Guidelines on Anti-Money Laundering Standards and Combating the Financing of Terrorism Obligations for Dealers of Precious Metals
Guidelines on Anti-Money Laundering (AML) Standards and Combating the Financing of Terrorism (CFT) – Obligations for Dealers of Precious Metals and Precious Stones under the Prevention of Money Laundering Act, 2002 and Rules made thereunder.
The Prevention of Money Laundering Act, 2002 (PMLA) was brought into force with effect from 1st July 2005. Necessary Notifications/Rules under the said Act were published in the Gazette of India on July 01,
2005 by the Department of Revenue, Ministry of Finance, Government of India.
As per the provisions of the PMLA, all Designated Non-Financial Businesses and Professions (DNFBPs), which includes the dealers of precious metals and precious stones, shall have to adhere to client
account opening procedures and maintain records of such transactions as prescribed by the PMLA and rules notified thereunder.
The DNFBPs shall also be required to report the specified transactions, including the suspicious transactions with a view to provide deterrence to the money-laundering and financing ofterrorism.
In view of the Risk Based Approach (RBA) adopted by the Financial Action Task Force for dealers of precious metals and precious stones and the recommendations made by it, these guidelines in the context of existing anti-money laundering law in the country, viz, the P L A and the rules made thereunder have been issued for the dealers, who are referred to as the Reporting Entities for the purposes of these
guidelines. The guidelines provide an overview on the background and essential principles that concern combating Money Laundering (ML) and Terrorist Financing (TF) as well as a detailed account of the procedures and obligations to be followed by all reporting entities to ensure compliance with AML/CT provIsions.
These guidelines have been issued in supersession of earlier Guidelines issued on 25.01.2023.
Guidelines for Reporting Entities (Dealers in Precious Metals and Precious Stones) under the Prevention of Money Laundering Act, 2002
Table of contents:
- Introduction
- Background & Legal Framework
- Purpose of the guidelines
- Obligation to establish policies and procedures under PMLA
- Detailed Guidelines on Anti Money-Laundering and combating the financing of terrorism Procedures
- Liability for failure to fulfil obligations
- Illustrative list of documents required for KYC
- Cash and Suspicious transactions reporting to Financial Intelligence Unit-India (FIU-IND)
- Implementation of Section 51A of the Unlawful Activities (Prevention) Act, 1967 (UAPA) 10. Recruitment and training of employees
INDIRECT TAXES & CUSTOMS
Introduction:
These guidelines shall be called Guidelines for Reporting Entities (Dealers in Precious Metals and Precious Stones) under the Prevention of Money Laundering Act, 2002 (hereafter called “The Guidelines”). The Guidelines aim to provide a general background and summary of the provisions of the applicable anti-money laundering and anti-terrorism financing legislations in India, viz. the Prevention of Money Laundering Act, 2002 (hereinafter referred to as the “PMLA”) and the Prevention of Money Laundering (Maintenance of Records) Rules, 2005 (hereinafter referred to as the “PMLR”) and their applicability to and implications for the dealers in precious metals and precious stones in applying certain Anti Money Laundering/ Countering the Financing of Terrorism (AML/CFT) obligations.
The Guidelines are being issued by the Directorate General of Audit (DGA), Central Board of Indirect Taxes and Customs (CBIC), which has been appointed Regulator on behalf of Central Board of Indirect Taxes & Customs, Ministry of Finance, Govt. of India for this purpose vide O.M. dated 22.11.2021 of the Commissioner (GST-Inv), CBIC (Annexure-I). The broader context for the Guidelines is provided by the Recommendations made by Financial Action Task force (FATF) on anti-money laundering standards and the Guidance on the Risk-Based Approach adopted in its June 2008 Plenary to Combating Money Laundering and Terrorist Financing, which includes guidance for public authorities and designated non-financial businesses and professions (DNFBPs) amongst others.
The DNFBPs subjected to these Guidelines include the dealers in precious metals and dealers in precious stones (hereinafter also referred to as the “Reporting Entities”)
The PMLA and the rules made thereunder, viz. the PMLR, on implementing a riskbased approach for the Reporting Entities, lay down the principles to be followed by them and highlights risk factors specific to those DNFBPs, alongwith suggestions to minimize the risk of Money Laundering/ Terrorist Financing (ML/TF).
These guidelines also set out the steps that a Reporting Entity shall implement to discourage and to identify any money laundering or terrorist financing activities. The procedures and obligations to be followed by the reporting entities to ensure compliance with Anti Money Laundering/ Countering the Financing of Terrorism (AML/CFT) guidelines are also prescribed.
The strategies to manage and mitigate the identified money laundering and terrorist financing activities are typically aimed at preventing the activity from occurring through a mixture of deterrence [e.g., appropriate Client Due Diligence (“CDD”) measures], detection (e.g., monitoring and suspicious transaction reporting), and record-keeping so as to facilitate investigations by the appropriate authorities, wherever required, which are discussed at length here under.
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