What Makes Trading in Precious Metals A Risky Business?

While assessing the risks in DPMS, we have to consider the nature of the precious metals and the characteristics of the markets where they are traded. In light of these two factors, we have codified some of the reasons that make them vulnerable to ML / CFT risks as follows,

1. Precious Metals have high intrinsic value in a compact form and maintain or increase value over a period. Precious metals are easy to smuggle physically in a variety of forms.
2. Precious Metals can be used as a means to launder the proceeds of crime.
3. Money laundering through precious metals can be done in a wide range of ways, such as physical exchange through currency or indirect exchange through the exchange of value via various formal and informal financial systems.
4. The presence of well-established cash-based markets for gold and diamonds make it vulnerable to money-laundering risks.

Threshold

The criterion for applying the required AML/CFT measures relates to the carrying out of monetary transactions which meets the threshold amount of AED 55,000.

This occurs whenever they carry out any single transaction, or series of transactions that appear to be related, whose monetary value equals to or exceeds AED 55,000.

How can Precious Metal Dealers Mitigate Money-Laundering Risks?

Gold or other precious metal dealers are required to fulfil specific obligations which constitute the basis of a robust risk-based AML/CFT programme in respect of suspicious transactions. These obligations include:

1. Identifying and assessing risks related to money-laundering.
2. Establishing, documenting and updating AML / CFT policies to mitigate the risks identified.
3. Implementing and maintaining risk-based Customer Due Diligence and monitoring process.
4. Identifying and reporting suspicious transactions.
5. Implementing a robust governance framework for AML/CFT, such as appointing an AML/CFT Compliance Officer, and training staff.
6. Maintaining proper records in relations to all the above recommendations.
7. Complying with the directives of the Competent Authorities in the UAE in relations to global AML watchdogs such as the UN and the FATF.

Adopting these measures help the DPMs to maintain a reliable paper trail of business relationships and transactions. It helps in tracing the true beneficial ownership and movement of assets to prevent DPMS from being exploited for the purposes of money laundering and the financing of terrorism.