• Lease Hire and Purchase Financing

    Some services provided by lease hire and purchase financing companies that are attractive to criminals wanting to launder the proceeds of crime and to finance terrorism.

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Lease Hire and Purchase Financing

What are the ML/TF Risks?

Equipment finance consists of three broad product groupings; leasing, hire purchase and chattel mortgage, which are generally considered lower risk in ML/TF terms.

Lease financing is an important source of medium and long-term financing where the owner of an asset gives another person the right to use that asset against periodical payments.

Under a hire purchase contract, the buyer is leasing the goods and does not have ownership until the full amount of the contract is paid, where as a chattel mortgage is a term used to describe a loan in which an item of movable property is used as security for the loan.

The Money Laundering and Terrorism Financing (ML/TF) risks associated with lease and hire purchase include:

  • Accelerated repayment over and above the agreed repayment schedule;
  • Lump sum repayments;
  • Early termination or repayment;
  • Involvement of unrelated third parties without apparent connection or legitimate explanation;
  • Transaction activity is inconsistent with the age and profile of the parties; and
  • Clients may provide false or counterfeited documentation to confirm their identity.

Lease and hire purchase businesses must ensure the organisation conducts a comprehensive ML/TF risk assessment to identify, assess, mitigate and manage ML/TF risk exposures as a critical first step in complying with AML/CFT laws.

What are the AML/CFT obligations?

In developing responses to obligations under AML/CFT laws and regulations the following steps must be undertaken:

  • Conduct a Money Laundering and Terrorism Financing Risk Assessment;
  • Develop an AML Program that is proportionate to ML/TF Risks;
  • Establish effective Board and Senior Management oversight of the AML/CFT Program;
  • Appoint an AML Compliance Officer;
  • Establish a Customer Due Diligence (CDD) Program including collection and verification of know your customer (KYC) information including Enhanced and Ongoing CDD controls;
  • Implement a ML/TF Risk Awareness Training Program for staff;
  • Implement a monitoring program to identify unusual and possibly suspicious customer activity, transactions and behaviour;
  • Establish a process to report suspicions and other activity specified by AML/CFT law and regulation;
  • Establish Record-keeping controls; and
  • Maintain the ML/TF Risk Assessment and the AML Program as the business and risks change.

How can AML Accelerate help?

AML Accelerate, drawing on unparalleled expertise and real-world experience, has developed an AML/CFT Program Manual for the lease hire and purchase financing industry.

Our solutions deliver all the foundational AML/CFT materials including a ML/TF Risk Assessment, an AML/CFT Program, CDD Standards, and an AML Operating Manual, which you can tailor to your specific needs, ensuring your AML/CFT controls are commensurate with your business.

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