Luxury watches are not just expensive accessories; they are also becoming tools for criminals to launder money. Luxury watch laundering attracts criminals because these watches are valuable, easy to move around, and can be sold again without much inspection.
Criminals often use luxury watches during the integration stage of money laundering. They can later sell these valuable watches to convert them into legal money. Alternatively, they might exchange them with drug suppliers or use the watches as collateral for loans, reducing their tax liabilities by deducting interest payments. This is how the risk of luxury watches in financial crimes grows.
Financial criminals face challenges in moving large amounts of cash across borders or depositing it in a bank without raising suspicion. To circumvent this, they use the cash to buy expensive watches.
They can then travel to other countries to sell these watches in the grey market without attracting attention.
Authorized watch sellers may not know where the money comes from when people buy watches, so they might end up selling watches to criminals without realizing it. Money launderers often use shell companies to make these purchases appear legitimate, using cheques instead of cash to buy high-priced watches.
These transactions are conducted through legitimate dealers, keeping the client’s identity secret. These dealers may represent buyers or sellers in watch auctions, highlighting a major loophole exploited by money launderers in criminal activities.
Modus Operandi of Luxury Watch Laundering
Money laundering using luxury watches typically involves several steps that help criminals disguise the illicit origins of their funds. Here we will discuss the modus operandi of this technique.
- Acquisition of Luxury Watches: Criminals use illicit funds, such as those from drug trafficking or fraud, to purchase luxury watches. These watches are often high-end, expensive models from renowned brands.
- Anonymous Purchases: To avoid detection, Criminals might buy these items secretly or through shell companies to hide where the money comes from.
- Bulk Purchases: Criminals may buy luxury watches in bulk, sometimes clearing out entire collections or limited editions, creating scarcity and increasing the value of these watches in the secondary market.
- Resale through Legitimate Channels: After acquiring luxury watches, criminals resell them through legitimate channels, such as auction houses, luxury watch dealers, or online platforms. This process helps “clean” the money, making it appear legitimate.
- Price Manipulation: Criminals may artificially inflate the prices of luxury watches in the secondary market, creating a false impression of their value. This manipulation helps them justify the source of their funds when they sell the watches.
- Cross-Border Transactions: Luxury watches are easily transportable and highly liquid assets, making them ideal for cross-border transactions. Criminals may use these watches to move funds across borders without raising suspicion.
- Use as Collateral: Sometimes, criminals might use luxury watches as a guarantee for loans. This lets them access legal money while also using the watches for money laundering.
- Disposal of Evidence: Once the funds are laundered, criminals may dispose of the luxury watches to avoid detection. This can involve selling them at a loss or through illicit channels.
Characteristics of Luxury Watches That Make Them Vulnerable
Luxury watches are attractive to criminals because they are:
- Compact and Easy to Carry: Luxury watches are small and simple to transport, making them convenient for illegal deals.
- Highly Valuable: Luxury watches can hold significant monetary worth, offering criminals a valuable asset.
- Quick to Sell: Luxury watches are easily resalable, enabling criminals to convert them into cash swiftly.
How to Combat Money Laundering in the Luxury Watch Market
To combat money laundering in the luxury watch market, businesses and individuals can:
- Know Your Customer (KYC): Verify the identity of buyers to ensure they are not involved in illegal activities.
- Monitor Transactions: Keep an eye on transactions for any suspicious activity and report it to the authorities.
- Comply with Regulations: Stay up-to-date with anti-money laundering regulations and follow them.
- Use Blockchain Technology: Consider using blockchain technology to track the ownership and transaction history of luxury watches, making it harder for criminals to use them for money laundering.
Conclusion
Luxury watches are more than just fashion accessories; they are also tools for criminals to launder money. By understanding the risks businesses, and individuals can protect themselves and the integrity of the luxury watch market.
