Precious metals and stones have been forged into jewelry, artefacts, and currency since the dawn of civilization. The modern trade of precious metals and stones has developed for centuries, but certain industry changes of late have caught the attention of those looking to eradicate financial crime. Analysts and law enforcement agencies have considered closely on the illegal mining industry, the smuggling of gold and silver over borders and the use of the products as a laundering mechanism.
Dealers in Precious Metals, Jewels and Stones are engaged in the business of production, mining or trading of precious metals or jewelry.
This sector is an attractive channel for money laundering because cash is an acceptable method of exchange, and the goods can be transported easily. Trade-based money laundering: false reporting, commodity misclassification, carousel transactions, or round-tripping through other countries; make it difficult to identify the source of funds or the purpose of transactions. This allows the proceeds of crime and illicit activities to be laundered through these goods, exposing dealers to fraud, bribes, or terrorism financing (TF).
Anti-Money Laundering for Dealers in Precious Metals and Stones should start with the assessment of the overall risks involved, and as it progresses, it should include four-pillar requirements, which are as follows.
- Policies, procedures, and internal controls, based on the dealer’s assessment of the money laundering and terrorist financing risk associated with its business.
- A compliance officer who is responsible for ensuring that the program is implemented effectively.
- Ongoing training of appropriate persons concerning their responsibilities under the program.
- Independent testing to monitor and maintain an adequate program.
AML COMPLIANCE REQUIREMENTS:
Dealers in precious metals and precious stones must implement a compliance program. A strong compliance program will form the basis of meeting all your regulatory requirements and includes;
- Onboarding stage with KYC
- Determining third-party involvement
- Ultimate beneficial owners
- Conducting sanctions
- PEP checks
ONGOING COMPLIANCE A PERQUISITE:
It’s simply not enough to establish an AML compliance program and have a compliance officer manage it. No AML program can remain static. It is a regulatory expectation that AML compliance programs will be modified and updated in response to changes in regulations and the business of the firm.
You must protect your firm from all risk — reputational, operational, credit and regulatory. Your AML compliance program should inform your overall risk management program. It should include
- Training staff and designating an AML Compliance.
- Conducting customer due diligence (CDD) when establishing a new business relationship or enhanced due diligence (EDD) for cash transactions above a designated threshold, or when a criminal is found to be the beneficial owner or holding a management function in the precious metals business.
- Keeping records as required by your regime.
- Ongoing CDD and transaction monitoring to identify and report suspicious activity.
- Complying by the laws set out by your country’s regulator, and industry bodies.
- Reviewing your compliance program at regular intervals.
MONEY LAUNDERING FOR DEALERS IN PRECIOUS METALS AND STONES – KEY INDICATORS:
- Payments are made in cash. Usually, in a transaction of precious stones or metals, massive amounts are involved. But if the payments are bifurcated in cash, multiple money orders, cashier’s cheque, or traveler’s cheque, or are being paid through a third-party account. Then you might suspect the probability of money laundering.
- The customer is not willing to provide complete or accurate financial references, contact information, or any type of business affiliations.
- The supplier or customer attempts to maintain a high degree of secrecy about a transaction, like normal business records should not be maintained.
- Sales or purchases don’t conform to industry standards.
- Sales or purchases are unusual for a particular supplier, customer, or a type of supplier or a customer.
Navigate The Red Flags with the help of Ahmad Alagbari Chartered Accountants
Ahmad Alagbari Chartered Accountants experts can help you by providing following services
- AML Health Check
- AML Business Risk Assessments
- Develop AML Policy & Procedures
- Develop Compliance Mechanism- Customer Due Diligence & Ongoing Monitoring.
- Train employees on countering money laundering and combating terrorism financing
Alia Noor (FCMA, CIMA, MBA, GCC VAT Comp Dip, Oxford fintech programme, COSO Framework)Associate Partner
Ahmad Alagbari Chartered Accountants