Financial Crime World

Managing Risk in Jewelry Sector: A Guide for Dealers

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As the jewelry sector continues to evolve, it’s essential for dealers to stay ahead of the curve when it comes to managing risk. In this article, we’ll explore the key risk categories and provide guidance on how to mitigate potential threats.

Risk Categories

The Financial Action Task Force (FATF) recommends that dealers assess money laundering and terrorist financing risks by using various categories. These include:

Country or Geographic Risk

  • Dealers must consider factors such as participation in the Kimberley Process, mining or trading of precious stones, government oversight, and regulation when assessing country risk.
  • Other factors to consider:
    • Level of cash usage
    • Informal banking systems
    • Designated terrorist organizations
    • Access to nearby markets

Customer and Counterparty Risk

This category includes:

Retail Customer Risk

  • Dealers must be aware of transactions that may be subject to structuring, payment by or delivery to third parties, or use of cash.

Business Counterparty Risk

  • Higher-risk counterparties may lack knowledge or understanding of the industry, have no business premises or required equipment and financial resources, or propose excessive or nonsensical transactions.

Mitigating Risks

To minimize risk, dealers can:

Conduct thorough due diligence on customers and counterparties

Implement robust know-your-customer (KYC) procedures

Monitor transactions for suspicious activity

Report any potential money laundering or terrorist financing activities to the relevant authorities

By understanding these risk categories and implementing effective mitigation strategies, jewelry dealers can ensure a safer and more compliant business environment.

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