Car Dealers: Do you know your KYC/AML obligations?

Luxury cars are often used to launder money

On March 6th, John Frank Mussari Jr., the owner of a luxury car dealership was sentenced to 2 years in prison for money laundering.

Cars, especially luxury cars, are often used to launder money.  Auto dealers routinely deal in transactions exceeding the AML regulatory limits, usually $10,000 or similar amount in Euros, Pounds or other local currency.

Mussari’s case is a very good example.  Mussari owned a dealership specializing in Ferrari, Lamborghini and other luxury cars.  Mussari developed a relationship with a “good client” who bought several sports cars from him.  Over the course of this relationship, he was paid $132,000 for a Ferrari 360 Spyder, $147,000 for a Porsche 911 Turbo Cabriolet and $320,000 for two Lamborghini Gallardos, among others.

In what could have been a scene out of Miami Vice, Mussari was stopped by Federal Agents leaving the client’s Fallbrook house in a yellow Ferrari.  Over the course of their relationship it became apparent to Mussari that the client’s source of funds was from drug dealing, yet he never reported any transactions to the authorities.  When this came to judgement in court, Mussari was found guilty and sentenced to two years in prison.

Clearly, it is important to have a reasonable KYC system in place in order to protect your business from the risk of money laundering.  Mussari probably only made a few tens of thousands of dollars on the sales, yet will spend two years in prison for it.  A basic KYC/AML procedure could have prevented this.

The first step is in obtaining the identification of the buyer and to have them declare the source of funds, e.g. savings, sale of another asset, or so forth.  Once this is done, some basic research should be conducted, such as checking sanctions and wanted lists.  If there is any hint of doubt regarding the client or the source of funds, a detailed media check should be made.  There are many tools available to do this, from self service KYC tools through to outsourced enhanced due diligence consultants who perform a full background check and provide a detailed report.

Mussari is a reminder that we should remember that auto sales also have an AML obligation that must be taken seriously.