Indications of Suspicious Activity Related to the Boat/Yacht Retail Industry

A search of the SAR database revealed 61 SARs containing the terms "boat sales," "boat dealership," "yacht sales," or "yacht dealership" in the narrative portion of the SAR. The top three reported violations were: 1) BSA/ Structuring/Money Laundering (28 SARs); 2) Consumer Loan Fraud (14 SARs); and 3) Commercial Loan Fraud (12 SARs). One SAR reported no violation. Violation amounts ranged from $0 to $28,500,000. Twenty-seven SARs reported a violation amount between $10,000 and $99,999. Twenty SARs were between $100,000 and $999,999. The violation amount on eight SARs exceeded $1,000,000. A total of 13 SARs were forwarded directly to federal, state or local law enforcement or regulatory authorities. The following are summaries of these types of activities.

The most common scenario involved Structuring.

Individuals working in the boat retail industry withdrew and/or deposited cash just below the CTR reporting requirements. Some individuals conducted these transactions with unusual frequency within a short period of time (days) at various bank branches within close proximity. The SARs indicated that the transactions were unusual for that type of business. It was noted that many deposits were regularly made, even during the boat sale off-season. Cash is not typically used to purchase boats. One boat dealer deposited over $255,000 from January 2002 to May 2002. Forty-three deposits were made, typically ranging from $5,000 to $9,000 (none over $10,000). Another SAR revealed that the owners and employees of a particular boat dealer purchased cashier's checks, with cash, at a bank with which they had no relationship, and then deposited the cashier's checks in the dealership's business account at another bank. All transactions fell below $10,000 and were, believed by the filer, to be intended to avoid CTR reporting requirements.
When informed of CTR reporting requirements, while attempting to conduct a transaction, some customers would alter the cash amount transacted to fall below reporting requirements.
Individuals structured deposits and claimed the funds were derived from boat sales.
Customers purchased boats by submitting structured checks/money orders.
Customers purchased boats by submitting large, one-time payments (in some cases in excess of $100,000). During a two-month period in 2001, a yacht sales company received $2,685,000 in seven wire transfers from the same individual located in a Middle Eastern country.
One internet-based yacht brokerage firm filed a SAR regarding a suspicious acting customer. The customer wished to purchase a $28.5 million yacht through the firm. The customer's behavior was erratic and the deal was never consummated.

Incidents of Consumer Loan Fraud primarily involved the submission of false or forged statements by loan applicants in their attempt to purchase a boat.

Commercial Loan Fraud also occurred involving boat dealerships.

Several SARs reported boats may have been sold to more than one owner; serial numbers on boats were altered; and boats stored at the dealership/ marina by legitimate owners were represented as inventory. These violations were discovered during audits performed by the lender.
More than one bank financed the same boat (duplicate loans) maintained by a boat dealer. The invoices on these boats were later found to be fraudulent.
Boat dealers, maintaining large lines of credit, substantially overstated the value of their boat inventory. A large portion of the overstatement resulted from the out-of-trust sale of boats without forwarding the sale proceeds to the banks. It is believed that the borrowers may never have owned boats pledged to the loan.
Boat dealerships diverted sales proceeds due the financing institution and loans from the financing institution to improper uses.

Excerpted from SAR Activity Review Issue , page 31