Patriot Act Requires Jewelers to Help Prevent Money Laundering

The Patriot Act—a terrorism-fighting measure passed by Congress in response to the Sept. 11 attacks—will likely create new legal obligations for jewelers, manufacturers, and anyone else who sells or trades in precious gems or metals.

The act calls on all “financial institutions” to develop policies to prevent money laundering. Most jewelers would be surprised to learn that the government considers them financial institutions, thanks to the Bank Secrecy Act of 1970. (Also included in the definition: pawnbrokers, metal refiners, even auto dealers.)

A long list of industry organizations, led by the Jewelers Vigilance Committee, recently answered a Treasury Dept. request for information on how the industry will comply with these rules. The industry’s proposal calls on jewelers to:

  • maintain records of all business partners;

  • be extra diligent regarding “unusual or extraordinary transactions”;

  • designate a compliance officer to oversee these programs;

  • train employees to comply with these programs;

  • have the programs independently audited.

“Our proposal will be easily complied with,” says JVC executive director Cecilia Gardner. “It consists of identifying your business partners, maintaining records, and making sure someone audits your books independently, which your auditor does anyway. It does require extra sensitivity toward doing business with people you don’t know, but in this industry people are sensitive to that anyway.”

The next step is for the Treasury Dept. to review the industry’s proposal and issue its own proposed guidelines, after which there will be a comment period. The regulations are due to take effect by October 2002.