AML Regulation: new obligations for the automotive sector from 10 July 2027
Persons dealing with high-value goods, including motor vehicles of a price exceeding EUR 250 000 will become obliged entities under Regulation (EU) 2024/1624 of the European Parliament and of the Council of 31 May 2024 on the prevention of the use of the financial system for money laundering or terrorist financing (the "AML Regulation"). Consequently, new obligations will be imposed on these entities. Leasing companies financing vehicle purchases retain their status as obliged entities and must align existing procedures with more detailed requirements.
Who in the Automotive Sector will be subject to the AML Regulation?
The significant novelty for the automotive sector is the extension of the catalogue of obliged entities to persons trading, as their regular or principal professional activity, in high-value goods (Article 3(3)(f) of the AML Regulation). High-value goods include jeweler and gold or silver articles worth more than EUR 10,000, watches worth more than EUR 10,000 and — most importantly for the automotive sector — motor vehicles priced above EUR 250,000, as well as watercraft and aircraft worth more than EUR 7,500,000 (Annex IV to the AML Regulation).
The justification for bringing this category within the AML regime is the high value and mobility of such goods: motor vehicles, watercraft and aircraft in the higher market segments are exposed to the risk of use for money laundering and terrorist financing because of the ease of moving them within and outside the EU and the limited access of authorities to information on goods registered in third countries (recital 20 of the AML Regulation).
Consequently, dealers and distributors of high-value vehicles, which to date have not been subject to AML/CFT obligations (other than in cases concerning cash payments), will become fully-fledged obliged entities, with all the obligations that follow.
Leasing companies, which commonly finance customers acquiring vehicles from dealers and distributors, already qualifies themselves as obliged institutions under the current AML/CFT rules. That status is maintained under the AML Regulation, as financial leasing falls within the catalogue of activities of a "financial institution" (defined in Article 2(1)(6)(a) of the AML Regulation, referring to the activities in Annex I to Directive 2013/36/EU).
For the sector as a whole, this means that some entities (leasing companies) will need to adapt existing AML procedures to the new, more detailed requirements of the AML Regulation, while others (sellers of high-value vehicles) will need to implement AML compliance from scratch.
Main obligations of obliged entities
Internal AML procedure. Obliged entities — both high-value vehicle traders and leasing companies — must put in place internal policies, procedures and controls to ensure compliance with the AML Regulation (Article 9). These should be proportionate to the nature, scale and complexity of the business and cover, among other things: a business-wide risk assessment and its updating; customer due diligence rules; suspicious transaction reporting rules; outsourcing rules; record keeping; staff training; and screening of the integrity of employees.
Customer due diligence. Due diligence measures apply, among other cases, when establishing a business relationship and for occasional transactions of EUR 10,000 or more (Article 19). For occasional transactions carried out in cash, the threshold falls to EUR 3,000 (Article 19(4)), and identification and verification of the customer is then required. As regards cash payments themselves, for persons trading in goods (for example car dealers) and providing services, the AML Regulation will limit acceptance of cash payments to EUR 10,000 (Article 80), although member states may set a lower limit.
Due diligence measures comprise, taken together: identification of the customer and verification of their identity; identification of the beneficial owner and reasonable steps to verify their identity; assessment of the purpose and intended nature of the business relationship; screening of the customer and beneficial owner against targeted financial sanctions and ongoing monitoring of the business relationship; establishing politically exposed person ("PEP") status; identification and verification of the person authorised to act on the customer's behalf; and identification of the persons on whose behalf or for whose benefit a transaction is carried out (Article 20). For entities trading in high-value goods, including motor vehicles, the customer is deemed to include not only the direct purchaser but also the supplier of the goods (Article 19(6)(a)), meaning due diligence must also be applied to the entity from which a vehicle is acquired, for example for onward resale.
Identifying the customer and beneficial owner. Identification of the customer consists of establishing their data, the catalogue of which is set out in the AML Regulation and differs depending on the customer's legal status. For an individual customer, the AML Regulation lists: all forenames and surnames; information on each nationality held or on statelessness and refugee or subsidiary protection status, where relevant; the national identification number, where relevant; date of birth; place of birth; and place of habitual residence or, in the absence of a permanent residential address, the place of legal residence in the EU, together with a postal address at which the individual can be contacted (Article 22(1)). Identification of the beneficial owner covers establishing all natural persons who ultimately own or control a legal entity, an express trust or a similar legal arrangement, including understanding the customer's ownership and control structure, and obtaining all identification data of those persons as catalogued in Article 62(1)(a).
Verification. Verification of the identity of the customer and beneficial owner should take place before establishing a business relationship or carrying out an occasional transaction (Article 23), by obtaining and checking documents, data or information from reliable sources. For beneficial owners, verification additionally involves a mandatory check of the data in central beneficial ownership registers (Article 22(7)) — an obligatory step, independent of other verification methods used.
Organisational structure and staff. The AML Regulation organises and harmonises requirements for compliance roles, whose appointment is mandatory in obliged entities. First, the obliged entity designates one member of the management body responsible for compliance with AML rules — the "compliance manager" (Article 11(1)). Their duties include ensuring that internal policies, procedures and controls are consistent with the entity's risk exposure and are implemented; ensuring compliance with the relevant rules; ensuring that sufficient human and material resources are allocated; and receiving information on significant deficiencies in internal policies, procedures and controls. Second, a compliance officer is appointed (Article 11(2)), who, among other tasks, submits suspicious transaction reports to the financial intelligence unit ("FIU"). The AML Regulation also introduces a new obligation to screen the integrity of employees and persons of comparable status, including agents and distributors, directly involved in ensuring compliance with the AML Regulation, covering their skills, knowledge and good repute, honesty and ethical conduct, both before they take up the function and periodically thereafter (Article 13).
For high-value vehicle dealers, implementing these functions will be a new organisational element, while leasing companies will need to verify whether their existing compliance structure — a responsible management board member and a designated AML officer — meets the new, more detailed requirements. For both categories, the integrity screening of employees and persons of comparable status involved in AML/CFT duties will be new.
Reporting obligations. Obliged entities must report to the FIU, on their own initiative and without delay, situations in which they know, suspect or have reasonable grounds to suspect that funds or activities, regardless of the amount involved, are the proceeds of criminal activity or are related to terrorist financing or criminal activity, and must respond to FIU requests for additional information in such cases (Article 69). All suspicious transactions are reportable, including attempted transactions and suspicions arising from an inability to carry out customer due diligence.
A new reporting obligation also merits attention: persons trading in high-value goods must report to the FIU all sales transactions involving, among other things, motor vehicles priced at EUR 250,000 or more (and watercraft and aircraft above EUR 7,500,000) acquired for non-commercial purposes (Article 74). The same reporting obligation applies to credit and financial institutions, including leasing companies, providing services connected with the purchase or transfer of ownership of those goods, in relation to all transactions they carry out for their customers concerning those goods.
Conclusion
The AML Regulation imposes obligations on two groups of entities operating in the automotive sector:
- entities trading in high-value motor vehicles, in practice dealers and distributors, which come within the AML/CFT regime for the first time under the new AML Regulation; and
- leasing companies, which most often already qualify as obliged institutions under the AML/CFT rules currently in force.
The key challenges are: implementing or updating internal AML procedures and risk assessments; applying the full range of due diligence measures to customers and beneficial owners; meeting the FIU reporting obligation; and appropriately adapting the internal organisational structure to the new requirements. It is also worth remembering the new EUR 10,000 threshold for occasional transactions, and that in certain situations vehicle dealers will need to apply due diligence measures to the entities from which they buy vehicles for onward sale. The AML Regulation applies from 10 July 2027, which leaves automotive sector participants limited time to prepare for the new requirements.
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