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HMRC internal manual

Money Laundering Regulations: Compliance

From
HM Revenue & Customs
Updated
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High Value Dealers: High Risk HVDs - Alcohol Traders.

Businesses trading in duty suspended alcohol frequently operate high risk businesses that fail to comply with the Money Laundering Regulations. The following table sets out common circumstances surrounding the predominance of HVPs by businesses dealing in alcohol products.

High Risk Trader Profile Comments on Credibility
   
One man business with no staff or commercial premises who often rely on one supplier. Lack of awareness of normal business practices to control business and limited accounting records.
Business starts spontaneously with no visible capital or previous trade experience Unconvincing explanations on background to the business and how customers acquired.
Relevant customers are cash and carry outlets based in Northern France, or other UK based traders supplying them Trust allegedly plays a key part in trading relationships with no evidence of checks on customer status or background to manage commercial risk/bad debt. Lack of evidence in respect of beneficial owners and their representatives.
Customer base is often small with a standard mark-up of around 5% Dependence on small customer base makes business vulnerable to competition.
Consignments are supplied in bond, delivered under duty suspense- predominantly high strength beers.  
Cash payment collected in person but often delivered by a courier without any security precautions being in place. Cash handover often takes place in public places such as motorway service areas, hotel foyers, car parks. No consideration of possibility of robbery. loss of cash and/or physical danger. Not prudent business practice
  Payment accepted with no attempt to count the cash or issue a receipt.
  No audit trail to evidence that cash was actually received from a customer in France.
Reasons given for accepting large cash payments Comments on reasonableness of explanations
   
Customers of French cash and carry outlets are primarily UK based tourists on “booze cruises” who pay in cash sterling. Payments claimed to be mainly cash sterling with few credit or debit card payments as no chip and pin to prevent fraud.
To prevent lodgement in French banks and to avoid charges/currency exchange costs, cash payment is accepted from customer. Sterling accounts appear to be available in France from UK banks with operations there. Traders claim that the banks are unwilling to offer accounts (risk appears to be too great). No concrete evidence to support this but even if plausible is this a sufficient business reason to justify the unsecured movement of large sums of cash?
The trader (supplier) can get preferential cash lodgement rates from his bank so cash accepted from customer (and paid on to supplier) This is not a valid reason why the customer pays in cash. It is just a commercial consideration that affects profitability. It is inevitable that cash is banked by one of the parties in the supply chain but it is unclear how it affects margins and prices.
Cash lodgement rates charged by UK banks are typically 60 pence per £100 with special rates down to 20 pence and below. In general the position taken by traders is to justify/ facilitate accepting cash rather than confirming the customer’s bona fides and the legitimacy of the source of the cash.