Just three per cent of car retailers are currently compliant with tough new money laundering regulations, new research suggests.

The findings by Coleman Parkes Research mean the majority of dealer group directors are leaving themselves open to legal action and jail.

Dealers face fines of up to £5,000 if they fail to comply with the new rules which came into effect on March 1. If they want to continue taking cash payments for goods worth more than Euros 15,000 (about £10,000) they must register with Customs and Excise.

Coleman Parkes says that while a third of UK car dealers claim to be aware of the new legislation, 97% have not registered and 44% do not have a defined anti-laundering process.