Small size yet big shine makes the precious jewels, metals and stones a tempting target to launder money for. Using illicit funds to get gold and diamonds and reselling them to get the dirty money in the market is no big deal for a criminal mind; marking the consequences of the growing jewelry industry bringing vulnerability to money laundering and terrorist financing. Anti-Money Laundering (AML) compliance is crucial for jewelers to protect their business’s reputation and financial integrity. This guide helps navigate the UAE’s AML regulations, ensuring a safe business of jewels and precious stones.
Importance of AML Compliance in the Jewelry Sector
The UAE jewelry industry maintains a high-profile appeal to money launderers since its high-value items including gems and precious metals flow freely into the market for quick resale. Such valuable assets become ideal vehicles through which criminals clean their illicit money before creating lawfully appearing financial profits. Jewelers in the UAE face increased risk enhancing the need of establishing effective AML programs which defend their business reputation and customer trust.
AML compliance stands as a business-critical practice for all jewelers in the UAE because it serves to protect both business credibility and regulatory compliance. The compliance with strict regulations protects businesses because law enforcement can defend them from unintentionally facilitating money laundering or terrorist financing activities. UAE’s strong dedication to fighting financial crimes makes it essential for jewelers to follow AML frameworks which protects their operations against criminal attacks as well as ensures compliance and security.
Why Are Jewelers Prone to Money Laundering?
The risk of money laundering is high in the jewelry industry due to the ease of moving high-value assets discreetly. There is no one factor that tempts jewelers to launder money. Some includes:
- High Value in Small Size: The financial value compared to physical dimensions of jewelry make it suitable for criminal money transactions.
- Ease of Transport: Convenient border and location transport boosts criminal opportunities and ease for financial crimes.
- High Liquidity: The easy convertibility which streamlines the process of cleaning illicit funds by transforming precious metals and stones into cash remains high in the case of jewelry.
- Anonymous Transactions: The absence of transaction oversight in jewelry marketplaces lets criminals exchange their assets for cash without disclosing their identity.
Money laundering susceptibility of the jewelry market rises due to multiple conditions among other factors. Every jewelry establishment requires establishing robust AML procedures to avoid losing money through criminal activity.
UAE’s AML Framework for Jewelers
The United Arab Emirates depends on jewelers to maintain its economic strength. The UAE operates a comprehensive regulatory framework which aims to battle money laundering crimes along with the financial support of terrorist groups specifically within the jewelry industry framework. The framework establishes three significant elements which are its fundamentals.
Federal Decree-Law No. 20 of 2018
The primary law governing the AML framework in the UAE is Federal Decree-Law No. 20 of 2018 on Anti-Money Laundering and Combating the Financing of Terrorism and Illegal Organizations. The legislation outlines money laundering offenses and penalties along with reporting duties that order DNFBPs and jewelers to put into place risk-based AML programs designed to stop financial malpractice.
Cabinet Decision No. 10 of 2019
Jewelers who operate with precious metals and stones mandatorily follow particular guidelines defined in this decision, encompassing the need of carrying customer due diligence procedures before transactions and their tracking for indications of suspicious activity. Jewelry businesses require submitting reports about doubtful transactions while keeping full documentation which serves to meet their Anti-Money Laundering obligations.
Cabinet Resolution No. 74 of 2020 (Targeted Financial Sanctions Compliance)
The UAE AML legislation through this resolution follows United Nations Security Council (UNSC) resolutions by enforcing strict counter-terrorism financial measures against weapons of mass destruction proliferation. The jewelry industry is obliged to conduct transaction screening using international sanctions lists in order to fulfill their obligations to global standards.
The Ministry of Economy maintains regulatory duties for jewelers throughout the UAE but ADGM free zone operations fall under Financial Service Regulatory Authority supervision and jewelers in DIFC // wrong link incorporated free zone operate under the oversight of Dubai Financial Service Authority.
Precious Metals and Stones Under AML Laws
The laws of UAE AML consider precious metals and stones to be high-risk financial assets because of their ability to be easily moved and their function as cash substitutes, which together with other categories make up the regulations of AML.
Precious Metals
- Gold (minimum purity: 500 parts per 1,000)
- Silver (minimum purity: 800 parts per 1,000)
- Platinum (minimum purity: 850 parts per 1,000)
- Palladium (minimum purity: 500 parts per 1,000)
Precious Stones
- Rough diamonds (any weight)
- Polished diamonds (minimum 0.3 carats per loose stone)
- Colored gemstones like emeralds, rubies, and sapphires
These pieces have superior value and acceptable liquidity thus making them attractive targets for criminals who wish to launder money illegally, requiring dealers to enforce strict AML processes for their transactions involving these assets.
AML Compliance Best Practices for Jewelers in the UAE
All jewelers and those engaged in precious metals and stone trade in the UAE must maintain Anti-Money Laundering (AML) and Counter-Financing of Terrorism (CFT) compliance for protecting their businesses from financial criminal activities. All jewelry businesses in the UAE strictly observe the series of AML compliance for jewelers in the UAE, described below:
Registration on goAML Portal
Jewelers must register their business on the online reporting system called goAML Portal which serves both reporting needs and regulatory compliance with AML laws on the UAE Financial Intelligence Unit platform. Users need to submit essential business information at the same time as appointing the AML Compliance Officer and providing organization details during the registration procedure. The online portal enables users to make reports about suspicious conduct and large financial deals as well as deliver essential financial details to UAE authorities.
Appointment of an AML Compliance Officer
All jewelers need to select and depute a person who functions as both an AML Compliance Officer (MLRO) for AML compliance duties. As part of their role the designated AML Compliance Officer must lead the execution of AML compliance rules through staff regular training and transaction observation and reporting of doubtful financial activity. The goAML registration process requires relevant AML supervisory authorities to approve the appointment of the AML Compliance Officer before the officer receives status recognition from authorities.
Enterprise-Wide Risk Assessment (EWRA)
A Jewelry business needs to execute an Enterprise-Wide Risk Assessment (EWRA) as a way to uncover the particular money laundering and terrorist financing challenges that exist within its operations. An assessment reviews risk factors which encompass high-risk customer profiles including PEPs and transaction numbers as well as geographic locations and precious metal and stone offerings and additional business-related risks. The results from EWRA assessments require jewelers to develop new procedures which aim to minimize detected business risks.
Tailored AML/CFT Policies and Procedures
Merchants require adjusting their AML compliance operations to address threats that uniquely affect their jewelry operations. It introduces a structured AML/CFT policy to establish criminal risk prevention methods and employee responsibilities together with crime detection protocols. The business ought to maintain current policies by reflecting changes in laws and regulations and updated risk factors to always stay AML/CFT compliant.
Customer Due Diligence (CDD)
Businesses operating in the jewelry sector need to create a comprehensive Know Your Customer (KYC) system for their Customer Due Diligence (CDD) prevention practices. Businesses need to confirm both customers’ and suppliers’ identities together with their ultimate beneficial owners then evaluate the risks from each customer. The KYC procedure includes following enumerated steps:
- Identifying individuals and legal entities: The process includes document verification of customer identification through the examination of passports alongside Emirates IDs and trade licenses.
- Address Verification: The company verifies customer address legitimacy by using dependable documentation.
- Sanctions List Screening: Before final business approval jewelers run their customers through both international and UAE-specific sanction listings to detect possible risks.
- PEP Screening: It requires identification of Politically Exposed Persons followed by their assessment before conducting adverse media checks for negative news.
Enhanced Due Diligence (EDD) must be executed on high risk profile customers through the verification process of their funding source.
Ongoing Transaction Monitoring
Jewelers need to track customer transactions so they can spot doubtful patterns that match their customer backgrounds and economic reporting systems. This includes:
- Analyzing Transactions: Jewelers should analyze all transactions to spot irregular or big payments along with cash exchanges or high-end deals which differ from typical business operations of the customer.
- Third-Party Payments: Monitoring third-party payments constitutes part of the process to verify if any illegal funds attempt to conceal their source through these transactions.
- High-Risk Customers: Harmful customers require stricter tracking due to their risk factors which include big transfer amounts and their connection with territories prone to financial misconduct.
Compliance with Targeted Financial Sanctions (TFS)
Jewelers need to verify their financial sanction compliance through transaction and customer screenings that refer to both the UN Consolidated List and the UAE Local Terrorist List. Under these circumstances jewelers need to perform the following procedures.
- Freeze Funds: Jewelers need to freeze all funds along with their business ties that match the filed reports.
- File Reports: To inform authorities about sanctioned individuals and entities the jeweler needs to submit Funds Freeze Reports (FFR) and Partial Name Match Reports (PNMR) through the goAML portal.
Suspicious Transaction Reporting (STR)
All jewelers operating in the UAE must create methods to find and document unusual transactions to the UAE Financial Intelligence Unit (FIU). The common symptoms when detecting suspicious operations within a business include:
- Large, unexplained cash transactions.
- The business practice of trading small but nonspecific quantities of precious metals or stones not aligning with customer profiles.
- Unwillingness to share monetary information or business connections with the organization.
- The system requires notification of transactions that occur in dangerous or protected financial areas.
Practitioners must convey financial suspicious incidents through the goAML portal by using Suspicious Activity Reports (SARs) alongside Suspicious Transaction Reports (STRs).
AML Training and Awareness
Companies needs to provide ongoing AML training for all workers and supervisory staff teaching them how to detect suspicious activities combined with proper reporting mechanisms. Employee-specific programs which include various training modules should form part of the corporate AML program.
- KYC and CDD Procedures: Understanding the importance of verifying customers and suppliers.
- Identifying Suspicious Activities: Staff members need to learn what constitutes suspicious activities so they can properly report them through this course.
- Updates on Regulatory Changes: Keeping staff informed about the latest AML regulations and industry-specific risks.
AML Governance and Independent Audits
The business needs senior managers to create an established anti-money laundering culture across all departments, that includes reviewing AML/CFT reports to assess risk mitigation progress while monitoring whether business meets its compliance guidelines at all times. AML evaluations need to be performed through independent assessments which detect system weaknesses along with the need for improvement initiatives.
Reporting Large Transactions (DPMSR)
All large transactions require jewelers to submit information through the Dealer in Precious Metals and Stones Report (DPMSR).
- Cash transactions of AED 55,000* or more.
- Curious parties must report all international wire transfers whenever the legal threshold is exceeded.
Food and trade establishments need to submit their reports through the goAML portal to fulfill regulatory documentation requirements.
AML Record Keeping
All jewelers must keep detailed records of their AML-related documents which must be maintained for at least five years and extend to six years if they have registered with the Dubai Financial Services Authority (DFSA) and the Abu Dhabi Global Market’s (ADGM) Financial Services Regulatory Authority (FSRA). This includes:
- Customer Identification and CDD Documentation: Each customer requires documented verification records when establishing their account.
- Transaction Records: Jewelers should create documented financial records which must contain details about all transactions together with the reasons that prompted suspicious transaction reporting.
- AML Reports: These reports should be kept in documents that will be used for both authority audits and compliance verification purposes.
A jewelry business which strictly follows the aforementioned AML best practices ensures maintaining compliance with UAE laws and defends against money laundering and terrorist financing crimes.
Conclusion
In the deep rooted system of financial crimes, AML compliance for jewelers in the UAE combat the financing of terrorism and other illegal activities in an ever-evolving financial landscape. The UAE AML framework provides jewelers with two key benefits, ensuring compliance with evolving AML policies and safeguarding their business reputation and financial stability. By adopting these measures, the jewelry sector strengthens its position as a trusted pillar of the global economy, free from malicious influences.
Jewelry industry in UAE is highly vulnerable to money laundering, but strong AML compliance ensures security and legal protection. Xpert Advisory provides tailored AML compliance consultancy services, including KYC implementation and risk assessments, to help jewelers maintain compliance and protect their reputation. Contact us today to stay compliant!
FAQs
What Are the AML Compliance Requirements for Jewelers in the UAE?
Jewelers must follow all requirements from AML regulations by performing customer due diligence (CDD) and monitoring transactions and reporting suspicious activities. The compliance officer leads AML procedures by checking for regulatory compliance while sending reports to authorities.
Are AML requirements the Same for Dealers in Precious Metals as Jewelers in UAE?
Yes, both must comply with AML regulations by conducting customer identification procedures and reporting certain activities. The Central Bank of UAE established AML/CFT Guidelines for Designated Non-Financial Businesses and Professions that directly affect both jewelers and dealers in precious metals.
What Penalties Do Jewelers Face for Failing to Comply With AML Regulations?
Non-compliance can result in fines up to AED 5 million, business license suspension, and criminal prosecution. Businesses must adopt a risk-based approach to assess and mitigate money laundering risks.
