Top Anti-Money Laundering Best Practices for Jewelry Dealers

May 17, 2022

At a glance

  • All that glitters isn’t gold: The jewelry business is ripe for money laundering. Jewelry dealers can reduce the risk of fraud and comply with regulatory requirements by implementing an anti-money laundering (AML) program.
  • Protect what’s most important: Some jewelry dealers are required to adhere to Section 352 rules under the USA PATRIOT Act, in addition to a range of reporting and OFAC requirements, to mitigate risk to the business and the customer.
  • Next steps: AML programs can be complicated to implement, and the legal and regulatory complexities can be hard to navigate. Aprio’s Forensic Services team is here to bridge the gap.

Schedule a consultation with Aprio’s Forensics Services team today.

The full story:

Money laundering crimes can affect a wide range of industries, but jewelry dealers are among the most sought-after victims by thieves. Jewelry pieces and precious stones and metals are susceptible to money laundering and terrorist financing due to their liquidity, value, transportability and negotiability on the global market.

Below, we summarize the most important regulations and compliance best practices jewelry dealers should know when developing their anti-money laundering (AML) programs, so they can properly safeguard themselves against nefarious actors.

A breakdown: AML regulations in the United States

Certain jewelry dealers are required to adhere to an AML program under Section 352 of the USA PATRIOT Act, which was introduced in 2001 and designed to “deter and punish terrorist acts in the US and around the world and to enhance law enforcement investigatory tools,” according to the Financial Crimes Enforcement Network (FinCEN). Any dealer that is engaged in a business that sells or purchases precious metals, stones and jewels, and that also purchases and sells $50,000 or more of those items in the prior year, is required to adhere to the Section 352 regulations and maintain an AML program.

Note that the AML rule only applies to those individuals who both purchased and sold $50,000 or more in precious metals, stones and jewels during the prior tax or calendar year. The $50,000 cap is calculated based on the value of the jewels, precious metals and stones your business sold and purchased during the prior year — not the selling price.

From a recordkeeping and compliance perspective, dealers’ AML programs must be supported by written policies and procedures that outline exactly how they maintain compliance under Section 352. Dealers must also appoint an AML compliance officer and create and implement training programs for employees on a continual basis. What’s more, compliance officers must arrange for independent reviews of these AML programs, in addition to performing regular updates, maintenance and monitoring of key processes and procedures. 

AML reporting and sanctions requirements

Jewelry dealers also must adhere to a range of AML and sanctions requirements, including:

  • Filing Form 8300, reporting on cash payments (and soon, cryptocurrency payments) from a business or trade in excess of $10,000
  • Reporting on the contents of any foreign bank and financial accounts (FBARs)
  • Filing reports on the international transportation of currency or monetary instruments (CMIRs)

Dealers are also required to comply with the Office of Foreign Assets Control (OFAC) requirements, as these apply to all US citizens and permanent resident aliens no matter where they are located. Here are a few other compliance and reporting caveats that are essential to keep in mind:

Suspicious activity reports (SARs)

Jewelry dealers aren’t required to file SARs, but FinCEN does suggest that they file them on a voluntary basis for the purposes of reporting instances of suspected money laundering or terrorist activities. Dealers can check the appropriate box on their Form 8300 filing for recording suspicious transactions.

Customer Identification Program (CIP) requirement

The PATRIOT Act also requires banks and financial institutions to incorporate a customer identification program (CIP) into their AML process — but it is not a requirement for jewelry dealers. Moreover, dealers are not subject to the Beneficial Ownership Rule (customer due diligence requirements for financial institutions); only institutions that are subject to CIP requirements must identify beneficial owners for legal entity customers. Keep in mind that FinCEN has indicated that it will continue to re-evaluate businesses and institutions for the application of customer due diligence rules, so this could change in the future. However, if transactions meet the specifications described above where a Form 8300 is required to be filed, certain customer identifying information should be obtained to accurately file the form.

Let Aprio help you build a better AML program

You don’t have to navigate AML legal and regulatory complexities on your own. At Aprio, our specialists can help you:

  • Develop procedures and internal controls that reduce the risk of money laundering, terrorist financing and other illicit financial activities
  • Evaluate your internal controls and procedures to make sure you’re compliant with Section 352 regulations
  • Create an employee training program that suits your needs
  • Perform an independent review of policies, procedures and internal controls
  • Test transaction monitoring systems to ensure compliance with regulatory laws

The Aprio team can complete independent transaction testing to validate the efficacy of your program; perform lookback reviews to investigate previously undetected suspicious activity; and conduct Know Your Customer (KYC)/Customer Due Diligence (CDD) testing to ensure proper collection and retention of customer data. Our team also includes Certified Anti-Money Laundering Specialists (CAMS) and Certified Fraud Examiners (CFEs) with the extensive regulatory experience your business needs.

Schedule a consultation with us today.

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About the Author

Haley Beatty

Haley Beatty is a forensic accounting, financial crime reporting expert. Her specialties include Anti-Money Laundering (AML), Know Your Client (KYC) investigation and regulatory compliance. She has advised some of the largest financial institutions in the world and led teams of 500 investigators. Haley works closely with clients to establish and advance AML compliance, monitoring and reporting programs that exceed regulatory requirements. She has experience advising a broad spectrum of financial industry clients from FinTech companies to MSBs and transaction processors.