Dealers in Precious Metals and Stones: Red Flags and AML Solutions

Financial institutions play a major role in maintaining the health of a country's economy. A well-flourishing economy makes every possible effort to avoid the entrance of financial crimes.

But, exposure to serious crimes like money laundering is increasing at a high rate. This makes an alarming call for financial businesses, including the jewellery industry.

Dealers in precious metals and stones can deal with difficult challenges due to the treasury nature of the industries. So, there is a need for a strong combative strategy like the AML compliance program. 

It can help the authorities identify potential money laundering red flags and catch the ultimate criminals. 

Keep reading to learn the common red flags associated with the jewellery industry. We will also discover the solution for the same.

Using Precious Metals in Place of Currency

Precious metals like gold and gems store high value, which may lead criminals to use them as an alternative to currency. There can be a high possibility of smuggling gold and diamonds for making illegitimate transactions.

Using PMS to Proceed the Crimes

There are certain factors related to the trade of precious metals and stones that may catch the attention of money launderers. That can include:-

• Being international commodities, these can be easily traded and transferred overseas.

• Their value can be retained or increased over a long time.

• Their insurance, warehouse, and transformation are easily possible.

Interpreting the Supply Chain of PMS

The supply chain of PMS has many stages and channels, which makes it easy for criminal interference. They deploy various techniques to proceed with the crime, and some of them are:-

• Smuggling

• Mixing illegal and legal materials

• Presenting false certifications

• Misplacing the number of metals

• Misrepresenting the quality and type of materials

Illegal Transportation of PMS

PMS trading has a global network, so criminals find it easy to deploy the techniques to conduct illegal practices. This includes false invoicing, customs/VAT fraud, issuing false documents, virtual trading, etc.

How Can Dealers in Precious Metals and Stones Avoid the Risk of  Financial Breaches?

Precious metals dealers can avoid the occurrence of money laundering through AML compliance. That can include:-

• Identifying and analysing the potential money laundering risks

• Regulating AML and CFT policies at their vast venture

• Conducting AML solutions within the sector, like customer due diligence and transaction screening.

• Determining and reporting suspicious transactions

• Hiring AML/CFT compliance officers or analysts.

• Providing training and skills to use AML policies to the staff.

• Maintaining and updating records of all the transactions, including historical details.

Apart from the discussed measures, the sector can also use AML software that can help with easy compliance. This is a cost-effective and efficient technique to track and report potential financial risks.

Also, it can help dealers in precious metals and stones maintain reliable business operations.

Bottomline 

Money laundering is a financial threat that can occur in any form. It is increasing at a high rate and can bring critical challenges for the financial sector. One such sector is the jewellery industry, which may need AML solutions. This can help identify and report financial risks as well as protect the sector's stability.

Also Read: Money Laundering in Real Estate: What You Need To Know