Risk of Money Laundering to which Dealers of Precious Metals Exposed to

Dealers in precious metals and precious stones are considered as DNFBP under the UAE AML-CFT law in Cabinet Decision No. (10) of 2019. DPMS is eligible to be a DNFBP in UAE when they carry out any monetary transaction with a value of AED 55,000 or greater than that. It may also include many interrelated transactions whose aggregate may be more than the stipulated value to become qualified for becoming a DNFBP.

It is evident from many studies and research that DPMS are exposed to high risks and are most vulnerable to the money-laundering and terrorism financing threats due to the unique characteristics of precious metals and stones like gold and metal. Many persons illegally use DPMS as camouflage for money laundering, therefore the AML compliance officers must be aware of all the risks to which the dealers are exposed to identify the criminals who are engaged in the money laundering activity. Below are some of the common money laundering risks to which the dealers are exposed:

• When precious metals are used as a currency alternative:

The unique characteristics of the precious stones and metals to store the value provides the criminals an opportunity to gain an undue advantage of such characteristics by utilizing such metals or stones as an alternative for making payments for any terrorist activities. Recent studies on terrorism activities and the group have brought out the fact that the common method of payment for terrorism activities is the smuggling of gold, silver, or diamonds which are easy to conceal. 

• Precious metals can be used as proceeds of crime: 

Due to the unique characteristics of storing the value as stated above and having international acceptability and along with that, they are very easy to transport beyond the borders. They can be stored and maintained till their value increases over time which can be sold for profits in the future and they can be changed into different forms which makes them a perfect valuable medium of exchange for terrorism activities. So, the dealers need to stay vigilant regarding money laundering and terrorism financing activities.

•  Laundering of illicit precious metals by criminals: 

The high complexity involved in the PMS supply chain and the presence of different intermediaries at different levels gives rise to many loopholes that the criminals may exploit to conceal or smuggle the precious metals. AML officers must be aware of all the possible methods or ways that the launderers may use to acquire illicit money or metals. 

• Using trade for smuggling of precious metals: 

As discussed earlier its certain features and high value-to-weight ratio many criminals use trade tactics to smuggle gold or other precious metals. They may also try to camouflage the illegal smuggling as a trade of lawful objects to deceive the respective authorities.

Read More : Complete List of Fines and Penalty for Money Laundering and Terror Financing in UAE

How can the dealers overcome these risks?

It is the responsibility of the DPMS to ensure that they are not exposed to any kind of money laundering risks to ensure so, they can follow certain tips which they can use to avoid getting into any huge mishaps. 

1. If the DPMS have any suspicion on the firm grounds regarding any client who may be indulged in any criminal activities like money laundering then they must consider it as a red flag and report such suspicious transaction to the concerned authority or the AML officer.
2. DPMS must not fail to keep records of all the transactions, especially which include the huge amount of money and suspicious transactions which can be used as strong evidence against the criminals.
3. DPMS must always ascertain the identity of the customers and they must conduct customer due diligence to have a clear idea of whom they are dealing with, so that there can be a transparent relationship between the customer and the dealer.
4. The DPMS must strictly follow the AML compliance regime which may include the appointment of a compliance officer, and having specified rules and regulations that are to be followed.
5. DPMS have adequate training and knowledge regarding the money laundering risk they face and they must also try to provide the training to their employees to help them to identify any suspicious transactions. 
6. The payment methods adopted by the clients must be monitored to know the source of such funds and to ensure that they are not illegal.

Read More: What Are The Duties of An Auditor Under UAE-AML?

How can CDA help?

DPMS is the sector that is highly exposed to money laundering risks and they must stay vigilant all the time in making any transaction. They must strictly follow all the AML and CFT compliance regimes to keep their heads up to detect any malpractices beforehand. CDA provides its expert assistance in helping the DPMS in maintaining a robust compliance structure. It aims at providing professional assistance with proper advice to the clients to counter the risks. CDA is not only confined to compliance services, but it also provides an all-around accounting and auditing service pack to its client so that they can find solutions for all the problems they face in the business. To explore more contact CDA now.