The sector in brief
Luxury goods such as watches, cars, yachts, art and antiques store a large amount of value in a form that can be carried, shipped and resold. A buyer who wants to turn illicit money into something that looks respectable, and can later be sold for a clean payment, has an obvious interest in such items.
Dealers in high-value goods are treated as designated businesses in some jurisdictions, including Abu Dhabi Global Market. What counts as high-value, and which dealers are covered, is set by the rules that apply to your licence, so the first task is to check whether you are in scope and under which regime.
The business is relationship-driven and discreet, and sales can close in a single visit. A good programme has to work in that setting: quick enough not to lose the customer, strong enough to answer the supervisor.
Where the risk sits
Large cash and unusual payments
Paying for a luxury item in cash, in virtual assets or through third parties is the main warning sign for a dealer.
Buying on behalf of others
A buyer who is acting for an unnamed person, or has the item delivered to someone else, may be hiding the real owner.
Quick resale
Buying and soon reselling, possibly at a loss, can convert illicit money into a seemingly legitimate sale payment.
Valuation problems
Art and antiques have subjective values, so over- or under-valuing items is a way to move value between parties.
Export and cross-border delivery
Items shipped out of the country shortly after purchase move value across borders with little trace.
Who supervises you
In Abu Dhabi Global Market, high-value goods dealers are supervised by the ADGM Registration Authority. Elsewhere, whether a dealer in luxury goods is covered depends on the goods and the rules that apply to the licence. For gold, jewellery and stones, see the page on precious metals and stones dealers.
The supervisor decides the detailed rules for your licence category, so always read its current guidance alongside this page.
What supervisors expect
- A named compliance officer with authority to refuse a sale, and a proportionate programme.
- A business risk assessment that considers the goods you sell, the customers you attract, payment methods and delivery routes.
- Customer due diligence for sales that fall within the rules, including identification of beneficial owners where the buyer is a company.
- Understanding of where the funds come from for large purchases, and who is actually paying.
- Sanctions and politically exposed person screening, with a record of how matches were reviewed.
- Reports through goAML where the rules require them, and suspicious transaction reports when you suspect wrongdoing.
- Training, record keeping for the required period, and an independent check that the programme works.
Red flags to watch
- A customer who wants to pay a large amount in cash or through an unrelated party.
- A buyer who is uninterested in the details or price of an expensive item.
- An item bought and then offered for resale very soon afterwards.
- Delivery to a different person or country than the buyer's own.
- A customer who becomes uncomfortable when asked for identification.
- A price that does not match the item's real market value.
A worked example
A watch bought in cash and resold the next week
A visitor buys a very expensive watch with a large payment in cash and returns a week later wanting to sell it back at a loss, asking for payment into an account in a different name. The dealer who sees two unrelated transactions has missed what the supervisor will see: a cash purchase converted into a bank payment. The dealer should record both transactions together, ask for an explanation and identification, speak to the compliance officer and, if the explanation is not credible, consider a report.
How Adventant helps
Questions answered
What counts as a high-value good?
The rules that apply to your licence set the scope and any threshold. Typical examples are watches, jewellery, art, cars and yachts. Check the guidance of your supervisor to see whether your goods and sales are covered.
Do auction houses and galleries have duties?
If they deal in covered goods above the relevant level, they are likely to be covered. Both buyers and sellers need to be understood, because laundering can occur on either side.
Can we accept cryptocurrency for a luxury item?
The AML duties apply whatever the payment method. Many dealers choose not to accept virtual assets, or apply extra checks. Check your supervisor's position.
What if a customer is a regular?
Familiarity is not due diligence. Keep records up to date and watch for changes in the pattern of purchases.
How do we deal with a refusal to give identification?
Do not complete the sale. Record the refusal and tell the compliance officer, who will consider whether a report is needed.