Anti-money laundering guidance for supervised businesses

AMLG3600 - Sector Risk Assessments: Risk Assessment of High Value Dealers

About this risk assessment

This risk assessment by HMRC is prepared and made available to you under regulations 14 and 47 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (referred to as ‘the Regulations’ throughout this guidance).

It tells you about the key risks that your business might face as a high value dealer (HVD).

In line with regulations 18 and 18A of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the Regulations) all HVDs must carry out a risk assessment to identify and assess the risks to their business for:

• Money laundering (ML)
• Terrorist financing (TF)
• Proliferation financing (PF)

You must take this risk assessment published by HMRC into account when carrying out your business’s own risk assessment. 

You must also read and consider other relevant documents such as:

• The National Risk Assessment of Money Laundering and Terrorist Financing 2025 (We strongly recommend you read the whole document as important risk information is likely to be missed if only parts of the NRA are considered. In particular, you should read and consider Section 2, 3 and 4).
• The National Risk Assessment of Proliferation Financing published in 2021.
• Guidance produced on the Financial Action Task Force (FATF) website.

As a HVD, you must take appropriate steps, taking into account of the size and nature of your business, to identify and assess the risks your business may be exposed to. You must consider the following risk factors:

• Your customers – are they private individuals, companies or trusts etc?
• The geographical areas of your operations – where your customer is based or the country the goods are exported to?
• Your products or services - whether some are more attractive to criminals seeking to launder money and/or fund terrorism?
• Your transactions - how you are paid and the types and values of those transactions?
• Your delivery channels - how you interact with your customers, whether in person or remotely, e.g. via intermediaries.

The steps you have taken to identify and assess these risks must be properly reflected in your business’s risk assessment and you must keep an up-to-date written record of these steps. 

You must be able to provide an up-to-date copy of your risk assessment, and the information you have used to carry out that risk assessment to HMRC when requested.

This risk assessment by HMRC is to help you to identify and assess the risks of money laundering, terrorist financing and proliferation financing that your business may be exposed to. It also highlights where that level of risk may be increased or decreased depending on your business model. Whilst all these risks must be taken into account in your risk assessment and PCPs, you may also find additional risks when evaluating your own business.  You must apply the appropriate measures as set out in the regulations where there is a high or higher level of risk.

Your risk assessment must identify and assess any risks where your business could be exploited for:

• Money laundering
• Terrorist financing
• Proliferation financing

HMRC expects a risk assessment to be more than a ‘tick box’ approach. You must be able to provide an up-to-date copy of your risk assessment, and the information you have used to carry out that risk assessment to HMRC upon request.  Please see Part 1 of this guidance on how to risk assess your business.

When you have identified the risks that are relevant to your business, you must put in place policies, controls and procedures (PCPs) to effectively manage and mitigate those risks.

If you begin to provide additional or new services, or if you change how your services are provided, or how your business operates, you must make sure your risk assessment reflects these changes. Your policies, controls and procedures (PCPs) must also be updated to reflect how you will effectively manage and mitigate any additional or new risks, before you start the new services or business operating model.

The requirements in the regulations for risk assessment and associated policies, controls and procedures to manage those risks within this guidance only apply to cash transactions – including linked transactions – over the HVD threshold.

The presence of one or more of the risk indicators contained within this risk assessment in HVD transactions means that there is a heightened risk of money laundering, terrorist financing or proliferation financing. You should consider carefully the risks involved and whether enhanced due diligence and/or enhanced ongoing monitoring measures should be applied, in line with regulation 33(1)(ii) of the Regulations and whether a suspicious activity report (SAR) should be submitted.

 

Risk Characteristics

The services, products and level of cash use in the HVD sector can make HVD businesses attractive to criminals seeking to convert criminal proceeds into high value or luxury portable assets, which can be easily moved outside the UK or used to conceal the origins of criminally-derived cash. Common risks throughout the sector may present as, but are not limited to, the following:

• Businesses may receive cash payments via couriers, intermediaries (including surrogate shoppers) or directly from customers. The goods may be paid for overseas through a cash deposit without checking the origins of the cash or conducting relevant customer due diligence (CDD) or enhanced due diligence (EDD). 
• 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.  These will invariably involve breaches of the regulations (e.g. no CDD will have been carried out).
• Businesses with whom you deal may be acting as unregistered HVDs, by taking and/or making cash payments above the threshold and not applying appropriate AML controls, leaving themselves – and, through your business dealings with them, you – exposed to ML/TF risks.
• HVDs with multiple sites may have undeclared or unregistered sites which have made or accepted relevant cash payments due to poor staff training or unclear polices, controls and procedures (PCPs). 
• The HVD may have made or received cash payments over the £10,000 threshold before being registered with HMRC.

Further risks to consider within the sector:

• Is there a genuine reason for those with whom you have dealings for paying in large volumes of cash? Why do these customers pay cash when other customers do not?
• Are your customers from or in countries that have cash control restrictions or limits in place for taking cash out of that country? If so, how did the customer have the cash to pay for the goods?
• If your customer is a HVD, is it an online only business? If so, how does it receive the cash?
• Is your customer an alcohol wholesaler and, if so, is it registered for the Alcohol Wholesaler Registration Scheme (AWRS)? A business is not allowed to trade in wholesale alcohol in the UK unless they are registered with AWRS.
• If exported goods are being paid via a UK money service business (including Informal Value Transfer Systems (IVTS)), is that business properly supervised and registered with HMRC?
  

Money laundering

Since the first UK National Risk Assessment of money laundering and terrorist financing risk in 2015, all NRAs present a consistent view that cash is extremely high-risk due to it being untraceable, readily exchangeable and anonymous.

The National Risk Assessment 2025 assessed high value dealers as facing a medium risk of money laundering.

High-value goods are appealing to criminals partly due to their versatility. Goods purchased with criminal cash can be re-sold, either for profit or loss in exchange for clean funds. They can also be kept as a store of value, or, depending on the goods in question used as status symbols.

The risk is heightened in cases where remote cash payments are involved, either through couriers stated to be delivering cash for customers or depositing cash directly into your bank account.

High value goods such as watches, precious stones and jewellery can also be moved across international borders, through passenger routes, without attracting the same attention as large cash movements. 

Terrorist financing

The National Risk Assessment 2025 assessed high value dealers as facing a low risk of terrorist financing. The sector can provide opportunities to obtain small objects of high value, which:

• Can be moved across borders without the need for individual export licences.
• Might not be checked by customs officials.

Proliferation financing

Proliferation financing is defined in Regulation 16A(9) of the Regulations as “the act of providing funds or financial services for use, in whole or in part, in the manufacture, acquisition, development, export, trans-shipment, brokering, transport, transfer, stockpiling of, or otherwise in connection with the possession or use of, chemical, biological, radiological or nuclear (CBRN) weapons. This includes the provision of funds or financial services in connection with the means of delivery of such weapons and other CBRN-related goods and technology, in contravention of a relevant financial sanction’s obligation”.   PF measures exist to prevent the build-up of chemical, biological, radiological or nuclear (CBRN) weapons of mass destruction (WMD) by certain regimes, meeting UK obligations under relevant United Nations (UN) Security Council Resolutions. 

Current PF sanctions caught by the Regulations target organisations, businesses, and individuals in:

• Iran
• North Korea

Banking services to both countries are limited, so, although proliferation finance typically has characteristics similar to regular trade finance, the lack of banking options, combined with the increasingly diverse means deployed by the countries to fund and obtain proliferation-sensitive materials means that there is a chance that HVDs may be exposed to PF risks.  Thus, you should carefully consider the PF risks associated with your customers and transactions, especially when they involve these and bordering countries.

The UK proliferation financing sanctions are regularly updated, so it is important to be aware of any changes and additions by checking the UK sanction list.

Proliferation financing risk indicators

The proliferation financing risks outlined in this assessment should be regarded as high risk and considered together with the wider set of risk indicators contained in this guidance.

Customers linked to the governments of proliferation financing sanctioned regimes

Proliferation sanctions place financial and trade restrictions on certain countries.  For the purposes of the Regulations, financial sanctions apply to countries sanctioned by the UN to prevent their development of CBRN WMD and delivery systems.  Financial sanctions are restrictions put in place to achieve a specific foreign policy or national security objectives and can limit the provision of certain financial services and/or restrict access to financial markets, funds and economic resources.

UK asset freezes are in place against both Iran and North Korea, meaning it is against the law to: 

• deal with the frozen funds or economic resources, belonging to or owned, held or controlled by a designated person (an individual or entity on the UK Sanctions List (The UK Sanctions List - GOV.UK) or to a person who is owned or controlled directly or indirectly by the designated person
• make funds or economic resources available, directly or indirectly, to, or for the benefit of, a designated person or to a person who is owned or controlled directly or indirectly by the designated person
• engage in actions that, directly or indirectly, circumvent the financial sanctions prohibitions 

More details on UK sanctions can be found here Starter guide to UK sanctions - GOV.UK and detailed guidance on financial sanctions here: UK financial sanctions general guidance - GOV.UK.

There is an increased risk of proliferation financing in any transaction or business relationship linked to a regime sanctioned for proliferation financing.  These transactions and customers should be treated as high risk.  Regimes seeking to evade UN sanctions and develop WMD and delivery systems take extensive steps to obscure the true nature of their transactions, including using neighbouring countries from which funds or material will be sent to the sanctioned country.  Firms should be aware of the increased risk around countries and geographical areas bordering sanctioned countries.

HVDs being used to procure or finance dual use goods

Dual use goods are often seemingly innocuous and can be used for civilian purposes as well as for WMD programmes.  The include items such as:

• Carbon fibre
• Electronic components and chemicals
• Aerospace components
• Metals with specific properties
• Certain software or technical data

See the National Risk Assessment of Proliferation Financing and Export controls: dual-use items, software and technology, goods for torture and radioactive sources - GOV.UK for more information on dual use items.

A HVD may deal in or have business dealings with a business which, possibly through overseas branches/subsidiaries, deals in dual-use goods or may be linked to proliferation-related activities or actors. 

You should implement a robust risk-based approach, apply enhanced due diligence measures, provide appropriate staff training, and maintain effective transaction monitoring to help identify suspicious activity related to dual use goods.

Risks common to all high value dealers

The goods bought and sold by high value dealers can include higher and lower risk customers and transactions. It is important that businesses understand and review the risks presented by each activity and customer.

The key cross-sector risks for all high value dealers include:

• Unusual sales or purchase activity
• Linked transactions
• Goods purchased by organised criminal groups
• Payments into bank accounts or made by cash
• Country or geographical area

Lack of clarity or transparency with the customer  

Use of unclear company structures trusts, and intermediary jurisdictions would indicate a higher risk in a transaction or series of transactions.  You should consider carefully whether to proceed with a transaction (see Part 1 guidance on customer due diligence) and/or whether to file a SAR with the NCA under such circumstances.

Similarly, HVDs may be exposed to the risk of surrogate shopping or “Daigou”, where individuals outside China purchase goods on behalf of customers in mainland China.  These are often luxury or high-demand/high-value products, which are sent back to China for resale or personal use. Daigou can be above board, but there are risks associated with it that HVDs must carefully assess and manage, including:

• Identifying and risk assessing the true customer.
• What is the money laundering risk associated with the UK cash pool used to purchase the goods including:
  • The source and origin of funds (China – and several other countries, including India) has restrictions on currency exports: is the source of the cash legitimate?
  • Were the funds moved through UK- supervised businesses or from unregistered or Informal Value Transfer Systems (for example, Chinese underground banking)?  
  • If the goods are to be exported, are there risks associated with tax and export duties and controls to consider? 

The customer is from or linked to a FATF call for action (“black listed”) country

FATF call for action countries (formerly referred to in the Regulations as High Risk Third Countries (HRTCs)) are jurisdictions considered by the FATF to have strategic deficiencies in their regimes to counter money laundering, terrorist financing, or proliferation financing.

These countries are listed in the following publication, which is subject to change and revision: High-Risk Jurisdictions subject to a Call for Action (black list) on the FATF website.

Services provided to or from FATF black listed countries or customers, intermediaries and third parties who are resident, have their principal place of business, or are incorporated in one, pose a high risk of money laundering, terrorist financing and/or proliferation financing.

You must apply enhanced due diligence measures before you form a business relationship with a person established in a black-listed country.

As the FATF lists are subject to change, there is a risk that that customers you have an existing business relationship with are established in a jurisdiction which may become black listed during the business relationship. You should factor this into your ongoing monitoring, alongside other considerations, like changes in country risk profiles, changes to sanctions and embargoes.

The customer is from or linked to an overseas jurisdiction

Services provided to or from overseas jurisdictions or customers, intermediaries and third parties who are resident, have their principal place of business, or are incorporated overseas may pose an increased risk of money laundering, terrorist financing or proliferation financing.

In determining the appropriate customer due diligence or enhanced due diligence measures to take where there is a link to an overseas jurisdiction in a business relationship, you must consider your business’s risk assessment, as well as your assessment of the level of risk arising in that particular case.

Your assessment of the level of risk arising in a particular case must include consideration of the following geographical risk factors in Regulation 33(6)(c) of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.

The following can indicate, where identified by a credible source, that an overseas jurisdiction poses an increased level of risk:

• Not having effective systems to counter money laundering or terrorist financing.
• Having a significant level of corruption, terrorism, or supply of illicit drugs.
• Subject to sanctions or embargoes issued by the EU or UN.
• Providing funding or support for terrorism.
• Having organisations designated under domestic sanctions legislation or if they are proscribed terrorist groups or organisations by the UK.
• Having terrorist organisations designated by the UK, EU, other countries or international organisations.
• Countries that have been assessed by organisations such as FATF, FATF-style regional bodies, World Bank, Organisation for Economic Co-operation and Development or the International Monetary Fund as not implementing measures to counter money laundering and terrorist financing that are consistent with the FATF recommendations.

In addition to the geographical risk factors in Regulation 33(6)(c), HMRC considers there may be an increased geographical risk where the overseas jurisdiction:

• Is not subject to anti money laundering or counter terrorist measures equivalent to the UK.
• Shares a border with a FATF black-listed country or a country known to have high levels of crime or corruption, host terrorist groups, or be involved in proliferation-related activities, as money laundering, terrorist financing or proliferation financing often involves the movement of funds across borders.
• Has limited corporate registration requirements or limited beneficial ownership information requirements (for example, where there is no requirement to update ownership changes).
• Allows unrestricted bearer share usage.
• Has laws aiding financial secrecy.
• Has high levels of tax evasion.
• Has high levels of capital flight.
• Is a conflict zone.

Examples of sources which may help you to consider the risk of an overseas jurisdiction may include:

• Guidance on the Joint Money Laundering Steering Group website, for example, Annex 4-1 of part 1, on the level of risk in other jurisdictions
• Guidance and corruption index on the Transparency International website.
• Guidance on the Global Witness website.
• Internet searches.
• News articles and media publications
• Basel AML index (the Basel index classifies countries with a score of 6.08 or higher to be high risk, but note that not all countries are included on the index).

You should take care to make sure the sources you consider are credible.

Where you consider there is a high risk in a particular case, you must apply enhanced due diligence measures before you form a business relationship.

If an overseas jurisdiction is also a black-listed country, you must apply enhanced due diligence measures before you form a business relationship.

 All persons and entities linked to the UK sanctions list, irrespective of which sanctions regime, should be treated as high-risk. You must not deal with those specifically listed – see sanctions section at end.

Whilst you must make your own assessment of all jurisdictions based on the factors already mentioned, HMRC considers the countries listed within the NRA 2025 to be higher risk.

The customer is from or has links to a country subject to foreign policy sanctions

Foreign policy sanctions, including financial and trade restrictions, are in place on certain sectors, entities or individuals in certain countries.  Financial sanctions are restrictions put in place to achieve a specific foreign policy or national security objective and can limit the provision of certain financial services and/or restrict access to financial markets, funds and economic resources.  Trade sanctions may target a particular sector or type of goods.

It is against the law to breach sanctions restrictions, including to: 

• Violate trade sanctions, such as those in place against Russia;
• Deal with frozen funds or economic resources, belonging to or owned, held or controlled by a designated person (an individual or entity on the UK Sanctions List (The UK Sanctions List - GOV.UK) or to a person who is owned or controlled directly or indirectly by the designated person.
• Make funds or economic resources available, directly or indirectly, to, or for the benefit of, a designated person or to a person who is owned or controlled directly or indirectly by the designated person.
• Engage in actions that, directly or indirectly, circumvent sanctions prohibitions.

More details on UK sanctions can be found here: Starter guide to UK sanctions; and detailed guidance on financial sanctions here: UK financial sanctions general guidance.

There is an increased risk of sanctions evasion or proliferation financing in any transaction or business relationship linked to a sanctioned country.  Such transactions and customers should be treated as high risk.  Regimes seeking to evade sanctions take extensive steps to obscure the true nature of their transactions, including using neighbouring countries from which funds or material will be sent to the sanctioned country. Firms should be aware of the increased risk around countries and geographical areas bordering sanctioned countries. 

Customers from jurisdictions that offer Citizenship by Investment (CBI)

CBI is the practice of granting citizenship status principally or solely in return for financial investment, without any requirement for a significant period of prior physical residency in the issuing jurisdiction. CBI schemes are often referred to as Golden Passports or Golden Visas. Some CBI schemes feature investment directly into property within the jurisdiction.

CBI programmes usually allow applicants to acquire citizenship quicker than through other, more traditional immigration channels. Some schemes also allow for citizenship to be passed down to dependants.

Illicit actors can exploit CBI programmes to facilitate a range of illicit activity including financial crimes, such as money laundering, corruption, fraud and tax evasion. These criminals may also abuse citizenship or residency status granted to them to enable further criminal activity or to evade law enforcement authorities.

CBI offers the opportunity to acquire a travel and identification document under a different nationality or name, which can be used to represent who the holder is in a novel way, or hide the original identity, particularly to avoid sanctions.

When assessing whether there is a high risk of money laundering, HVDs must take account of the risk of CBI, in order to meet their obligations under regulation 33(6)(viii) of the regulations, in regards to enhanced due diligence measures. HMRC expects HVDs to treat any customer who has a passport from a country that offers CBI as a higher risk where the place of birth is shown as being in a different jurisdiction to that of the issued passport.

Countries that offer CBI include, but are not limited to:

•  Antigua and Barbuda
•  Cyprus
•  Dominica
•  Grenada
•  Jordan
•  Malta
•  Montenegro
•  Saint Vincent and the Grenadines
•  St. Kitts and Nevis
•  St. Lucia
•  Turkey
•  United Arab Emirates
•  Vanuatu

Some examples of risk indicators associated with persons from overseas include:

Cash payments from jurisdictions with cash movement limits

Many countries have strict limits on the volume of cash that can be legally used or taken out of that country, often around US $10,000 or equivalent.

If your customer operates in one of these countries and exceeds that cash limit, it is likely that cash is being used to avoid local restrictions. Care should be taken to make sure cash has been properly declared at borders.

Cash payments from overseas customers without evidence of UK travel or business premises

If a customer has travelled to the UK, they should be able to provide evidence of their travel. Regular cash payments made in person should be checked against the cost of travel and whether these costs are reasonable in relation to the value of the goods provided.

Cash brought into the UK

As part of your customer due diligence checks a copy of form C9011 should be requested from any customers travelling to the UK, from outside the EU, with more than £10,000 in cash.

Source of cash funds

If a customer provides C9011 evidence of bringing sterling into the UK, you should still check the source of the funds. Consider whether it is reasonable for someone from that country to hold large amounts of UK sterling, or whether the funds may be linked to criminal activity.

A potentially unusual sale or purchase of goods

If, for example, the goods; the delivery method or payment arrangements do not:

• Appear consistent with the normal business practices for the type of business concerned;
• Have a clear business reason; or
• Make economic sense

You should consider this an indicator of heightened risk and take appropriate precautions.

A business wants to conduct an ‘off the record sale’

The cash sale or purchase of goods for an ‘off the record sale’ is not likely to have been recorded in that business’ records.

If offering payment this way, the business is also likely to be using cash for other purposes, such as paying workers cash in hand so they do not pay tax and National Insurance on the wages.  In such cases, there may also be risks associated with illegal workers, including those without a UK work permit, or payments below National Minimum Wage. 

 

“Smurfing” transactions

“Smurfing” is the term used to describe when large transactions are broken down into numerous smaller transactions in order to evade AML controls.  The concept of “linked transactions” is included in HVD requirements to prevent this behaviour.  A customer seeking to break down a large cash transaction into several smaller ones should be a red flag indicator.

For example, a customer buys 4 pallets of goods in cash for £5,000 each at one time, making the total sale £20,000. Normal business practice would be for all 4 pallets of goods to be on one invoice. The transaction would therefore be caught by the Money Laundering Regulations, and appropriate customer due diligence measures would be required.

It would not be appropriate to issue separate invoices for each pallet of goods and claim they were separate sales. Whilst these individually would be under the high value dealer's threshold, the total cash for the sale is still £20,000.

There is a difference between repeat business and linked transactions.  You will need to consider on a case-by-case basis, based on the customer’s business model and your risk assessment whether the same customer is attempting to circumvent your controls or smurf payments.  For example, if there is an unfeasibly short period between the customer making one cash transaction and the next, or one that would not normally fit with that customer’s business model; or normal behaviour, this should be an indicator of higher risk.  

 

Dealing with an unregistered high value dealer

As part of your customer due diligence measures, if you are making relevant transactions and the business you are dealing with is based in the UK, you should check whether it is registered with HMRC. If it is not, you should not continue with the high value cash payment and report them to HMRC.

You should consider submitting a Suspicious Activity Report to the National Crime Agency.

Unregistered HVDs pose significant money laundering risks because they are unlikely to be engaging with AML guidance and risk management material provided by HMRC and therefore not implementing appropriate controls.  They are also likely to be at an unfair competitive advantage compared to registered HVDs as they are unlikely to be funding the cost of meeting their legal AML obligations.

Criminals take advantage of legitimate businesses

Talking to your customers about the reason they need to pay you in cash will help to find out whether there is a legitimate reason for the sale and whether anything appears unusual.

A new customer

Some customers may have little or no trading history and no trade references. You should consider carefully whether such a prospective customer is genuine or a front for a business that is possibly involved with money laundering.

The customer asks for the goods to be delivered in an unusual manner or to an address that is not their own

There may be a genuine reason for this, but it is important to ask questions to decide if the transaction should go ahead.

A Suspicious Activity Report on the National Crime Agency website should be filed if appropriate.

Customer travels far for goods available nearby

It does not make commercial sense for a customer to travel a long distance in the UK to purchase goods that are readily available near their home location.

If the goods you sell are unique and not readily available elsewhere, this would make business sense.  If not, this is an indicator of increased risk.

The customer operates a cash-intensive business

Cash-intensive businesses can be attractive tools for criminals to launder illicit cash through, presenting it as legitimate funds.  They also provide anonymity and make funds harder to track.

Cash may originate from a variety of sources, including legitimate trading activity, however the use of cash can obscure audit trails and increase the difficulty of tracing the origin of funds.

HVDs can be exploited by criminals using cash for high-value transactions, including the purchase of luxury of high-risk items.  You must consider establishing whether the source of funds for the transaction is consistent with your knowledge of the customer, the customer’s business and risk profile.

This includes considering whether the nature, scale, and frequency of cash transactions are commercially credible when compared with the customer’s stated business activities.

If the volume of cash is not consistent with what you know of their business activity or does not make commercial sense, this poses an increased risk and may indicate an attempt to launder illicit funds.

Such inconsistencies may arise where there is a sudden change in transaction behaviour, unusually high levels of cash compared to similar businesses, or a mismatch between reported turnover and cash volumes.

Even if your customer is another UK-supervised HVD, you need to carefully consider the risks associated with that customer and put appropriate arrangements in place to manage those risks.

Consideration of the appearance and origin of bank notes

A key risk across all HVDs is the widespread use of cash by criminals seeking to exploit features of the HVD sector to convert criminal funds to launder money or finance terrorism.

It is important for you to consider how cash is presented to you.  Is it all bundled up or is it just loose bank notes, does the presentation match the explanation for cash? For example, if your customer tells you that they withdrew the money from their bank account, then higher value notes may be in thousand-pound bundles contained by a bank wrapper and not likely to be rough bundles with rubber bands holding them together.

The condition and appearance of bank notes should also be considered, including whether notes appear excessively worn, mixed between different issue types, or inconsistent with normal circulation for the stated source of funds.

When cash is presented, it may appear either as loose banknotes or bundled together. If a customer says they withdrew the money from their bank account, higher amounts are often in thousand-pound bundles with a bank wrapper, and less likely to be rough bundles with rubber bands holding it all together.

If the customer claims the cash came from a casino win, it is likely to be wrapped in that casino’s slips, and you could undertake further customer due diligence checks with the casino.

It is important that you satisfy yourself that the evidence supports where the cash comes from.  If not, you must consider whether to stop the transaction and submit a Suspicious Activity Report (SAR).

Decisions to proceed, refuse, or report should be made on a risk basis, taking into account all available information, and in line with your business’s policies, procedures, and escalation processes.

Using Scottish and Northern Irish banknotes in other parts of the UK

You must consider whether your customer has a cash business in Scotland or Northern Ireland that uses Scottish or Irish bank notes, or both. There have been law enforcement cases involving criminals buying drugs in England but paying in Scottish or Irish notes.

If the business only operates in England, it is unusual for them to have Scottish or Northern Irish banknotes. This could mean they are:

• Bringing large amounts of cash from Scotland or Northern Ireland.
• Claiming that customers travel long distances to spend money at their location in Southern England.

Both scenarios seem unlikely and may raise concerns.

If the customer claims the cash came from a casino win, then it should be wrapped in that casino’s slips, and further customer due diligence checks could be done with that casino for confirmation.

You should consider if you are satisfied there is enough evidence to support where the cash came from. If there is any doubt, you should:

• Not continue with the transaction.
• Submit a Suspicious Activity Report on the National Crime Agency website.

Suspicious cash transactions by customer

Observe the appearance of the cash and consider if the banknotes resemble those typically issued by a bank or if they appear as loosely bundled street cash. Record how the customer presents the cash, whether in a secure bag, a carrier bag, or a fast-food paper bag.

Criminals are known to use everyday bags like rucksacks, carrier or fast-food bags to avoid drawing attention while transporting cash.

Cash deposits into your bank account 

Payments made by your customers in cash directly into your bank account still count as cash payments for the purposes of the regulations: the customer is still exchanging their cash for your goods, albeit through an intermediary.  The money laundering risks are greater if a customer pays cash into your business bank account than if they pay the cash directly to you at your business, for the reasons set out below.

Criminals have been known to deposit cash directly into a bank account which means the high value dealer does not see the cash or the person making the deposit. This helps them keep their anonymity and allows multiple people to deposit criminal cash on behalf of one customer with little chance of getting caught.

Direct deposits into your account, or using third parties, also removes your ability to check the appearance of the cash (dirty, street cash or unexpected volumes of Scottish or Northern Irish notes).

You are responsible for anti money laundering checks on such deposits, not the bank or the third-party cash collection business.

You must be able to show what your procedures are to:

• monitor bank deposits or cash collection pickups
• be able to identify who put cash into your business bank account or passed it to the collector
• challenge any unexpected deposits, amounts or unexpected locations

If relevant, complete a Suspicious Activity Report on the National Crime Agency website.

Deposits and their locations should match with what is known about the customer. Unusual patterns such as cash deposits made in multiple, possible geographically dispersed or distant locations on the same day may be inconsistent with the profile of the customer, particularly if they are a sole trader, or small business.

Attention should be paid to the timings and frequency of these cash payments as they may be split up on purpose to avoid being noticed.

If a customer or representative is paying in cash, and is located near to you, normal practice would be for them to come to your premises and pay you personally rather than go to a bank and pay the cash in. It is your responsibility to carry out checks on customers making such cash payments.

Cash payments from unknown individuals

If the person paying you cash is not known to you or does not appear to have a link to your customer, you must find out how they got the customers’ money.

It is important to identify the person delivering the cash and their relationship to your customer.

Understanding where your customers’ money comes from

If your customer runs their business outside the UK, you need to check where the money came from and make sure there’s clear evidence to support the source of the cash.

If the money comes from a foreign exchange, especially in the UK, your customer should provide proof (for example, a receipt). You must retain a copy as part of your customer due diligence checks.

Customer does not have a business bank account

If a customer is using a personal bank account instead of a business account, you should consider the reason and potential risks associated with this. It may be:

• To avoid business banking charges.
• Due to a business account being closed.
• Because the bank has refused to open one.

 

Commercial sense of the transaction

You need to consider if the purchase or sale of goods makes commercial sense. For example:

• A business overseas is buying large quantities of goods from a UK high value dealer, but there is no marketplace in that country for these goods for re-sale.
• The director travels to the UK to pay for the goods but there is no rationale for paying in cash, e.g. if a bank transfer would be quicker, easier and cheaper.

There are higher levels of risk whenever you are involved with supply chains of goods but do not have physical sight or control of the goods, especially if you do not have a relationship with the named seller or buyer.

In some money laundering methods, third party payment invoices may be:

• Made up by criminals (the invoice does not relate to any sale of goods); or
• Amended to change the bank account details to one that is controlled by the money launderers.

The invoice is simply used to try to claim some legitimacy for the movement of the money.

Unusually large transactions

Transactions that are unusually large for the customer, transaction type, purpose or your business may indicate increased risk. Likewise, where a customer transacts at a value or frequency that is outside of their normal pattern this should be viewed as an indicator of risk.  Appropriate risk assessment and management should be put in place in these circumstances.

Unusually complex transactions or customers

Transactions or corporate structures that are unusually complex, or that lack a clear commercial or lawful purpose, may indicate an attempt to obscure the origin, destination, or ownership of funds.

In line with the Regulations, HVDs should give enhanced scrutiny to transactions where complexity appears unnecessary or disproportionate to the stated purpose. This may include the use of multiple legal persons, intermediaries, third parties, jurisdictions, currencies, or transaction steps without a clear explanation.

Where transactions or corporate structures appear unusually complex, the business should assess whether the activity is consistent with the customer’s profile and expected behaviour and consider whether additional due diligence, enhanced monitoring, or escalation for suspicious activity reporting is required.

 

Use of third-party identity providers or compliance companies

There is a well-established market of third-party identity verification providers and compliance specialists that offer a range of services to support compliance with obligations under the Regulations. These services include conducting CDD and sanctions screening checks, providing wider regulatory compliance support, and developing risk assessments and controls.  The level of service, and standard of the product and service provided will depend on which third-party you use, and which level of service you pay for.

It is important to note that you, as the HVD, are responsible ensuring you comply with all of your obligations under the regulations. Any service, product or report the third-party provides must be examined by you, and you need to decide what, if any, further action you need to take to ensure you meet your obligations under the regulations.  

Care must be undertaken when using third parties, as any breach of the regulations may result in sanctions, including financial penalties or criminal charges, on you or your business, as the supervised entity: use of a third party does not absolve you of your responsibility for compliance.

Digital identity services certified under the UK Digital Identity and Attributes Trust Framework and included on the DVS Register are considered a reliable and independent source of information, provide an appropriate level of assurance against impersonation, and can be relied upon when conducting customer due diligence. Entities are able to fulfil their obligations under regulation 28 by verifying a customer who is a natural person’s identity using certified and registered digital identity services.  Digital verification services which are not certified and therefore not on the DVS register cannot reliably be deemed suitable for identity verification in compliance with the Regulations.