Patriot Act Anti-Money Laundering Program (ML) is a concern for Jewelry & Precious Stone retailers, manufacturers and more!

The Patriot Act requires that any person or business within the United States who has purchased and sold at least $50,000 worth of “covered goods” during the preceding year business qualify as a “dealer” and are required to establish an AML program by January 1, 2006. 

“Covered goods” include jewels, precious metals, precious stones, or finished goods. The interim regulation covers entities including manufacturers, refiners, wholesalers, retailers, and any other entity engaged in the business of purchasing and selling jewels, precious metals, precious stones, or jewelry. To exclude small businesses from the AML program requirement, the interim regulation contains a minimum dollar threshold.

A person is a “dealer” only if, during the prior calendar or tax year, the person: (1) purchased more than $50,000 in jewels, precious metals, precious stones, or jewelry; and (2) received more than $50,000 in gross proceeds from the sale of jewels, precious metals, precious stones, or jewelry.

Exceptions

In addition to the minimum dollar threshold, the definition of “dealer” contains two exceptions. Under the first exception, a “retailer” (i.e., a person engaged within the U.S. in sales of covered goods primarily to the public) is a dealer only if it purchased more than $50,000 in covered goods from persons other than from other “dealers” or other retailers (such as members of the general public or foreign sources of supply) during the prior calendar or tax year. Therefore, a retailer that purchases jewels from a dealer would not be deemed a “dealer” – and therefore not be subject to the AML program requirement – even if its gross sales of jewels exceeded $50,000 in the prior calendar or tax year.

Under the second exception, businesses licensed or registered as pawnbrokers under state or municipal law are specifically exempted from the definition of “dealer.” Therefore, pawnbrokers are not required to establish anti-money laundering programs under this exception as long as they are properly licensed or registered with the appropriate state or local government and engaged in pawn transactions.

Anti-Money Laundering Program

A person that meets the definitions of “dealer” in the proposed regulation and does not fall under one of the exceptions would be required to establish an AML program by January 1, 2006. The AML program, at a minimum, must include:

1. written policies, procedures, and controls;
2. the designation of a compliance officer;
3. an ongoing employee training program; and
4. an independent audit function to test the AML program.

A link to the proposed rule may be found on FinCEN’s Web site at: www.fincen.gov/wn_main.html