Reporting, limits and red flags – what brokers and dealers should know about every transaction 

In the previous articles in this series – New AML obligations – will your company become an obliged entity? – I explained the new AML-CFT package will affect the entire yacht industry, not only the superyacht segment, and who will become an obliged entity. Now it is time for the question that arises in practice with every transaction: what exactly do I have to do, and when? 

It is September 2027. Your client has just made an offer for a yacht priced at 950,000 EUR. The transfer is to be made from the account of a company registered in Cyprus. The client claims to won the company – but neither the bank nor you have yet seen the ownership structure. 

The transaction does not exceed the 7.5 million EUR threshold. Does that mean you can sleep easy? 

Not quite. 

Two levels of obligations – and why both apply to you 

The AMLR introduces two levels of obligations which should be clearly distinguished from the beginning. 

The first level consists of obligations triggered by the mere fact of being an obliged entity. These apply to every client relationship and every transaction above certain thresholds, regardless of how much the yacht costs. 

The second level consists of obligations triggered by a specific transaction – the sale of a yacht for at least 7.5 million EUR for non-commercial purposes. This is where additional requirements arise, including a mandatory notification to the General Inspector of Financial Information (GIIF). 

The two levels should not be confused. The mistake many companies make is to focus only on the “7.5 million EUR threshold” and overlook the entire first level. 

Level 1 – Obligations in every relationship and every transaction 

When do you have to “check the client”? 

As an obliged entity, you must apply customer due diligence measures (CDD) in four situations: 

1. You establish a business relationship – meaning you start working with a client on a regular basis.
2. You carry out an occasional transaction of at least 10,000 EUR – either in a single transaction or in several linked operations.
3. There is a suspicion of money laundering or terrorist financing – regardless of the amount.
4. You have doubts about the reliability of previously collected data – for example, the client changes the ownership structure during the transaction.
5. Pay particular attention to point 3. There is no financial threshold here. If something raises your suspicions, you check it. Always. 

What exactly do you need to establish 

Standard CDD includes: 

• the client’s identity – first name, surname, personal identification number or passport number, and address; in the case of a company – registration details, legal form and management structure;
• the ultimate beneficial owner (UBO) – who stands behind the buyer (threshold: 25% of shares or voting rights, and if this cannot be established – the person exercising actual control);
• the purpose and nature of the relationship – why the client is buying the yacht and for what type of activity;
• verification of the data – asking is not enough; the documents must confirm the identity. 

When does enhanced due diligence (EDD) apply 

In some situations, standard CDD is not enough. Enhanced due diligence (EDD) is required, among other things, where: 

• the client or UBO is a politically exposed person (PEP), or has been one within the last 12 months;
• the transaction involves a client from a high-risk third country, as listed by the European Commission;
• the ownership structure is excessively complex or unclear without a business justification;
• the transaction is unusual – for example, it is of exceptionally high value, lacks economic logic, or payment is made through an intermediary.
• In the case of EDD, you must establish not only who is buying, but also where the funds come from and where the client’s wealth comes from. These are two different things: the source of funds for the specific transaction and the general source of the buyer’s wealth. 

Level 2 – Mandatory reporting for transactions above 7.5 million EUR 

If you sell a yacht for at least 7.5 million EUR, and the acquisition is for non-commercial purposes, an additional obligation is triggered: notification of the transaction to the General Inspector of Financial Information (GIIF). 

You must submit the notification before the transaction is completed. Not after the agreement is signed, but before it is concluded. 

What do you need to report? 

• the details of the parties to the transaction,
• the details of the buyer’s ultimate beneficial owner (UBO),
• the value and method of payment,
• information about the yacht,
• documentation confirming the source of funds and source of wealth. 

An important point: this obligation applies to you regardless of whether the bank also reports the transaction. If the payment goes through a credit institution, that institution has its own reporting obligations. But you cannot rely on the bank to “take care of it for you”. 

Commercial purpose 

The reporting obligation applies to acquisitions for non-commercial purposes. If a yacht is being purchased for charter activity, the obligation may not arise. 

But note: the purchase of a yacht by a company or another legal person does not automatically mean that the acquisition is for a commercial purpose. As the AMLR indicates, acquisition for private use may also cover legal persons, particularly where the company is used to manage the private assets of the ultimate beneficial owner. 

For this reason, assess the actual purpose, not the formal one. An SPV company that buys a yacht but does not carry out genuine charter activity does not change the nature of the transaction. 

Red flags – when you stop the transaction 

Not every risk can be quantified. Some warning signs are a matter of experience and common sense. The AMLR requires monitoring of transactions and a response when anomalies appear. 

Below is a list of signals that should trigger enhanced analysis or suspension of the transaction: 

Signals relating to the buyer’s structure: 

• the client does not want to disclose the ultimate beneficial owner or hides behind “confidentiality”;
• the ownership structure is multi-layered and involves remote jurisdictions, without a clear business justification;
• the buyer or ownership structure changes at the last minute before the transaction is closed;
• the client acts through an attorney-in-fact who cannot explain the purpose of the transaction. 

Signals relating to the payment 

• payment from an account unrelated to the buyer – for example, from a third party or a company operating in a different sector;
• a proposal to pay in cash or cryptocurrency;
• the client wants to pay in several instalments through different channels;
• unjustified urgency in making the transfer;
• a transfer from a sanctioned country or a high-risk country. 

Signals relating to the transaction: 

• the price differs from the market value of the yacht – significantly upwards or downwards;
• the client is not interested in a standard inspection or sea trials;
• the client wants to register the yacht as quickly as possible under the flag of a third country, without a clear reason;
• the client or UBO appears on sanctions lists (OFAC, EU, UN) or is a PEP. 

What to do when you see a red flag 

The procedure is simple, although it requires courage. 

Step 1: Do not close the transaction. Suspend the process until the doubts have been clarified. 

Step 2: Ask for additional documents. This may include explanations regarding the ownership structure, the source of funds and the purpose of the purchase. 

Step 3: Assess the response. If the client cannot or does not want to clarify the doubts, that is a signal in itself. 

Step 4: Consider reporting the suspicious transaction to the GIIF. As an obliged entity, you have a duty to report where you have reasonable suspicions of money laundering or terrorist financing. This obligation applies regardless of any financial threshold. 

Step 5: Do not inform the client about the report. The AMLR introduces a prohibition on tipping off – you must not inform the client that you have reported a suspicion or that they are being checked. 

Practical table – what you do and when 

Yachts below 7.5 million EUR – why they still matter to you 

Let us return to the situation described at the beginning. A yacht worth 950,000 EUR, a Cypriot company and an undisclosed ownership structure. 

The transaction does not exceed the reporting threshold. But: 

• if you are an obliged entity, you must carry out CDD when establishing a business relationship – regardless of the value of the yacht;
• if the ownership structure raises doubts, you must apply EDD;
• if the client does not disclose the UBO, you should not enter into the transaction;
• if you complete the transaction despite those doubts, you risk liability for breaching AML regulations. 

The 7.5 million EUR threshold is the threshold for mandatory reporting and for classifying the item as a high-value good. It is not the limit of your obligations as an obliged entity. 

Summary 

From 10 July 2027, every yacht transaction in the higher segment of the market will require a systematic approach to client verification. This is not only about the largest transactions – it is about every client relationship and every situation in which something raises doubts. 

Three questions you should ask in every transaction: 

Do I know who is really buying? Do I know where the money comes from? Does the transaction make economic sense? 

If you cannot answer any of them, you should stop. 

In the final article in this series, I will show how to translate these requirements into a specific system in your company: risk assessment, procedures and checklists that actually work. 

Do you have questions about a specific transaction, or do you want to assess whether your company should implement an AML procedure? Contact us.