The FinCEN Files: How Anti-Money Laundering Procedures Can Identify and Reduce The Money Laundering Risks Facilitated Through The Purchase and Sale of Precious Metals, Precious Stones and Jewels

Abstract

PURPOSE – This paper aims to shed light on the use of precious metals, precious stones, or jewels as an alternate currency by criminals, and discuss the various anti-money laundering programmes that dealers in precious metals, precious stones, or jewels, and banks are required to put in place, to mitigate money laundering risk(s).. This is particularly notable in the case of gold companies used by criminal enterprises engaged in drug trafficking, (i.e., the trade of gold for drugs). Gold companies are also used by such criminals for wealth movement, storage and preservation, and use as a status symbol. DESIGN/METHODOLOGY/APPROACH – This paper uses the “FinCEN Files” to illustrate the vulnerability of the banking system and the gold and diamond industry to money laundering, and to solidify the hypothesis that effective implementation of anti-money laundering measures, including customer due diligence, enhanced due diligence, recordkeeping, account monitoring and suspicious activity reporting with artificial intelligence enabled systems can help flag illicit funds before they are fully integrated into the society. FINDINGS – This paper determined that dealers in precious metals, precious stones, or jewels and banks may be able to detect illicit funds if they implement an anti-money laundering program that, at a minimum, provided for: (a) procedures for using all available information to determine and verify name, address, social security or taxpayer identification number, and other identifying information for a person; (b) procedures for using all available information to determine the occurrence of any transactions or patterns of transactions required to be reported as suspicious; (c) procedures for using all available information to determine whether any records must be made and maintained pursuant to the United States Bank Secrecy Act (BSA) and the Nigerian Money Laundering Prohibition Act 2011 (as amended); (d) independent testing of the anti-money laundering program of banks and dealers in precious metals, precious stones, or jewels; (e) training of personnel; and (f) the designation of an individual or individuals responsible for assuring day-to-day compliance. ORIGINALITY/VALUE – This paper uses the “FinCEN files” to help build awareness with the regulatory, enforcement and customs authorities as well as reporting entities about the money laundering risks and vulnerabilities of precious metals, precious stones, or jewels, and how to mitigate them. This paper recommends the use of artificial intelligence enabled systems with risk-based measures. This is the only Article to adopt this kind of approach.