Buying and selling secondhand goods is attractive for criminals because such transactions can avoid interaction with the financial sector.
Criminals may buy and sell second hand goods anonymously for cash (that is, physical currency) and these types of assets may be easily hidden and/or can be transferred to third parties with limited documentation.
Pawnbrokers and secondhand dealers may also have become more attractive to criminals over the past few years as the financial sector has implemented comprehensive AML/CFT measures.
The Money Laundering and Terrorist Financing (ML/TF) risks associated with pawnbrokers and secondhand dealers include:
- Significant or frequent use of cash to purchase valuable commodities and assets, which can then be resold to disguise the origin of illicit funds;
- Criminals may also use cash to buy secondhand goods, then travel overseas with them to transfer value while avoiding detection by financial institutions; and
- Organised crime groups may use cash to purchase goods then sell them for cash, so they can disguise the origin of the funds and deposit the money into the financial system without raising red flags.
Pawnbrokers and dealers in secondhand goods 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.