Following is the USA Patriot Act Anti-Money Laundering Regulations Summary Of Interim Final Rule supplied by the Jewelers Vigilance Committee:

 

On June 3, 2005, the Financial Crimes Enforcement Network (FinCEN), U.S. Department of the Treasury, issued the Interim Final Rule implementing section 352 of the USA PATRIOT ACT and requiring dealers in precious metals, stones or jewels to establish anti-money laundering programs. 

 

§       Effective Date: The Interim Final Rule will be effective 30 days after publication in the Federal Register.  All persons covered by the Act will have until January 1, 2006 to come into compliance with this regulation.  By January 1, 2006 dealers in goods covered by the rule will have to have an anti-money laundering program implemented in their business, available to US Department of Treasury upon request. 

 

§       Definition of “covered goods:” The “covered goods” include jewels, precious metals, precious stones, and finished goods (including, but not limited to, jewelry, numismatic items, and antiques) that derive 50% or more of their value from jewels, precious metals, or precious stones contained in or attached to such finished goods.

 

§       Definition of the term “dealer:” A person who both purchases at least $50,000 worth of covered goods and sells at least $50,000 worth of covered goods during the preceding year. 

 

§       Important distinction: The Interim Final Rule distinguishes between a “dealer” and a “retailer” of covered goods.  A “retailer” is defined as a person engaged within the US in sales of covered goods, primarily to the public.    

 

§       Retailer exemption:

1.      Retailers who purchase their covered goods from US based dealers already covered by the rule and from other retailers will not be required to establish anti-money laundering programs.

2.      Retailers who purchase less than $50,000 of covered goods from non-US dealers and members of the general public will not be required to establish anti-money laundering programs.

3.      BUT! Retailers who both purchase more than $50,000 of covered goods from non-US dealers or members of the public and sell more than $50,000 of covered goods are deemed to be “dealers” for the purposes of the Interim Final Rule and need to implement an anti-money laundering program, addressing the purchases from non-US dealers and members of the public.  The program would not need to address sales.

 

§       Pawnbroker exemption:

Businesses properly licensed and registered as pawnbrokers under state or municipal law are specifically exempted from the definition of “dealer” and are not required to implement anti-money laundering programs under the Interim Final Rule.

 

§       Determination of the $50,000 threshold:

The $50,000 threshold is calculated based on the value of the jewels, precious metals, and precious stones contained in jewelry or finished products, not on value due to other reasons.

If the purchased or sold jewelry items derive 50% or more of their value (defined as the selling price at which the item is sold to retailers, not the price that retail stores will charge to their customers) from jewels, precious metals, or precious stones, only the value of those jewels, precious metals, and precious stones in that jewelry needs to be counted towards the $50,000 threshold.  The focus of the Interim Final Rule is on jewels, precious metals, and precious stones, not on jewelry or finished goods.

 

§       Requirements:

Persons covered by the Interim Final Rule need to:

1. perform risk assessment in order to evaluate their particular risks of being exploited for money laundering purposes;
2. appoint an employee as compliance officer responsible for implementation and administration of the anti-money laundering program;
3. design and implement a written anti-money laundering program, based on prior performed risk assessment;
4. train their employees;
5. periodically test the anti-money laundering program independently to ensure that the program functions as designed.  The tester cannot be the same person as the compliance officer, but can be an independent service provider.

 

§       FinCEN is soliciting additional comments:

In addition, FinCEN is soliciting comments on four particular aspects of the rule for 45 days after publication of the rule. 

These four aspects are:

1. Should Silver be removed from the definition of a “precious metal?”
2. Should “precious stones” and “jewels” be defined more specifically, for example, by reference to a minimum price per carat, and if so, how?
3. Is 50% the appropriate value threshold for determining whether finished goods (including jewelry) containing jewels, precious metals, or precious stones should be subject to the rule?
4. What is the potential impact of the rule on small businesses (including manufacturers, dealers, wholesalers, distributors, and retailers) that may be “dealers” subject to the provision of the rule?