[Code of Federal Regulations]

[Title 31, Volume 1]

[Revised as of July 1, 2005]

From the U.S. Government Printing Office via GPO Access

[CITE: 31CFR103.140]



[Page 449-451]

 

                  TITLE 31--MONEY AND FINANCE: TREASURY

 

                       DEPARTMENT OF THE TREASURY

 

PART 103_FINANCIAL RECORDKEEPING AND REPORTING OF CURRENCY AND FOREIGN 

TRANSACTIONS--Table of Contents

 

                Subpart I_Anti-Money Laundering Programs

 

Sec. 103.140  Anti-money laundering programs for dealers in precious 

metals, precious stones, or jewels.



    (a) Definitions. For purposes of this section:

    (1) Covered goods means:

    (i) Jewels (as defined in paragraph (a)(3) of this section);

    (ii) Precious metals (as defined in paragraph (a)(4) of this 

section);

    (iii) Precious stones (as defined in paragraph (a)(5) of this 

section); and

    (iv) 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;

    (2) Dealer. (i) Except as provided in paragraphs (a)(2)(ii) and 

(a)(2)(iii) of this section, the term ``dealer'' means a person engaged 

within the United States as a business in the purchase and sale of 

covered goods and who, during the prior calendar or tax year:

    (A) Purchased more than $50,000 in covered goods; and

    (B) Received more than $50,000 in gross proceeds from the sale of 

covered goods.

    (ii) For purposes of this section, the term ``dealer'' does not 

include:

    (A) A retailer (as defined in paragraph (a)(7) of this section), 

unless the retailer, during the prior calendar or tax year, purchased 

more than $50,000 in covered goods from persons other than dealers or 

other retailers (such as members of the general public or foreign 

sources of supply); or

    (B) A person licensed or authorized under the laws of any State (or 

political subdivision thereof) to conduct business as a pawnbroker, but 

only to the extent such person is engaged in pawn transactions 

(including the sale of pawn loan collateral).

    (iii) For purposes of paragraph (a)(2) of this section, the terms 

``purchase'' and ``sale'' do not include a retail transaction in which a 

retailer or a dealer accepts from a customer covered goods, the value of 

which the retailer or dealer credits to the account of the customer, and 

the retailer or dealer does not provide funds to the customer in 

exchange for such covered goods.

    (iv) For purposes of paragraphs (a)(2) and (b) of this section, the 

terms ``purchase'' and ``sale'' do not include the purchase of jewels, 

precious metals, or precious stones that are incorporated into machinery 

or equipment to be



[[Page 450]]



used for industrial purposes, and the purchase and sale of such 

machinery or equipment.

    (v) For purposes of applying the $50,000 thresholds in paragraphs 

(a)(2)(i) and (a)(2)(ii)(A) of this section to finished goods defined in 

paragraph (a)(1)(iv) of this section, only the value of jewels, precious 

metals, or precious stones contained in, or attached to, such goods 

shall be taken into account.

    (3) Jewel means an organic substance with gem quality market-

recognized beauty, rarity, and value, and includes pearl, amber, and 

coral.

    (4) Precious metal means:

    (i) Gold, iridium, osmium, palladium, platinum, rhodium, ruthenium, 

or silver, having a level of purity of 500 or more parts per thousand; 

and

    (ii) An alloy containing 500 or more parts per thousand, in the 

aggregate, of two or more of the metals listed in paragraph (a)(3)(i) of 

this section.

    (5) Precious stone means a substance with gem quality market-

recognized beauty, rarity, and value, and includes diamond, corundum 

(including rubies and sapphires), beryl (including emeralds and 

aquamarines), chrysoberyl, spinel, topaz, zircon, tourmaline, garnet, 

crystalline and cryptocrystalline quartz, olivine peridot, tanzanite, 

jadeite jade, nephrite jade, spodumene, feldspar, turquoise, lapis 

lazuli, and opal.

    (6) Person shall have the same meaning as provided in Sec. 

103.11(z).

    (7) Retailer means a person engaged within the United States in the 

business of sales primarily to the public of covered goods.

    (b) Anti-money laundering program requirement. (1) Each dealer shall 

develop and implement a written anti-money laundering program reasonably 

designed to prevent the dealer from being used to facilitate money 

laundering and the financing of terrorist activities through the 

purchase and sale of covered goods. The program must be approved by 

senior management. A dealer shall make its anti-money laundering program 

available to the Department of Treasury through FinCEN or its designee 

upon request.

    (2) To the extent that a retailer's purchases from persons other 

than dealers and other retailers exceeds the $50,000 threshold contained 

in paragraph (a)(2)(ii)(A), the anti-money laundering compliance program 

required of the retailer under this paragraph need only address such 

purchases.

    (c) Minimum requirements. At a minimum, the anti-money laundering 

program shall:

    (1) Incorporate policies, procedures, and internal controls based 

upon the dealer's assessment of the money laundering and terrorist 

financing risks associated with its line(s) of business. Policies, 

procedures, and internal controls developed and implemented by a dealer 

under this section shall include provisions for complying with the 

applicable requirements of the Bank Secrecy Act (31 U.S.C. 5311 et 

seq.), and this part.

    (i) For purposes of making the risk assessment required by paragraph 

(c)(1) of this section, a dealer shall take into account all relevant 

factors including, but not limited to:

    (A) The type(s) of products the dealer buys and sells, as well as 

the nature of the dealer's customers, suppliers, distribution channels, 

and geographic locations;

    (B) The extent to which the dealer engages in transactions other 

than with established customers or sources of supply, or other dealers 

subject to this rule; and

    (C) Whether the dealer engages in transactions for which payment or 

account reconciliation is routed to or from accounts located in 

jurisdictions that have been identified by the Department of State as a 

sponsor of international terrorism under 22 U.S.C. 2371; designated as 

non-cooperative with international anti-money laundering principles or 

procedures by an intergovernmental group or organization of which the 

United States is a member and with which designation the United States 

representative or organization concurs; or designated by the Secretary 

of the Treasury pursuant to 31 U.S.C. 5318A as warranting special 

measures due to money laundering concerns.

    (ii) A dealer's program shall incorporate policies, procedures, and 

internal controls to assist the dealer in



[[Page 451]]



identifying transactions that may involve use of the dealer to 

facilitate money laundering or terrorist financing, including provisions 

for making reasonable inquiries to determine whether a transaction 

involves money laundering or terrorist financing, and for refusing to 

consummate, withdrawing from, or terminating such transactions. Factors 

that may indicate a transaction is designed to involve use of the dealer 

to facilitate money laundering or terrorist financing include, but are 

not limited to:

    (A) Unusual payment methods, such as the use of large amounts of 

cash, multiple or sequentially numbered money orders, traveler's checks, 

or cashier's checks, or payment from third parties;

    (B) Unwillingness by a customer or supplier to provide complete or 

accurate contact information, financial references, or business 

affiliations;

    (C) Attempts by a customer or supplier to maintain an unusual degree 

of secrecy with respect to the transaction, such as a request that 

normal business records not be kept;

    (D) Purchases or sales that are unusual for the particular customer 

or supplier, or type of customer or supplier; and

    (E) Purchases or sales that are not in conformity with standard 

industry practice.

    (2) Designate a compliance officer who will be responsible for 

ensuring that:

    (i) The anti-money laundering program is implemented effectively;

    (ii) The anti-money laundering program is updated as necessary to 

reflect changes in the risk assessment, requirements of this part, and 

further guidance issued by the Department of the Treasury; and

    (iii) Appropriate personnel are trained in accordance with paragraph 

(c)(3) of this section.

    (3) Provide for on-going education and training of appropriate 

persons concerning their responsibilities under the program.

    (4) Provide for independent testing to monitor and maintain an 

adequate program. The scope and frequency of the testing shall be 

commensurate with the risk assessment conducted by the dealer in 

accordance with paragraph (c)(1) of this section. Such testing may be 

conducted by an officer or employee of the dealer, so long as the tester 

is not the person designated in paragraph (c)(2) of this section or a 

person involved in the operation of the program.

    (d) Effective date. A dealer must develop and implement an anti-

money laundering program that complies with the requirements of this 

section on or before the later of January 1, 2006, or six months after 

the date a dealer becomes subject to the requirements of this section.



[70 FR 33716, June 9, 2005]



    Effective Date Note: At 70 FR 33716, June 9, 2005, Sec. 103.140 was 

added, effective July 11, 2005.