AML stands for anti-Money Laundering. AML compliance refers to measures and regulations that are in place to combat money laundering and terrorism financing. In the UAE, there is a comprehensive legal and regulatory framework to prevent money laundering and terrorist financing. This legal and regulatory framework is in accordance with international standards as per the Financial Action Task Force (FATF). Jewelry and other precious metals are considered safe havens for money laundering. Therefore, jewelers must comply with the AML requirements in the UAE. This blog highlights AML compliance requirements for jewelers in the UAE.
AML Compliance for Jewelers in the UAE
The legal background
The Central Bank of the UAE (CBUAE) is the primary regulatory authority in charge of overseeing AML compliance in the UAE. CBUAE sets guidelines and regulations for all the financial institutions that undergo financial transactions, including banks and money exchanges. Federal Decree-Law No. 20 of 2018 is the primary AML law in the UAE. Furthermore, Cabinet Decision No. 10 of 2019 specifically highlights the AML compliance requirement for dealers in precious metals and stones (DPMS). This means that Jewelers and other dealers of precious metals and stones are subject to the AML law.
According to Article 3 of Cabinet Decision No. 10 of 2019, Jewelers are among the Designated Non-Financial Businesses and Professions (DNFBPs). Thus, these are subject to the AML Law. As per the Cabinet Decision, dealers of precious stones and metals are considered DNFBPs if they carry out a single transaction (or several interrelated transactions) that is over AED 55,000.
Why are jewelers prone to money laundering?
Jewelers are vulnerable to money laundering and other financial crimes. There are various reasons for their higher vulnerability.
Firstly, jewelry carries a higher value compared to its size. Therefore, jewelry can be a vehicle for financial crimes, specifically money laundering. Secondly, jewelry items are easily transportable from one place to another due to their size. Therefore, there is a higher risk of financial crime with respect to jewelry items. Thirdly, jewelry items are usually more liquid (easy to convert into cash) than other assets of the same size. Consequently, it will provide ease to the money launderers. Fourthly, jewelry items can be sold in markets where there is no supervision of the transactions. This means that money launderers can easily convert precious metals into cash by remaining anonymous.
There are various other reasons for the higher vulnerability of jewelry items to money laundering. So every institution must take the necessary steps to eliminate the risks of money laundering.
Risk-based AML/CFT approach for Jewelers
In the UAE, a risk-based approach to countering financial terrorism (CFT) and money laundering is followed. Institutions and DNFBPs, including jewelers, should have the following elements to combat money laundering and financial terrorism: However, as this is a risk-based approach, preset rules cannot be applied to every organization with different circumstances. Let’s discuss some of the common elements.
Risk assessment
Financial institutions and DNFBPs should assess the risk of money laundering with respect to their circumstances. For instance, a dealer dealing in high-value transactions may be susceptible to a higher risk of financial crime.
Monitoring transactions
Institutions should monitor customers’ transactions continuously for any suspicious activities, depending on their risk profile.
KYC Procedures
Institutions should implement proper KYC (Know-your-customer) procedures to identify and verify customers. Furthermore, they should perform customer due diligence (CDD). CDD is a part of KYC; it is the process of assessing the risks associated with money laundering and financial crimes associated with a specific customer and applying the appropriate course of action to mitigate those risks.
AML Compliance Officers
Institutions, including DNFBPs, must appoint AML compliance officers. In the UAE, it is obligatory to appoint an AML officer for financial institutions and DNFBPs. The primary duty of AML officers is to identify threats with respect to money laundering. Furthermore, the AML compliance officers must report any suspicious activities to the Financial Intelligence Unit (FIU).
AML training and awareness
Finally, institutions should conduct training and awareness programs for employees on combating money laundering and financial crimes. A proactive and adaptable risk-based approach is necessary to stay ahead of the evolving financial crime landscape.
Conclusion
In conclusion, AML compliance for jewelers in the UAE is crucial to combating money laundering and terrorism financing. Jewelers are vulnerable to financial crimes due to the high value, portability, liquidity, and potential for anonymity associated with jewelry. To effectively address these risks, jewelers should adhere to AML compliance as per AML law. A risk-based approach is followed in the UAE. Some elements of a risk-based approach include conducting risk assessments, continuous monitoring of customer transactions, implementing robust KYC procedures and customer due diligence, appointing AML compliance officers, and fostering employee training and awareness programs. By complying with proactive measures, jewelers can contribute to the prevention of money laundering and a safer financial environment in the UAE.
Creative Zone Tax & Accounting
AML compliance for jewelers and precious metals is a complex area that therefore needs guidance and knowledge. In order to avoid fines and penalties, why not consult an expert? If you are unsure about anything related to AML compliance, feel free to contact us. We will be happy to consult with you.
