AML / CFT Compliance Guide for Gold & Precious Metals Dealers in the UAE
Businesses that deal with Gold, Silver and other precious metals are now required to meet the requirements set out in the UAE Law for Anti-Money Laundering and Combatting Financing of Terrorism (AML-CFT). Dealers in precious metals and precious stones (DPMS) fall within the category of Designated Non-Financial Business and Professions (DNFBPs), regulated by the Ministry of Economy. Considering the inherent risk associated with the activity, the Gold and Precious Metal dealers must adopt specific predefined steps to ensure AML compliance and avoid the hefty penalties prescribed by the Ministry of Economy.
Since the risk factor is high, the DPMS need to perform regular client checks, monitor large transactions, and implement a robust AML compliance system within their organisation to ensure AML compliance. Since identifying the risks and adopting preventive measures are tough yet inevitable, the help of AML consultants in Dubai will come in handy for the gold dealers. Here is a detailed guide for the DPMS to ensure AML compliance and avoid AML penalties in the UAE.
When Do the AML/CFT Obligations Apply to Precious Metal Dealers?
Precious Metals or Precious Stones dealers must meet the AML / CFT obligations when they qualify as DNFBPs as defined in the Cabinet Decision No. (10) of 2019, Concerning the Implementing Regulation of Decree-Law No. (20) of 2018. As per the Cabinet Decision, DPMS qualify as DNFBP whenever they carry out any single or related multiple transactions whose monetary value equals or exceeds AED 55,000. The transactions may include transactions with the same customer or transactions that appear to be structured to avoid the established threshold.
What Makes Trading in Precious Metals A Risky Business?
While assessing the risks in DPMS, we have to consider the nature of the precious metals and the characteristics of the markets where they are traded. In light of these two factors, we have codified some of the reasons that make them vulnerable to ML / CFT risks as follows,
- Precious Metals have high intrinsic value in a compact form and maintain or increase value over a period. Precious metals are easy to smuggle physically in a variety of forms.
- Precious Metals can be used as a means to launder the proceeds of crime.
- Money laundering through precious metals can be done in a wide range of ways, such as physical exchange through currency or indirect exchange through the exchange of value via various formal and informal financial systems.
- The presence of well-established cash-based markets for gold and diamonds make it vulnerable to money-laundering risks.
How can Precious Metal Dealers Mitigate Money-Laundering Risks?
Gold or other precious metal dealers are required to fulfil specific obligations which constitute the basis of a robust risk-based AML/CFT programme in respect of suspicious transactions. These obligations include:
- Identifying and assessing risks related to money-laundering.
- Establishing, documenting and updating AML / CFT policies to mitigate the risks identified.
- Implementing and maintaining risk-based Customer Due Diligence and monitoring process.
- Identifying and reporting suspicious transactions.
- Implementing a robust governance framework for AML/CFT, such as appointing an AML/CFT Compliance Officer, and training staff.
- Maintaining proper records in relations to all the above recommendations.
- Complying with the directives of the Competent Authorities in the UAE in relations to global AML watchdogs such as the UN and the FATF.
Adopting these measures help the DPMs to maintain a reliable paper trail of business relationships and transactions. It helps in tracing the true beneficial ownership and movement of assets to prevent DPMS from being exploited for the purposes of money laundering and the financing of terrorism. To establish a proper AML compliance system, the DPMs can enlist the assistance of the best AML consultants in the UAE.
Illustrating Suspicious Transactions Specific for DPMs through Examples
Some examples of when the application of the AML/CFT measures is (or is not) required are provided below for illustration purposes.
- A customer purchases several different items of gold, silver and other precious metals at the same time but requests separate invoices for each piece. In this case, the customer cleverly avoided meeting the threshold of AED 55,000 even though the total purchase price exceeds the amount.
- A customer wants to purchase multiple items of total value equal to or more than AED 55,000. He or she, however, makes a deposit of 25% in cash which is below the threshold. After a week, the customer pays another 25% cash instalment, and after another week, pays the remaining balance (which is below the threshold) in cash. Since all these transactions are related, it comes under covered transactions and must be reported.
- Three related customers enter a retail jewellery shop together and look at various items of gold or any other precious metals. They each decide to purchase gold or diamond jewellery worth AED 50,000, which is below the threshold. However, they wish to pay in cash on separate invoices. On the surface, it may seem like a legitimate purchase, but since their total purchase crosses the threshold and they all are related, it is a covered transaction.
How Can Jitendra Chartered Accountants Help?
Gold and other precious metals have an intrinsic value and can be easily smuggled or traded internationally in different forms. This makes the sector riskier, and the players in the industry should implement robust measures to ensure compliance with AML / CFT regulations. The risks in the sector are likely to stay here in the foreseeable future, and therefore, the dealers in precious metals need the expert assistance of the best AML consultants in Dubai, such as Jitendra Chartered Accountants (JCA). JCA can help the DPMs by providing services such as assessment of tools and controls design, review of current AML Policy review, AML/ KYC/ CFT Plan and framework, AML audit & reporting, due diligence Frameworks and process implementations and corporate training.