Luxury goods sellers – jewellers and real estate agents, yacht builders and diamond brokers – are doing little to check if their customers are using corrupt money to fund their high-end purchases, according to an anti-corruption campaign group.
A new report, Tainted Treasures: Money laundering risks in luxury markets, from the campaigners Transparency International, found that little due diligence is done on luxury goods buyers and where there are laws, there is little enforcement. Transparency International (TI) is calling for governments in high risk countries, including China, Japan, the US and the UK, to introduce specific laws to mandate due diligence for high-risk luxury goods sales and establish a designated authority to enforce them. TI says leading brands and luxury multinationals should establish effective customer due diligence and reporting in their retail and customer service chains.
Transparency International Chair José Ugaz said: “For the corrupt, the luxury sector is more than just a money laundering vehicle. The behaviour of kleptocrats who amass millions in properties, sports cars, and art in a short period of time shows that the desire to own luxury can in fact be one of the drivers of corrupt behaviour. The luxury sector has a responsibility to prevent public funds, which could have gone to schools and hospitals, from being splurged on their products even if it means fewer sales.”
In the UK, auction houses filed just 15 suspicious transaction reports out of 381,882 total reports covering all sectors from September 2013 to September 2014, and there were no known cases of regulatory enforcement involving auction houses or art dealers. The red flags that point to a risk of money laundering include the widespread use of anonymous shell companies to disguise the ultimate owner of assets in addition to long-standing luxury industry traditions of discretion and confidentiality. Sectors such as precious jewels or luxury accessories also feature high-value goods that are easily transportable, yet anti-money-laundering measures are scant, TI complains.
