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.