DEALERS IN PRECIOUS METALS AND DEALERS IN PRECIOUS AND SEMI-PRECIOUS STONES INCLUDING BUT NOT LIMITED TO METALS AND STONES COVERED BY THE GEM AND JEWELLERY ACT, NO. 50 OF 1993 (GEM AND JEWELLERY DEALERS)

In terms of subsection (i) of Designated Non-Finance Business in Section 33 of Financial Transactions Reporting Act No. 06 of 2006 (FTRA), gem and jewellery dealers when they engage in any cash transaction with a customer, equal to or above the prescribed threshold they are required to comply with Anti Money Laundering and Countering the Financing of Terrorism (AML/CFT) measures. The Rule No. 9(2)(b) of the Designated Non-Finance Business (Customer Due Diligence) Rules, No. 1 of 2018 (CDD Rules for DNFBPs) prescribed the threshold as equivalent to or above United States Dollars 15,000 in Sri Lankan Rupees or in any foreign currency.

 

What are the Legal Obligations for Gem and Jewellery Dealers under AML/CFT?

 

  •  Appointing a Compliance Officer (CO):

According to the Rule No. 41 of the CDD Rules for DNFBPs, gem and jewellery dealers are required to appoint a senior management level officer as the CO to deal with AML/CFT related matters in your entity. The appointment of CO is required to be informed to the Director, FIU using 'CO Declaration Form’.

 

The duly filled CO Declaration Form should be submitted to the FIU;

 

Address The Director, Financial Intelligence Unit
Central Bank of Sri Lanka
No. 30, Janadhipathi Mawatha
Colombo 01
Email fiudnfbp@cbsl.lk and copy to theja@cbsl.lk 

 

  •  Assessing the Money Laundering and Terrorist Financing (ML/TF) Risk of the Gem and Jewellery Dealers:

As per the Rule No. 6(a) of the CDD Rules for DNFBPs gem and jewellery dealers have to conduct an assessment on ML/TF risk of the entity based on the professional judgment, knowledge and expertise of the business management. Further, risk assessment of the entity should be done based on the types of customers, types of products, types of payment methods that the gem and jewellery dealers are having and the geographical location.
Technical assistance to conduct ML/TF Risk Assessment of your entity could be obtained from FIU-SL. Please contact FIU-SL on 011 2398725.

 

  •  Having AML/CFT Policy and Procedures for Gem and Jewellery Dealers:

Rule No. 6(g) of the CDD Rules for DNFBPs indicates the requirement to develop an AML/CFT Policy for the entity. Once ML/TF risk of the entity is assessed, it is required to establish a policy which includes procedures and controls to prevent, detect and manage the possible ML/TF risks.
Technical assistance to prepare the AML/CFT Policy for your entity could be obtained from FIU-SL. Please contact FIU-SL on 011 2398725.

 

  •  Conducting Customer Due Diligence (CDD):

In terms of Part II of the CDD Rules for DNFBPs, where the gem and jewellery dealer engages in any cash transaction with a customer/beneficial owner in Sri Lankan Rupees or in any foreign currency equivalent to or above United States Dollars 15,000, are required to conduct CDD measures.
The following minimum information should be collected to conduct CDD on a customer/beneficial owner;

 

  1. the full name;
  2. permanent residential or mailing address;
  3. occupation, name of employer, business or principal activity;
  4. an official personal identification number or any other identification document that bears a photograph of the customer or beneficial owner such as the national identity card, passport or driving license;
  5. date of birth;
  6. nationality;
  7. source of funds;
  8. purpose of transaction;
  9. telephone numbers (residence, office or mobile).

 

Once collected the above information, the identity of the customer should be verified. The gem and jewellery dealers are required to verify the identity of the customer using reliable, independent source documents, data or information (10(a) of the CDD Rules for DNFBPs).
Further, information obtained on point (d) of the above should be verified by obtaining the relevant original document and a copy of the document should be taken.

 

  •  Customer Risk Profiling

According to the Rule No. 6(c) of the CDD Rules for DNFBPs, gem and jewellery dealers are required to profile customers according to the risk level based on the collected information. In this customer risk profiling customer’s geographical location, products and services, transactions or delivery channel of a particular individual/corporate customer should be considered.
Technical assistance on customer risk profiling could be obtained from FIU-SL. Please contact FIU-SL on 011 2398725.

 

  •  Conducting Enhance Customer Due Diligence

According to Rule No. 16 of the CDD Rules for DNFBPs gem and jewellery dealers are required to conduct Enhance Customer Due Diligence (ECDD) for high risk customers or high risk business relationships or transactions involved.


Eg: If a customer identified as a Politically Exposed Person (PEP) or having non-face-to-face business relationship with the customer or customer is profiled as a high risk customer then it is required to conduct ECDD for such customers.

 

Gem and jewellery dealers should take following measures when conducting ECDD;

  • obtain additional information of the customer.
  • obtain approval from the senior management before establishing a business relationship with such customers (In the case of an existing customer, for continuing such business relationship with the customer).
  • obtain additional information on the intended nature of the business relationship.
  • regularly update the identification data of the customer/beneficial owner.
  • enquire and record the reasons for prospective or performed transaction.

 

  •  Screening against the United Nations Security Council Resolutions (UNSCR) lists:

Gem and jewellery dealers are required to cross check customers’ or beneficial owners’ details against persons and entities designated by the UNSCR which have been issued in compliance with the United Nations Act, No. 45 of 1968, with respect to any designated list on targeted financial sanctions related to terrorism and terrorist financing and proliferation of weapons of mass destruction and its financing.

 

Click here for updated lists.

 

Technical Assistance on screening customers against the UNSCR lists could be obtained from FIU-SL. Please contact FIU-SL on 011 2398725.

 

  •  Reporting Suspicious Transactions (STRs)

As per the Section 7 of the FTRA, gem and jewellery dealers are required to report any transaction(s) or attempted transaction(s) which has reasonable grounds to suspect that it may be related to the commission of any unlawful activity or any other criminal offence.

  • STR should report to FIU-SL as soon as practicable, after forming a suspicion or receiving the information, but no later than two working days of forming a suspicion.
  • STR could be submitted by way of mail, telephone which should be followed up in writing within twenty-four hours, fax or e-mail.
  • STR should be contained a statement of the grounds on which the gem and jewellery dealer holds the suspicion and signed or authenticated by the gem and jewellery dealer.
  • STRs should be submitted using Schedule V of the Suspicious Transactions (Format) Regulations of 2017 to report STRs. .

 

Whenever, forming a suspicion of ML/TF, and it reasonably believes that conducting the CDD measures would tip off the customer, it may proceed without conducting the CDD measures, but shall immediately file an STR.

 

  •  Other AML/CFT Measures

  • Training and Awareness Programmes: Gem and jewellery dealers are required to provide training sessions regularly on AML/CFT compliance policies and procedures to the board of directors, senior management, employees, agents or any other individuals authorized to act on behalf of the entity. The compliance officer once appointed, is responsible on conducting regular AML/CFT trainings to other staff and employees.
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  • Employee Screening: Procedures should be adopted to screen employees before recruiting/hiring to make sure they are not connected to any activities relating to ML/TF.
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  • Independent Auditing: An independent audit should be carried out to ensure the AML/CFT functions within the entity.

 

  •  Raise the Red Flag

A set of possible suspicious indicators are as follows;

  • A frequent customer, who buy/sell precious stone/metal or jewellery products makes a transaction/transactions inconsistent with his usual financial status/profile.
  • Customer does not appear properly concerned about the value, size, quality and/or colour of the precious stone/metal or jewellery product.
  • Customer pays the value of the precious stone/metal or jewellery producing an unusual payment method.
  • Customer conducts large or frequent transactions using foreign currency without any economic rationale.
  • Frequent transactions by a customer especially over a short period of time below the regulatory threshold for customer due diligence, however the total of such transactions is substantial.
  • Payments received for a purchase of a precious stone/metal or jewellery product from a third party who is not the owner of the funds, without any legitimate business purpose.
  • Customer is suspected to be using forged, fraudulent or false identity documents for due diligence and record keeping documents.
  • Customer is unusually concerned and/or makes inquiries about the AML/CFT requirements and internal compliance policies, procedures or controls.
  • Customer attempts to maintain a high degree of secrecy with respect to transactions, for example by requesting not to keep normal business records.
  • Customer avoids answering questions related to the source of money to buy the precious stone/metal or jewellery product.
  • Customer is known to have a criminal/terrorism background.
  • Customer appears to be related to a country or entity that is associated with ML/TF activities.
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    Supplier and supplier behaviour:

  • Supplier undue/over invoice the value of the precious stone/metal or jewellery.
  • Supplier uses third parties in transactions related to precious gemstones/metals or jewellery. Ex: funds paid to a third party who is not related to the supplier without any legitimate business purpose.
  • Precious stones/metals/jewellery products delivered from a third party who is not related to the supplier, without any legitimate business purpose.
  • Supplier is unable to provide information for due diligence and record keeping purposes.
  • Supplier is suspected to be using forged, fraudulent or false identity documents for due diligence and record keeping purposes.
  • The origin of the precious stones/metals/jewellery products appears to be fictitious.
  • Supplier is unusually concerned with the AML/CFT requirements.
  • Supplier attempts to maintain a high degree of secrecy with respect to the transactions and requests not to keep the normal business records.
  • Supplier is not willing to disclose beneficial owners or controlling interests.
  • For Diamonds;
    • Rough Diamonds are not accompanied by a valid Kimberley Process (KP) certificate, or broadly recognized equivalent scheme for certification.
    • Ex: No KP certificate attached to the shipment of rough diamonds.
    • The KP certificate is/appears to be forged.
  • Supplier appears to be related to a country or entity that is associated with ML/TF activities or a person that has been designated as terrorist.
  • Supplier transports precious stones/metals or jewellery through a country which is associated with ML/TF activities, for no apparent economic reason.

 

  •  What Should You Know?

 

 Legislations relating to Gem and Jewellery Dealers

 

  •  Other Publications

 

 

  •  Related Links

National Gem and Jewellery Authority (NGJA):

 

Be Equipped

 

  •  Training Materials

 

 

  •  Need a Training on AML/CFT?

 

S P N S Senadheera Senior Assistant Director Tel : 011 2398766
E-mail: fiudnfbp@cbsl.lk

 

  •  Need More Information?

 

S P N S Senadheera Senior Assistant Director Tel : 011 2398766
E-mail: fiudnfbp@cbsl.lk

 

Special Notices

 

All Institutions engaged with FIU-Sri Lanka on Anti Money Laundering and Countering the Financing of Terrorism (AML/CFT) will be kept informed of any changes to the legislation or reporting procedures, trends, and other relevant developments.