Due Diligence Regulations for Responsible Sourcing of Gold

Due Diligence Regulations for Responsible Sourcing of Gold

Due Diligence Regulations for Responsible Sourcing of Gold

Ministry of Economy has published Due Diligence Regulations for Responsible Sourcing of Gold.

The Regulations aim to inform Regulated Entities of the measures to be adopted in relation to responsible sourcing of gold from Conflict-Affected and High-Risk Areas (CAHRAs) as part of their overall AML/CFT controls framework.

Regulated Entities must comply with all sections of the Regulations and should incorporate the requirements into their broader AML policy and procedures. The Regulated Entities should also inform themselves of the scope and application of all applicable AML/CFT Legislation targeted at DNFBPs.

The regulations require refiners and other supply chain actors to consider the financial crime risks while managing their business relationships. The sourcing of Gold from CAHRAs requires a set of measures to be taken by regulated entities, and they have to incorporate the requirements of the regulations in their AML/CFT policy and procedures.

The regulated entities have to carry out due diligence commensurate with the identified risks. These regulations apply to all regulated entities established and/or operating in the UAE mainland, commercial free zones, and the members of their board of directors, management, and employees. Specifically, and without prejudice to the definition of a DNFBP, they are applicable to all such natural and legal persons involved in the activity of Refining.

Legal Status

In UAE, the Ministry of Economy (MOE) is designated as the regulating body for the Designated Non-Financial Businesses and Professions (DNFBPs) by the Cabinet Decision No (3/1F) of 2019 and its amendment Cabinet Decision No (28M/4F) of 2019.

Clause No (2) of Article (44) of Cabinet Decision No. 10 of 2019 on the Implementing Regulation of Decree-Law No. (20) of 2018 on Anti-Money Laundering and Combating the Financing of Terrorism and Illegal Organizations designates the supervisory authorities with the “establishment of the crime-combating regulations, instructions and forms for the entities subject to their supervision, when necessary.”

Accordingly, Due Diligence Regulations for Responsible Sourcing of Gold Guideline forms part of the AML/CFT requirements of AML/CFT legislation of the UAE. Reporting Entities should therefore prepare and adopt internal policies and procedures to comply with the provisions of the guideline.

Responsible Sourcing of Gold - Due Diligence Framework

Regulated entities are required to take Due Diligence measures to ensure that the source of gold is free from all types of conflicts. Regulated entities are required to identify, assess, and understand the risks of gold supplied from CAHRAs in accordance with the nature and size of their business. Wherever required, the reporting entities are required to take Enhanced Due Diligence Measures.

It is required that Supply Chain due diligence is carried out in each Supply Chain irrespective of CAHRA involvement or non-involvement. For this, the reporting entities should:

1. Establish an effective governance system
2. Check if the supply chain involves CAHRA
   a. If it involves CAHRA, then
      i. Assess the supply-chain risk
         1. If it’s a high-risk supply chain, then manage the supply chain risk
         2. If it’s a low-risk supply chain, then go for the independent third-party audit
   b. If it does not involve CAHRA, then
      i. Go for an independent third-party audit to assess if the step 1 and 2 are implemented effectively
3. Submit annual report to the Ministry of Economy, UAE 

1. Establishing an Effective Governance Framework
1.1 Adopt and commit to a policy for gold Supply Chain due diligence

1.2 Establish management structures to support Supply Chain due diligence

1.3 Establish a system for transparency, information sharing and control on gold Supply Chain

1.4 Strengthen company engagement with gold supplying counterparties

1.5 Establish a confidential grievance mechanism

2. Identification and Assessment of the Supply Chain Risk

2.1 Conduct Supply Chain due diligence to identify potential risks

2.2 Identify red flags/ high risk Indicators in the gold Supply Chain

2.3 Undertake enhanced due diligence measures for high-risk Supply Chains

3. Management of the Supply Chain Risk

3.1 Devise a risk management strategy for the identified risk

3.2 Risk Control Plan

3.3 Continuous Monitoring

3.4 Senior Management Reporting

4. Independent Third-Party Audit of Due Diligence Measures

4.1 Audit Plan

4.2 Audit implementation Step

5. Annual Reporting on Due Diligence Measures

5.1 Management Systems

5.2 Risk Assessment

5.3 Risk Management

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