It is critical that a risk assessment be completed to keep up with AML regulations as well as changes in the business or customer activity. A risk-based approach should be built on sound foundations; effort must first be made to ensure that the risks are well understood. As such, a risk-based approach should be based on an assessment of threats. This is true whenever a risk-based approach is applied, at any level.
Developing a risk assessment of a firm's customer market will provide the foundation for designing the compliance program. Both the risk assessment and the compliance program should be reviewed and updated according to risk – no less than annually.
It's simply not enough to establish an AML compliance program and have a compliance officer manage it. No AML program can remain static. It is a regulatory expectation that AML compliance programs will be modified and updated in response to changes in regulations and the business of the firm.
Designating a compliance officer who is familiar with the regulatory requirements will go a long way to protecting you from regulatory risk. Simply appointing personnel with no experience will not serve you well in the long run.
You must protect your firm from all risk -- reputational, operational, credit and regulatory. Your AML compliance program should inform your overall risk management program.
Banks typically require their dealer-clients to provide a copy of their AML program and policies in order to continue their banking relationship. The U.S. Commerce Department has determined that the jewelry business is “high risk,” triggering certain obligations on banks, including monitoring jewelry and precious metal dealer clients for compliance.
Banks will ask to see dealers' documented AML Program and Policy and may even require the review of the dealer’s independent test report. This will ensure to them that the dealer is meeting its regulatory obligations.
An AML compliance program must contain four pillars, which includes policies, procedures and internal controls; designation of a compliance officer; training; and independent testing. Training is a key driver that advances the ability to detect unusual activity. Front-line personnel are often the first point of contact with potential money-laundering and fraud, and it is essential they be educated on red flags common to dealers. Having controls in place that include any red flags or suspicions is the first important step to maintaining an effective AML program.
Regulatory rules apply to “dealers” in “covered goods.” Covered goods include jewels, precious metals and precious stones, and "finished goods" (including but not limited to, jewelry, numismatic items, and antiques) that derive 50 percent or more of their value from jewels, precious metals, or precious stones contained in or attached to such finished goods.