

Toby Graham /

Cars (and quite often used cars) have often been juicy targets for criminals to use as a quick and easy way to launder dirty money. If your team isn’t aware of the warning signs they could be opening up themselves and your dealership to a world of penalties and potential jail time.  

With dealers relying more and more on used car sales, it’s important for your team to be up to speed on the warning signs of potential money laundering.

We’ve compiled seven for you. How many are on your radar?

1. Not Negotiating on Price

The buyer didn’t negotiate on a car’s price? That’s a red flag. 

Criminals are trying to conceal the origins of the money they’ve obtained – that’s the premise behind money laundering. Real buyers typically want to look at multiple ways to reduce their sticker price. But money launderers are looking to funnel money into legitimate purchases – and cars are great ones!

2. Purchasing and Trading-in Frequently

To complete a money laundering transaction, criminals are looking to sell assets purchased with dirty money in exchange for clean money. This clean money can then be deposited in a bank with fewer hassles.

Keep an eye out for buyers who come in often to trade in their car and buy a new one. Given how quickly cars depreciate, this isn’t a financially savvy move, and most likely has some darker motives behind it.

3. Trying to Dodge “The Form”

The IRS is keen on tamping down on money laundering, which is why they developed the Cash Reporting Rule and the Form 8300 that goes along with it. When your dealership receives more than $10,000 in cash in one transaction or in two or more related transactions, you must report this by filing a Form 8300 with the IRS.

Money launderers trying to stay off the IRS’s radar will shy away from transactions using this form. And if these conversations come up, take it as a red flag.

4. Paying Just Under $10,000…in Cash

Since money launderers understand how that form 8300 works, they’ll typically want to stay under the $10,000 threshold for their cash transaction. If a buyer’s looking to pay $9,999 in cash – hello, red flag!

You can file a form 8300 for transactions under $10,000 if something seems suspicious. But it may just be safer to just not pursue the deal in the first place.

5. Paying Through Third-Parties

Third-party payments can get overlooked sometimes when reviewing Form 8300s. Why? The third-party’s not on the purchase contract. It also helps wipe out the paper trail for the third-party who wants to use a large cash payment. 

If you see someone acting as the “piggy bank” for multiple customers, that’s a sign that they’re looking to clean up a lot of dirty money. 

6. Using Straw Purchases

What’s a straw purchase? It’s a transaction that’s obtained financing, but the person who will mostly be driving the vehicle isn’t listed on the contract, title, or insurance. 

Money launderers like to use this tactic, and here’s how it works. A money launderer will provide money to a straw buyer to purchase a vehicle. The straw buyer then sells the vehicle within a certain time frame and returns the “cleaned” proceeds from the sale back to the launderer.

7. Providing Generic-Looking Documents and Paperwork

Be on the lookout for forged documents when you’re reviewing a customer’s paperwork. Some areas to keep an eye on are foreign IDs that you can’t verify or things like “international driver’s licenses” (which aren’t real in the first place). 

That doesn’t mean don’t pursue a transaction with someone who doesn’t have US identification. But, paired with these other signs, it might signal that something is off.

We’ll ask the question in the title one more time. Can your employees recognize the signs of money laundering?

Keep in mind that while these may be seven red flags, customers may have a good explanation for them. But, if your team suspects money laundering, it’s best to stop the deal immediately. 

Why does this matter? If you are negligent, or if your behavior contributes to a criminal’s ability to launder money, you could face fines and jail time.

Keep your employees and dealership safe by making sure they’re trained up on these warning signs, along with the host of other F&I gotchas that dealerships experience. 

KPA has an incredible track record of keeping dealerships out of hot water. Here’s how we help:

 

Online Training

Educate every individual involved with vehicle sales and finance with award-winning training on best practices, compliance, industry updates, and other critical topics.

Inspection and Audit Services

Experts provide regular on-site and remote sales and finance audits, including Onsite Vehicle Inventory Audits, Showroom Licensing and GLBA Audits, and thorough review of your deal jackets to catch errors and avoid lawsuits and inspection penalties.

Self-Inspection Software

Our VeraF&I software is specifically designed for vehicle dealers to help you flag issues relating to sales best practices, inventory best practices, customer information security, and F&I department best practices.

Document Library

This comprehensive library includes policy templates, written programs, guides, and forms to help your dealership stay on track and monitor activity to improve accountability.

KPA’s F&I software and services are specifically designed for vehicle dealers, including automotive, truck, RV, marine, and power sports…and for dealerships of all sizes, from multi-location auto groups to single-lot businesses. Let us help ensure your dealership has ironclad processes and policies in place to stay on the right side of regulators.

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