Jewelers’ requirements for complying with the anti-money-laundering regulations of the revised Patriot Act were outlined by Ulla Wolff, assistant general counsel of the Jewelers Vigilance Committee, during a seminar on Thursday.
“This isn’t optional,” she warned her audience. “You can’t not comply. If you ignore these, you will be vulnerable to being exploited or being charged by the law.” She noted that a jewelry business could be required to demonstrate at any time, on request by the U.S. Treasury Department, its compliance with the law.
The final version of the revised rules hasn’t been published yet, she said, though the government says they will be soon. However, one suggested revision by the jewelry industry is expected to be in it: compliance within six months, instead of three.
Wolff said JVC will publish a compliance kit notebook after the rules are formally issued. (The cost is $150 for JVC members, $300 for nonmembers). She noted that JVC will help a jewelry business design and test its compliance program, train its employees to adhere to it, and help assess questionable payments and customers.
Section 352 of the revised Patriot Act is designed get the help of U.S. financial institutions—including “dealers in precious metals, stones and jewels”—in detecting and preventing funding of terrorism and criminal activities through money laundering. A dealer is defined, Wolff said, as someone who in a year purchases more than $50,000 in goods or receives more than $50,000 in gross proceeds from selling. That includes retailers, wholesalers, traders, manufacturers, refiners, and suppliers. (The only items not now included under the product definition of precious gems or metals are tanzanite and 10k gold.)
A jeweler’s compliance program must consist of five parts, Wolff said:
* Risk assessment. It can be based on, for example, where and with whom a retailer does business, and the products bought and sold. In today’s world, said Wolff, it is essential to “know your business partners and customers.”
* A compliance officer. This must be an employee in a position of responsibility, who is knowledgeable about the law, designs and implements the program, and has the support of senior management. The compliance officer, however, does not perform the periodic evaluation of the program.
* A written internal policy and program. This has to be signed and dated. It is based on the retailer’s risk assessment, specifies how to identify those with whom the company does business (including such information as the e-mail addresses and bank references of business partners in major transactions), and explains how to spot and deal with “red flags” (such as a change in form of payment).
* Employee training. “Be sure your employees have a good understanding of your anti-money-laundering policy and program, and factors that may indicate a transaction is being used to facilitate money laundering,” said Wolff. Those factors might include unusual payment requests, a high degree of secrecy, unknown clients, under- or over-invoicing or insuring, or no invoice at all.
Periodic, independent testing of the program. This is to determine if the program is functioning as designed and to make sure it addresses all required elements.