Which Industries Are Considered High-Risk and Why?
Which Industries Are Considered High-Risk and Why?
"But we just sell used cars?" The car dealer's frustration is evident as the accountant explains the enhanced KYC requirements. The truth is, some industries simply attract money laundering and other financial crime like magnets - and authorities know it.
Let's dive into which industries make alarm bells ring at the Financial Supervisory Authority, and most importantly: why.
Cash is King (of Problems)
Restaurants and Nightlife
Why high-risk:
- Massive cash flows
- Hard to verify actual number of customers
- Easy to inflate revenue
- "Ghost guests" who never existed
Typical modus operandi: Restaurant claims 200 guests on a night when there were only 50. Black money mixed with legitimate income.
Retail with High Cash Share
- Kiosks
- Tanning salons
- Laundromats
- Parking garages
Red flags: Revenue not matching location or customer flow. The kiosk in the industrial quarter with million-revenue.
Arcades and Casinos
Perfect for laundering because:
- Buy chips with cash
- Play minimally
- Cash in chips = "winnings"
- Documentation for money's "origin"
High Value, Low Traceability
Art and Antiques
Why loved by criminals:
- Subjective valuation
- International trades
- Private deals without registration
- Value transport in a suitcase
Example: Painting "bought" for 2 million. Who says it's not worth 50,000? Or 10 million?
Precious Metals and Stones
- Gold holds value
- Easy to transport
- Globally accepted
- Difficult valuation
Typical: Buy gold cash, melt down, sell elsewhere = money is "cleaned".
Luxury Goods
- Expensive watches
- Designer bags
- Luxury electronics
- Exclusive wines
Method: Buy Rolex cash in Copenhagen, sell in Dubai, money comes "legally" back.
Service Industries with Ambiguity
Consulting Companies
Why risky:
- Intangible services
- Hard to price
- International "consultants"
- Invoice without real service
Red flag: Newly started consulting firm invoices millions for "strategy advice" to foreign company.
Construction Industry
Perfect storm of risks:
- Many subcontractors
- Cash workforce
- Complex projects
- Materials that "disappear"
Typical fraud: Invoice for 100 tons cement, use 50, rest "disappeared".
Import/Export Companies
- Over- or under-invoicing
- Fictitious trades
- Trade chains through many countries
- Goods that never existed
The Digital Underworld
Cryptocurrency Companies
Why authorities' nightmare:
- Pseudonymity
- Cross-border
- Unregulated exchanges
- Mixing services
Development: From niche to mainstream problem. Every ransomware payment goes through crypto.
Online Gambling
- Players from whole world
- Hard to verify identity
- Fast money flows
- Jurisdiction shopping
Crowdfunding Platforms
New risks:
- Many small amounts = harder control
- International donors
- Fake projects
- Terror financing
Professional Facilitators
Lawyers with Certain Services
When they become high-risk:
- Client accounts with millions
- Company structures
- Real estate transactions
- Trust administration
Accountants and Tax Advisors
Risk arises from:
- Aggressive tax optimization
- Complex structures without substance
- Offshore advice
Real Estate Agents
Property = laundering favorite:
- Large values
- "Renovation" explaining value jumps
- International buyers
- Straw man purchases
Geographic Risks
Some industries become high-risk due to geography:
Companies with Connections to:
- Sanctioned countries
- Countries without AML control
- Tax havens
- Conflict areas
Example: Normal export company becomes high-risk when trading with certain Middle Eastern countries.
Industry Combinations That Explode Risk
Deadly cocktail:
- Cash-intensive + International = 🚨
- High value + Subjective pricing = 🚨
- Complex structure + Tax haven = 🚨
Example: International art dealer taking cash payment with companies in Panama.
How Do High-Risk Industries Handle It?
The successful implement:
- Extra due diligence on all customers
- Transaction monitoring in real-time
- Source of wealth documentation
- Close cooperation with authorities
- Technology catching patterns
They fail when they:
- Ignore risks
- Trust "we know them"
- Underinvest in compliance
- See it as bureaucracy
Trends and Future
New high-risk areas:
- NFT trading
- Influencer marketing
- Dropshipping
- Virtual worlds
Falling risk:
- Cash industries (becoming digital)
- Traditional retail
For Companies in High-Risk Industries
Accept reality: You're under scrutiny. Not unfair, just fact.
Invest proportionally: Higher risk = higher compliance budget.
See it as competitive advantage: "We have compliance under control" attracts serious customers.
Cooperate with authorities: They're not the enemy.
The Bottom Line
Being in a high-risk industry isn't a sentence. It's a reality requiring extra vigilance. Many legitimate, successful companies operate in these industries.
The difference between those who survive and those who close? The survivors take risk seriously and act accordingly.
Because ultimately, it's not about which industry you're in - it's about how you conduct business in that industry.
