The IRS has ramped up Patriot Act and anti-money laundering examinations; Cecilia Gardner of the Jewelers Vigilance Committee says she’s hearing about one a week. I just spoke to one small New York wholesaler, who was chosen at random by the IRS and went through the entire process and received a clean bill of health. Here are the owner’s impressions:
“It’s a formal inquiry. You receive a letter and schedule a time. The agent comes in the office and it took a whole day. Apparently, when it’s a bigger company, it can take several days. The agent was very polite, businesslike and detail-oriented.
The first few hours we spent reviewing my anti-money laundering policy. Most people use the one developed by the JVC. The IRS views that as helpful and a great start, but it’s not what they are looking for. They want the policy customized for your business; the agent constantly hammered that idea. They want to make sure that everything isn’t boilerplate.
They examined all my books for 2009, though if they did find irregularities they would have gone back more years. They asked for all my bank statements. They are looking for cash transactions over $10,000 that were not reported to the IRS.. They want to see documentation for any money you received. They are also looking for money orders and postal orders, anything that could be a possible sign of money laundering. They asked for contact information for all of our vendors and customers.
Our deposit slips matched our statements so we didn’t have any issues in that regard. We also had Xeroxes of all our checks. Basically they are looking for chinks in your armor. We had a former employee who was a paralegal so our policy was pretty comprehensive. Even so, we were missing a few things and I had to spend a few hours rewriting my policy.
The IRS is being pretty lenient with the industry. If they find lapses in your policy, they have indicated that they are not going to fine you, but there could be consequences later if the policy is not up to date.
I don’t think people in the industry take this as seriously as the IRS does. They say: Who is going to knock on my door? Well, they are going to knock on a lot of doors. Retailers who think they are not subject to AML (anti-money laundering) are wrong. If you are buying gold from the public you are subject to AML, even if you don’t realize it.