AML and CFT Guidelines for Dealers in Precious Metals and Precious Stones, 2023
In line with the Prevention of Money Laundering Act, 2002 (PMLA) and the Prevention of Money Laundering (Maintenance of Records) Rules, 2005, the Directorate General of Audit, Indirect Taxes and Customs, India, has recently issued the AML and CFT Guidelines for Dealers in Precious Metals and Precious Stones, 2023.
The guidelines summarise the regulatory obligations imposed upon the Dealers in Precious Metals and Precious Stones under PMLA around anti-money laundering and countering the financing of terrorism (AML/CFT).
Developing and implementing the AML Program
The guidelines mandate the Dealers in Precious Metals and Precious Stones or DPMPS to design and implement a comprehensive internal AML/CFT program to identify the possible attempts money laundering or terrorism financing and report the same to the Financial Intelligence Unit (FIU-IND). The AML program to be implemented by the entities must be aligned with the nature of the entity’s business, customer base, nature of products and transactions executed, etc.
Apart from documentation of the AML policies and procedures, the following are the essential AML obligations imposed upon Dealers in Precious Metals and Precious Stones under PMLA and related rules:
Registration with Director, FIU-IND
All the DPMPS must register themselves with the Director, FIU-IND, on or before their first encounter with any cash transaction exceeding INR 10 lakhs.
Appointment of Principal Officer and Designated Director
Every DPMPS is required to appoint a Principal Officer and Designated Director, whose information must be intimated to the FIU-IND and the Regulator of the entity.
Here, the Principal Officer shall act as an ultimate person responsible for identification and reporting of the suspicious transactions. While Designated Director shall be entrusted with the function of ensuring overall compliance with AML obligations by the entity.
Know Your Client and Client Due Diligence (CDD)
All the DPMPS must frame the “Know Your Client” form and perform the Client Due Diligence process for all cash transactions equal to or exceeding INR 50,000. The process aims at determining the true identity of the customers and suppliers, including the beneficial owners, when the customer/supplier is a legal entity.
The guidelines provide for classifying all the customers and suppliers into either high-risk or low-risk, basis the parameters like nature of business activities, mode of payment, geographies involved, etc. Further, the entity must perform Enhanced Due Diligence (EDD) for high-risk customers, including a Politically Exposed Person (PEP). The EDD measures would include obtaining details about the customer’s source of funds, applying more rigorous checks around identity verification, obtaining approval from the senior management and frequently monitoring the customer’s profile and transactions.
Cash Transaction Report
The guidelines provide for filing of Cash Transaction Report (CTR). DPMPS must submit the CTR to the FIU-IND under the following circumstances:
- All cash transactions exceeding INR 10 lakhs or its equivalent in foreign currency,
- All interconnect cash transactions executed in a month where the aggregate value exceeds INR 10 lakhs or its equivalent in foreign currency,
- All cash transactions where forged or counterfeit currency notes are used for the execution of the transaction.
Suspicious Transaction Report
Dealers in Precious Metals and Precious Stones must file a Suspicious Transaction Report (STR) with the FIU-IND when there is reasonable doubt about –
- the transaction is associated with the proceeds of the offence,
- the transaction being unusually complex,
- the transaction having any economic rationale or bonafide purpose,
- the transaction involves terrorism financing.
The employee observing any suspicion must report the same to the Principal Officer, who shall review and decide whether reporting must be done with FIU-IND.
CTR and STR are to be filed with the following:
Director, FIU-IND,
Financial Intelligence Unit-India,
6th Floor, Hotel Samrat, Chanakyapuri,
New Delhi-110021.
Website: http://fiuindia.gov.in
Implementation of Section 51A of the Unlawful Activities (Prevention) Act, 1967 (UAPA) or Sanctions Implementation
Dealers in Precious Metals and Precious Stones are restricted from dealing with sanctioned persons and banned entities or those reported to have a connection with the terrorists. The entities must regularly screen their customers and suppliers against these sanctions lists and list of banned entities, as collated by the Ministry of Home Affairs. If any transaction has been executed with such a designated person, the same must be reported to the FIU-IND and the Regulator.
Other AML Compliance requirements
DPMPS in India must also maintain all the AML/CFT records about transactions executed, customers’ and suppliers’ Client Due Diligence profiles, etc.
Moreover, all the entity’s employees must be adequately trained in AML/CFT compliance requirements and the internal AML program implemented by the entity.
