A subject that affects a great many retailers - albeit that they may not realise they are affected - is money laundering. Used in its broadest sense, the term is now taken to refer to any criminal financial activity that crosses over into apparently legitimate business activity. This means that it ranges from using a retail business to recycle ’dirty money’ into the commercial banking sector, through to the purchase and sale of stolen goods themselves, to handling the proceeds of theft, fraud or tax evasion.
At the most sinister end of this broad spectrum, of course, are the implications of terrorist-related funding, whether those terrorists are active within the UK, or on behalf of organisations waging their campaigns abroad.
These activities are covered by a raft of legislation, including the Proceeds of Crime Act 2002 (POCA) the Terrorism Acts 2000 and 2006 (TA02 and TA06), and the Money Laundering Regulations 2003 (MLR2003). In fact that last one is about be tightened up even further and will morph into MLR 2007 as of December this year.
So what’s this got to do with retailing in general and petrol retailing in particular? More than you might imagine at first glance. For a small proportion of today’s forecourt retailers there is a direct and explicit involvement with these regulations.
For example, those dealers who perhaps have a car sales operation related to their forecourt. If any of your cash sales are over the value of €15,000 (about £11,000 at today’s rate) then you are classed as a ’high-value dealer’ under the terms of the MLR, and are required to make due enquiries about the status and identity of your customers, the source of their cash etc. Failure to do so can result in unlimited fines, seizure of assets and imprisonment.
For other forecourt retailers the implications are not quite so obvious but are there nevertheless. Take a simple example. You are the owner/principal of a dealer group that owns, say, 10 forecourts, and you decide that you’ll install self-employed commission operators to actually run each site for you. At this point you too are now well within the scope of the Money Laundering Regulations. So consider this:
1. Do you know exactly who you have appointed to run the businesses at each site? Have you checked that their names, addresses, and National Insurance numbers are genuine?
2. Did you find out where they obtained the funds to pay for your shop stock, ’franchise deposit’, ’security bond’, or whatever else they’ve had to stump-up for you on day one?
3. How are you monitoring the activity of your appointed ’site manager’?
4. Do you have procedures in place to ensure that they are maintaining proper employment records and making the necessary PAYE/NI deductions (and of course payments to HMRC) - or have you fallen for the "all my staff are self-employed" nonsense?
5. Have you a procedure to identify whether the cash that they bank from the business can actually be reconciled back to provable sales figures, taking into account the level of sales that are made on plastic?
6. Do you know whether they’re actually making any money from the business?
At that last point one can imagine many network owners throwing their hands in the air and shouting "Why should I want to know whether they’re trading profitably - after all it’s their business, not mine?" Unfortunately one of the classic signs of a ’suspect’ business under MLR is one that continues trading when it clearly doesn’t ever seem to make any money. If your retailer continues racking up losses but stays working in your premises, you really do have to ask yourself why they’re still there. And that isn’t simply a rhetorical question; you can’t avoid it by ignorance of their financial performance.
If you are providing the facilities for someone to run a business on your premises, possibly under your trading name, then you must be able to prove that you have performed ’due diligence’ when you appointed them. That means you must have a reasonable system in place for monitoring their transactions and trading history so that they cannot simply be using your site to run a money laundering operation for themselves.