Money Laundering, Terrorism and Financial Institutions - USA Patriot Act Monitor

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3/31/2008 Guidance Describes How Dealers in Precious Metals, Precious Stones, and Jewels Should Evaluate Foreign Suppliers

Interim final rules issued in 2005 required dealers in precious metals, precious stones, and/or precious jewels to develop anti-money laundering programs by January 1, 2006. FinCEN estimated there were about 20,000 dealers covered by the rules. The program a dealer implements is to be risk-based, taking into account the dealer’s suppliers, customers, and distribution channels, and where these are located. In Guidance issued in March 2008 (FIN-2008-G003), FinCEN provides some perspective on how the risks associated with foreign suppliers should be evaluated. FInCEN acknowledges that some foreign suppliers may present no more risk than many domestic suppliers, but others may bring significant risk of being involved in money laundering or terrorist financing. To evaluate the susceptibility of a foreign supplier, dealers should consider (1) regulatory coverage of the foreign supplier in the foreign jurisdiction, (2) enforcement efforts in that jurisdiction to prevent money launderers and terrorist financiers from entering into or exploiting the industry, and (3) the dealer’s relationship with the foreign supplier. A dealer should not assume that its relationship with the foreign supplier comes with little risk simply because the relationship is longstanding. Dealers should attempt to verify that the foreign supplier complies with its jurisdiction’s anti-money laundering requirements. The IRS has been delegated authority to examine dealers for anti-money laundering program compliance, and can be expected to evaluate the efforts dealers make to assess the risks of their foreign suppliers. This issue will be discussed in detail in the April issue of the Monitor.

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