Jewelry Dealers Now Covered by AML/CTF Requirements

By Victor Comras

I 'm not sure how many jewelry dealers read the Counter-Terrorism Blog, but I did want to join others in reminding you that as of January 1, 2006, you are required to have in place, and available for inspection, due diligence plans to assure that your auspices and merchandise are not being abused by others for the purpose of money laundering or terrorism financing. The Treasury Department (FinCen) issued new rules last June, pursuant to the Patriot Act requiring "dealers in precious metals, precious stones, jewels and covered goods" to implement an AML program. The section of the Patriot Act under which these rules were imposed is law and not subject to the renewal action now being debated in Congress. Jewelry dealers who buy and sell these products in an amount in excess of $50,000 in one year must comply by January 1, 2006. Failure to do so can result in severe legal sanctions. Yet, there apparently remains a good deal of confusion in the industry as to who is covered and who is not covered. And, only a small percentage of jewelry dealers have yet brought themselves into compliance with these new rules.

A starting point is to determine whether you are a dealer or retailer. You are a dealer, and are covered by the rules, if you both purchased at least $50,000 worth of covered goods and sold at least $50,000 worth of covered goods during the preceding year. Covered goods include �jewels, precious metals, precious stones, and finished goods (including, but not limited to, jewelry, numismatic items, and antiques) that derive 50% or more of their value from jewels, precious metals, or precious stones contained in or attached to such finished goods.� You are also covered by the rules if you are a retailer and purchased more than $50,000 of covered goods from non-U.S. dealers or members of the public and sold more than $50,000 of covered goods to persons who are deemed to be "dealers" Retailers who purchases their goods from US based dealers already covered by the rule and from other retailers are not required to establish anti-money laundering programs.

The program you design to comply with Treasury's interim final rule must be established in writing, must include the designation of a compliance officer responsible for administering your compliance program, and must demonstrate that you are effectively evaluating transactions to determine if they pose specific money laundering or terrorism financing threats. You must also assure that your employees are trained to be aware and to carry out their responsibilities under your established AML program. You must also carry out periodic tests to ensure that the program functions as designed. A number of organizations have put together packets of information that can be used to simplify the process of establishing a compliance system. FinCen has also published a FAQ paper useful in this regard. Good luck and let us know if we can be of further help.

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