Do You Have a Cash Reporting and Money Laundering Policy?

Do your employees understand your cash reporting and money laundering prevention policy? If not, consider the fates of the following dealers in just the last few months.

  • In Albuquerque, NM, the federal government seized $841,883.00 from a used car dealer alleged to have structured otherwise reportable transactions. The government has not indicted the dealer, but it is attempting to keep the money through a forfeiture action.
  • A Baltimore, MD car dealer pled guilty to structuring deposits of over $2,000,000.00 to avoid bank reporting requirements. Under a plea agreement with the government, the dealer will do 30 months in prison and will forfeit $800,000.00, a Mercedes Benz, and three residential properties.
  • A federal grand jury indicted a Colorado auto dealer and two others for money laundering. According to the indictment, undercover officers paid more than $10,000 in cash for each vehicle purchased that they said came from drug dealing.  The dealer never reported the cash.  The feds seized 20 vehicles.
  • The president and vice president of a car dealership in Orlando, Florida were sentenced for laundering money by taking cash that they did not report and shipping vehicles to members of a drug cartel in Texas. The president was sentenced to 40 months in prison, and the vice president was sentenced to 72 months.
  • An Ohio auto dealer was sentenced to 12 months, ordered to pay a $10,000.00 fine, and forfeited two bank accounts totaling nearly $400,000.00, nine automobiles, and a trailer. He reportedly assisted drug dealers in concealing their assets by selling them cars but titling the vehicles in names of straw purchasers.

All dealer personnel must understand that law enforcement is active with respect to money laundering and failure to report cash. The Financial Fraud Enforcement Task Force, made up of twenty federal agencies, 94 U.S. Attorneys offices, and state and local partners, was formed in November 2009 and is charged with waging an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes.

With such active enforcement underway, dealers must make aggressive, coordinated, and proactive efforts to ensure that that their employees understand the dangers of money laundering and the failure to report cash.

  • Have a cash reporting and money laundering prevention policy.
    • The program should be in writing.
    • It should include training on the requirements of cash reporting and the prevention of money laundering.
    • A coordinator should be appointed to be in charge of implementation of the program, training, and compliance.
    • Employee training should be ongoing and should be mandatory for new employees.
    • Compliance with the system should be regularly reviewed by the coordinator, the dealership controller, and the dealer.
  • Do not leave cash reporting compliance solely to the general office. Many dealers make the general office responsible for filing IRS 8300 reports. However, by the time the deal gets to the office, information necessary for the report may not have been gathered. Make sure those involved in sales can identify a reportable transaction so that the necessary information can be gathered while the deal is going on.
  • Use a backup system to identify reportable transactions. Sometimes the sales department may miss a reportable transaction. Have in place a backup system through the general office to catch reportable transactions. DMS systems provide the capability to identify transactions that should be reported. However, these only work if cashiers are trained to code receipts accurately for the forms of funds received.
  • Salespeople must understand the signals of a suspicious transaction. Today, more often than not, that involves the attempt to hide the identity of a true owner by use of a straw buyer. That may be especially true for vehicles that are exported since it is common today to try to launder money by purchasing vehicles and exporting them. Not every straw buyer is doing something illegal, but when one is trying to hide the identity of the true owner using proceeds of illegal activities, that is very dangerous. Know your customers. Use your Red Flags protocol with every buyer.
  • Stop a suspicious transaction. Don’t listen to those who tell you that if a deal looks suspicious, deliver it and check the suspicious transaction box on the IRS Form 8300. If a deal is suspicious, halt the transaction. Ask questions of a potential buyer. If the concerns can’t be resolved, do not deliver the vehicle and do report the attempt to law enforcement authorities.