U.S. Targets Diamond Dealers in Anti-Money Laundering Rules

The U.S. Treasury's Financial Crimes Enforcement Network (FinCEN) has issued an interim final rule requiring dealers in precious metals, stones or jewels to establish anti-money laundering programs.

Dealers affected by the rules based on their business activities this year will be required to set up an anti-money laundering program by January 1, 2006 that comprises at least the following four elements:

Policies, procedures and internal controls, based on the dealer’s assessment of the money laundering and terrorist financing risk associated with its business; a compliance officer who is responsible for ensuring that the program is implemented effectively; ongoing training of appropriate persons concerning their responsibilities under the program; independent testing to monitor and maintain an adequate program.

FinCEN said it issued the regulation to better protect dealers in jewels, precious metals and precious stones from potential abuse by criminals and terrorists.

“The characteristics of jewels, precious metals and precious stones that make them valuable also make them potentially vulnerable to those seeking to launder money,” said William J. Fox, Director of FinCEN. “This regulation is a key step in ensuring that the Bank Secrecy Act is applied appropriately to these businesses.”

The interim final rule applies to “dealers” who have purchased and sold at least $50,000 worth of “covered goods” during the past year. The dollar threshold is intended to ensure that the rule only applies to persons buying and selling a significant amount of these items, rather than small businesses, occasional dealers and persons dealing in such items as a hobby.

“Covered goods” include jewels, precious metals, and precious stones, and finished goods (including but not limited to, jewelry, coin collecting items, and antiques) that derive 50 percent or more of their value from jewels, precious metals or precious stones contained in or attached to such finished goods.