AML / CFT Compliance Guidelines - Gold & Precious Metals
OVERVIEW
Objective
As a result of record levels of trade activity in the Gold industry in Dubai, the DMCC Gold and Compliance Departments would like to take the opportunity to remind all its members of the importance of complying with international Anti-Money Laundering (AML) and Combating Financing of Terrorism (CFT) regulations and standards.
Adhering to the best global benchmarks in AML / CFT practices will be an important catalyst for the industry to continue to cement solid foundations and reach higher levels of development and sophistication.
Importance of AML / CFT Regulations and Standards
- International Monetary Fund requested the implementation of a risk-based Anti-Money Laundering and Combating Financing of Terrorism program for Gold & Precious Metal dealers; this request has been endorsed by UAE authorities.
- Absence of AML / CFT program for you may result in:
- Reputation Risk
- Potential Financial Loss
- Possibility of being Blacklisted - It is the member company’s responsibility to maintain a proper AML / CFT program and to adhere with international and local regulations and standards.
- Failure to demonstrate credible AML / CFT regulations and standards may result in DMCC license revocation.
DMCC’s Role
The DMCC is committed to providing its members with Guidance, Screening support and Counter party information assurances when requested by the member company.
It is the responsibility of the DMCC member company to ensure that they are compliant with AML / CFT policies - however, the DMCC shall use reasonable endeavors to support companies in implementing their AML policies.
These Guidelines and the documents linked below are intended solely as guidance for DMCC Gold & Precious Metal Companies wishing to implement or revise their AML / CFT procedures. DMCC makes no representation or warranty that compliance with these Guidelines or linked documents will result in DMCC Gold & Precious Metal Companies being deemed compliant by any competent third party authority with respect to AML / CFT procedures. DMCC Gold & Precious Metal Companies are advised to carry out there own due diligence in this regard.
A. KYC Form
Suggested ‘Know Your Client’ Form based on the DMCC’s form which can be adapted to fit your business.
B. Compliance Questionnaire
Basic set of questions that a company should be able to address with regards to its AML / CFT program. These can help identify whether your company has done enough towards implementing its AML / CFT approach. It may also be distributed to the counterparties your company works with to ensure they have adequate AML / CFT measures in place.
C. UN Company Sanctions List
- The latest list of entities subject to UN sanctions from the Democratic Republic of Congo (under resolution 1596 of 2005) can be found here.
- The UN may publish additional sanctions on entities based on other resolutions, if you believe the entity you are dealing with may be subject to a UN sanction you should visit the UN website (www.UN.org) or you may contact the DMCC for assistance.
- The United States Office of Foreign Assets Control (OFAC) also maintains a sanctions program and issues a list of Specially Designated Nationals & Blocked Persons (SDN List) which can be accessed online here.
Due Diligence Guidelines
Standard / Basic Due Diligence
Typically applied to customers with a good track record, well known industry references or significant past work experience.
- Know Your Client (KYC):
- Identify and verify the identity of their customers
- Identify the beneficial owner
- Obtaining information on the purpose and intended nature of the business relationship - Conducting ongoing due diligence on the business relationship and scrutiny of transactions undertaken throughout the relationship
- Ensure that the transactions conducted are consistent with the KYC
Enhanced Due Diligence
Typically applied to unknown companies or to companies that are operating in conflict areas or considered high risk.
Perform enhanced due diligence on:
- Politically exposed persons (PEPs)
- Complex transactions
- Unusual transactions that have no apparent economic or visible lawful purpose
- Higher risk customers and counter-parties
- New or developing technologies that may favor anonymity
Other Requirements
- Maintain, for at least five years, all records and transactions
- Report of suspicious transactions
- Internal AML/CFT controls, training and audit systems
- Develop a culture of compliance
- Senior management ownership and support
DMCC Recommendation - Applying a Risk Based Approach
It is the DMCC’s recommendation that in applying Enhanced Due Diligence, member companies should work towards adopt a ‘Risk Based’ approach in developing their AML practices. This would involve gathering and documenting information on the following broad areas although it shall be up to the discretion of the DMCC Gold & Precious Metal company concerned as to the extent to which such gathering and documenting is carried out.
Country / geographic risk
- Where the product is mined/refined
- Location of a seller/purchaser
- Location of the delivery of the product
- Location of funds used in the transaction
- Is it a known source country?
- Level of government oversight and regulation
- Extent of use of cash
- Informal banking systems e.g. hawalas
- Operation of terrorist or criminal organizations
- The existence of ready access to nearby competitive markets or processing operations
- Enforcement of AML/CFT laws and regulations
- Level of enforcement of laws addressing corruption and organized criminal activity
- Government regulation over business and accounting practices
- Government trade flow inspection mechanism
- Sanctions and embargos
Customer / counterparty risk
- Confirmed track record, competency and capabilities
- Familiarity with the business
- Duration of the business relationship
- Does the transaction make sense (amount, quality or profit-distance between retailer and dealer)
- Banks used and nature of banking transactions/frequent changes in bank accounts
- Involvement of third parties
- Difficulty in identifying beneficial owners
- Seeking anonymity
- Use of cash/structuring
- Using MSBs (Money Service Businesses)
- PEPs (Politically Exposed Persons)
- Companies subject to UN sanctions
Product / services risk
- Value of product / service
- Example: Gold is available in a variety of forms:
» Bars / coins
» Jewellery
» Scrap
» Alluvial gold / gold dust (values are uncertain until processed and assayed - higher risk of price manipulation) - The physical characteristics of products
- Vulnerability to be stolen or engaging in fraudulent products
- Metal accounts offered by major gold dealers
