AML Compliance Requirements for Jewellers in UAE​

AML Compliance Requirements for Jewellers in UAE

The industry of gems and jewellery, and precious metals and stones is a key contributor to the UAE’s economy. But, it is also an attractive point for illicit activities and financial crime. So, jewllers must protect themselves from money laundering and terrorism financing activities.

In this article, we focus on the factors that make the jewellery industry vulnerable to money laundering activities. We will list the regulations that govern AML compliance in UAE. We will also enlist the AML requirements that jewellers have to fulfill to comply with AML regulations.

Factors contributing to the higher vulnerability of jewellery industry to financial crime

Some characteristics of the jewellery industry make it vulnerable to exploitation by criminals. Unless jewellers are aware of these factors, their efforts against money laundering will not be successful. Following are these factors:

All the above factors make the jewellery industry an attractive means of money laundering activities. So, the UAE government introduced relevant regulations to combat such activities. These regulations run parallel to the global AML/CFT regulations.

Also read why gold is still the second-best mode for money launderers

AML regulation for jewellers in UAE

Decree-Law No. 20 of 2018on Anti-Money Laundering and Combating the Financing of Terrorism and Illegal Organizations is the primary law for AML in UAE. The Cabinet Decision No. 10 of 2019 concerning the Implementing Regulation of this Decree-Law makes dealers in precious metals and stones (DPMS) subject to the AML law. This means that the AML law applies to jewellers and dealers in precious metals, gems, and stones.

The Cabinet Decision provides a list of Designated Non-Financial Businesses and Professions (DNFBPs). AML regulations apply to these DNFBPs that include dealers in precious stones and metals and jewellers. If they engage in transactions valuing not less than AED55,000.0, AML regulations apply to them. Herein, a transaction can include any single transaction or several interrelated transactions.

The Guidelines for Designated Non-Financial Businesses and Professions mentions the Customer Due Diligence (CDD) obligations for jewellers. But, they must also be aware of the ways to identify suspicious transactions followed by reporting. In the next section, we describe the compliance requirements for jewellers in UAE.

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AML compliance requirements for jewellers in UAE

Jewellers must comply with the following requirements under the AML regulations of UAE:

AML Policy Documentation

Jewellers need to document their AML Policy and prepare an AML Policy Manual describing the procedures and controls embedded to counter the risk of money laundering. 

The jewellers must implement necessary measures to manage and mitigate the ML/FT risks. One of the key measures is the implementation of strong and effective internal policies, controls, and procedures. You must assess these policies for effectiveness and update them accordingly as and when the need arises.

The AML Policy Manual should cover the following areas:

  • The identification and assessment of ML/FT risks
  • Customer due diligence (CDD, EDD, SDD), including its review and updating, and reliance on third parties in regard to it
  • Customer and transaction monitoring and the reporting of suspicious transactions
  • AML/CFT governance, including compliance staffing and training, senior management responsibilities, and the independent auditing of risk mitigation measures
  • Record-keeping requirements

Read more about AML/CFT Policy

Understand possible ML/FT Risk Exposure

You must have a detailed understanding of how your jewellery business can be exposed to ML and FT risks. For this:

Read more about the risk-based approach in anti-money laundering compliance

Implement customer due diligence measures

Jewellers must apply the necessary customer due diligence (CDD) measures based on the category and profiling of the ML/FT risk. If there is any change in the risk category, jewellers must be ready to update the due diligence measures as well. You must apply these measures during or before the transaction happens or the business relationship starts.

These due diligence measures include the following:

Read the complete guide to effective customer due diligence

Report suspicious transactions to Financial Intelligence Unit (FIU)

Jewellers must report any kind of suspicious transactions to the Financial Intelligence Unit as and when they suspect it. You must add all the relevant information for the suspected transaction and keep it updated. You must be extra vigilant to identify any suspicion in any transaction or customer.
Some of the indicators for suspicious transactions include:

Devise and implement a sound governance structure

You must formulate a governance structure to ensure your business complies with AML/CFT requirements. For this, you must appoint a fit and capable compliance officer. He/she must be capable of handling Ml/FT reporting, AML/CFT program management, and training and development of the team.
You must keep your employee up-to-date on AML/CFT laws, policies, and norms. You must design a training manual and impart it to relevant team members. You must also assess the effectiveness of these training programs to ensure the right knowledge development.
A well-functioning governance structure is tested by an independent audit frequently. This auditing procedure will check the risk profile of products and services, customers, and target markets. If it is not possible for you to keep an internal audit team, then you can hire a third-party auditing team.

Effective AML consulting services

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Keep and maintain records

Jewellers are required to keep records of all their financial transactions. You must also keep all documents, data, and records of your ML/FT risk assessment and implemented measures. You must submit these records to the relevant authorities as and when requested.
You must maintain the records for the following:

Conclusion

These are the various measures that jewellers must implement to comply with AML regulations. These measures will enable them to save themselves from any fraudulent transaction or business relationship. This, in turn, helps them to minimize their exposure to money laundering and terrorism financing risks.
To plan and implement any of these measures, they can also take the support of AML consultants in the UAE. A professional, AML consultant will be better equipped to help jewellers with the right, relevant measures against money laundering. The consultant will ensure that industry-specific steps are taken in the fight against money laundering and terrorism financing.

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Frequently Asked Questions (FAQs)

Here are a few frequently asked questions when it comes to the need and importance of sanction and PEP screening in the customer onboarding process.

The jewelry industry’s AML guidelines in UAE include the creation of an AML/CFT policy manual, understanding of possible ML/FT risk exposure, implementation of CDD measures, reporting of suspicious transactions to FIU, formulation of a governance structure, and record-keeping to ensure jewelry industry’s compliance with jewelry industry’s anti-money laundering laws.  

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About the Author

Pathik Shah

CISA, FCA, CS, DISA (ICAI), FAFP (ICAI)

Pathik is a multi-disciplinary professional with more than 22 years of experience in compliance, risk management, accounting, system audits, IT consultancy, and digital marketing. He has extensive knowledge of Anti-Money Laundering rules and regulations, and he helps companies comply with legal requirements. Pathik also helps companies generate value from their IT investments.