I bought/sold a _________________________ without using a contract or title company.

I’m posting this on brand X talk because it applies to any type of airplane and this is something every buyer and seller needs to read.

I was recently browsing a forumn here and noticed that several BT’ers have purchased aircraft without using an escrow agent.

There are several major issues with closing out of escrow and I’m sure we will get into them here. The reality is saving a few hundred or even thousand dollars is simply not worth it.

Everyone familiar with the term AML?

I ask because if you’re selling an airplane you have to be.

The terminology is “know your customer.”

What it means is that you have a legal responsibility to know who you are selling your airplane to, you must know that they are not involved in the drug trade.

You must know that the funds you are receiving, are not elicit funds being used to purchase the aircraft in an effort to launder money.

AML is an acronym for “anti-money laundering” and it refers to the steps the US Government has taken to eliminate the purchase of aircraft for the purpose of laundering drug money.

Don’t assume that only people from Columbia or Mexico are in the drug business, there are plenty of folks right here in the US that are known drug traffickers. I’m sure a few of them are actually aircraft dealers. Plus, the drug cartels use middlemen and cut outs to make these purchases, I’m fairly confident that Pablo Escobar never showed up at Wichita in person to buy a new airplane.

If you’re reading this and thinking this doesn’t affect me, or it’s not my responsibility, you need to do your research. The fact is getting involved in an aircraft transaction where money laundering is involved could end up, with you in a Federal Court room. The best case scenario is that you will be there to testify against someone in the drug trade.

Sound like fun?

Well, the other option certainly is much worse, which is that you could actually be prosecuted for money laundering! This sounds outrageous, but it is true. Your choice will probably be testify on behalf of the government or be a defendant yourself, because the government takes the position that it was your responsibility to know your customer.

That’s right, you the airplane seller, who should have known better could actually go to the Federal Penitentiary.

Wow. That's certainly eye opening.
How do you recommend we check out a potential buyer from another city or state?

How many innocent sellers are in a federal penitentiary for this?

Are you implying that "only aircraft brokers know who the drug dealers are"?

How can I be expected to know who the drug dealers are when the government doesn’t? After all, they spend hundreds of million dollars per year trying to discover the drug dealer’s identity.

Does the escrow service guarantee legal representation, and a refund of the purchase price you are out in a AML situation? Or do they limit their liability to the amount you paid them for their services?

Start here https://www.treasury.gov/resource-cente ... fault.aspx

Thanks for letting us know Chip. This airplane business sure sounds scary. I think I just won't buy that jet from you now that I had been thinking about for a while. I mean eventually I would probably want to sell it, and I sure would hate to go to prison for it. Thank you for saving my ass.

BTW, I always take my legal advice from non-lawyers. It has served me well in the past.

Read my ‘government seized my airplane’ thread. Chip is right... at least in the sense that you don’t want to screw around with this sort of risk.

I imagine chip’s point is that you don’t want to just sell an airplane and casually transfer money/title.

Title company, legal sales contract, copies of ID for buyer and seller. I had all that... The feds asked for it. If I didn’t have it, I’m not sure I’d have been In trouble but.... when they ask is NOT the time to start wishing for paperwork that shows your intent.

Handshake deal for a C150 at your local airport is one thing...everything else...I’d do ‘right’.

IMO, you don't need to use an escrow agent to cover yourself here.

Take a federal wire transfer and you are almost surely in the clear with respect to money laundering. And if you're not, I don't see how using an escrow agent covers you any further. Chip, could you explain?

Federal wire transfer.... when?
Before or after the FAA receives and stamps the bill of sale? Take the wire first? Then sign bill of sale?
If you sell casually, what if he’s not a US citizen? Maybe he tells you he’s from Louisiana and that explains it in your mind. He can’t fly that N number.

Money in escrow until all terms are completed per the written, enforceable, legal sales contract. I want to see a FAA stamped Bill of sale... before it taxi s away...

Recieving a Federal wire is exactly how most laundering is done, the days of suitacses of cash are gone... I think.

This in no way removes liability... it is the liability.

As Chad said, having proper documentation tells the Government you are not trying to hide anything.

The title company doesn’t remove liability or insure you against it. They do add a degree of ligitimacy to the deal. Not to mention if the Feds sieze the airplane and funds, it will likely be from the escrow account not your bank account. Still stinks to lose your airplane, but at least you won’t have to explain it to your banker. (As long as you keep making your payments)

To Eric’s point, I am not an attorney. I am a professional aircraft buyer’s rep and I know more about AML than most attorneys.

We do always recommend that an AVIATION attorney is retained by our clients, and they are familiar with AML. You can always just ask your attorney if he’s familiar, you’ll know very quick if he doesn’t respond with “Anti Money Laundering law”.

If you do get involved in a bad deal, hire a criminal law attorney who handles cases at the Federal level immediately.

AND... most importantly there is nothing to be afraid of except ignorance. Wilfull ignorance AKA “how was I supposed to know” will get you in hot water quick.

Did you know that changing your story when interviewed by the FBI is a Federal offense?

Again, knowledge is everything... isn’t that why most of us are here, to share knowledge so that we all benefit?

I don’t think anyone knows, they try real hard to keep it on the down low... but there are common red flags, you just have to know what to look for. In a few pages, I’ll make sure you know more than the average aircraft broker.

A lot of aircraft brokers have gone to prison for money laundering and drug running... and I assume they know each other... so there’s that.

To Greg’s point I doubt any innocent sellers are in prison, but many have been compelled to testify so that they were assured they would not face charges themselves.

To Jason’s point, if you sell using a reputable listing agent, that is another level of protection, and one more set of knowledgeable eyes looking for red flags.

How many wire or ACH transfers get done every business day?

How many of those have the account of an LLC or individual on at least one end of the transfer?

How many of those do you think the counterparties have done any significant diligence on each other?

I think it's reasonable to continue to do business as usual, and in the 0.00000001% case that my transaction is flagged for AML investigation, lawyer up, and assert that I was relying on the banking sector's AML/KYC laws, which is why I took ACH or wire instead of a suitcase of cash in the first place.

Other people will have a different level of risk tolerance, some higher, some lower.

Now, if I need a broker for a broker's domain expertise or the significant efforts and advice they can apply, absolutely I'd use one. I don't see a need to use one as a kind of rhinoceros trampling insurance.

I don’t think anyone knows, they try real hard to keep it on the down low... but there are common red flags, you just have to know what to look for. In a few pages, I’ll make sure you know more than the average aircraft broker.

A lot of aircraft brokers have gone to prison for money laundering and drug running... and I assume they know each other... so there’s that.

To Greg’s point I doubt any innocent sellers are in prison, but many have been compelled to testify so that they were assured they would not face charges themselves.

To Jason’s point, if you sell using a reputable listing agent, that is another level of protection, and one more set of knowledgeable eyes looking for red flags.