What do sports cars, art, boats, antiques and jewels have in common — other than all being the things Gwyneth Paltrow doubtlessly casually bought over the weekend online?
They are also ways criminals in the U.K. are hiding the profits of their criminal activity.
Money laundering rules are generally not terribly well-understood among the purveyors of luxury items nor are the signs that someone is buying a high-cost good to hide criminal profits, such as paying in cash, not retaining a lawyer and wanting to get the transaction done as soon as possible.
According to Transparency International UK (TI), there are “major compliance issues" in the luxury sector, encouraged by the fact that enforcement is not a priority.
TI is also handing out blame for the lackadaisical enforcement, calling particular attention to HMRC, which has oversight of anti-money laundering rules for high-value dealers in the luxury goods and auction houses, arts and antiques sectors.
“HMRC have an institutional bias towards secrecy and confidentiality, and that hampers their effectiveness as an AML supervisor,” Nick Maxwell, TI’s head of advocacy and research, told Financial Times. “All of their sectors are the worst-performing, and all of that does come down to the supervisor.”
“The cornerstone of the problem is with the institutions that should be supervising the anti-money laundering rules in the U.K.,” TI said. The current system, which relies on 22 separate agencies with oversight of the rules in different sectors, “is structurally unsound.”
TI is now pushing for the U.K. to redesign the supervisory system to better bolster efforts at pushing compliance, particularly among senior managers that routinely deal with high-value goods.
"While many luxury goods items are expensive enough to require some form of customer due diligence checks, there is little evidence of awareness or compliance of AML obligations, making the sector a significant loophole in the U.K. economy for illicit funds," the group stated.