Dealers in Precious Metals and Stones (DPMS) which are classified as DNFBPs need to pay close attention when it comes to deal with suppliers in precious metals and stones, it is crucial to be aware of potential red flags in order to avoid relationships that can hinder your business. However, identifying these red flags can be challenging, especially for those new to the industry. In this blog post, we’ll explore some common red flags to watch out for in customer, company, product, gold mining, payment, and trade-based behaviour. By understanding these red flags, DPMS entities can make better informed decisions and avoid costly mistakes.
Now, let’s dive deeper into these behaviours:
CUSTOMER BEHAVIOR :
- Customer suddenly and significantly increases gold bullion purchases for no apparent reason.
- Foreign nationals make multiple transactions over a short period of time.
- Bullion is transferred among associates without a clear commercial purpose.
- Customer’s occupation doesn’t match their financial profile.
- Customer uses a PO box without a corresponding box number.
- Unusual transaction patterns and inconsistent customer profiles.
- Changes to business names and entities registered to deal in gold.
- Registration in tax havens despite operating in another jurisdiction.
- Numerous sole proprietorship businesses/private limited companies set up by seemingly unrelated people but controlled by the same group.
- Use of shell companies and a corporate structure across jurisdictions.
- Significant number of companies registered to one natural person.
- Lack of transparency in commercial activities and transportation of merchandise.
- Bullion with physical characteristics inconsistent with industry standards.
- Gold prices higher than local market prices.
GOLD MINING BEHAVIOUR:
- Unlicensed production and commercialization of gold by individuals or businesses.
- Third-party operation of a mine by an ethnic community.
- Decreased production without explanation at licensed mines.
- Use of inappropriate machinery and equipment for small or artisanal mining.
- Non-compliance with regulations for administrative, technical, social, and environmental reasons.
- Mining activities in prohibited areas.
- Multiple affiliated entities in the payments chain.
- Transit movement of funds and changes in payment purposes.
- Sale of gold claimed to come from unlicensed or non-existent mines.
- Large international fund transfers followed by quick withdrawals.
- Cash purchases of bullion, especially with multiple purchases, large amounts, or structured cash deposits.
- Transactions between domestic buyers and sellers with proceeds sent to unknown overseas parties.
TRADE-BASED BEHAVIOUR (ALSO RELATED TO TBML (trade-based money laundering )):
- Cash payments for high-value orders: This is a common indicator of TBML activity, as it can be difficult to trace the source of the funds.
- Misclassification of gold purity, weight, origin, and value on customs declaration forms: If the information on the customs forms is inaccurate or misleading, it could be a sign of TBML.
- Gold shipments to/from high-risk jurisdictions: If the gold is being shipped to or from a jurisdiction known for money laundering activities or sensitive/non-cooperative jurisdictions, it could be a red flag.
- Gold transhipped through high-risk jurisdictions: If the gold is being transhipped through one or more high-risk jurisdictions for no apparent economic reason, it could indicate TBML.
- Inconsistent consignment size or type of commodity: If the size or type of commodity being shipped is inconsistent with the scale or capacity of the exporter or importer’s regular business activities, it could be a sign of TBML.
- Use of front or shell companies: If the transaction involves the use of front or shell companies, it could be a red flag for TBML.
At VAF Compliance, we understand the importance of compliance and are committed to ensure that your business remains compliant with all relevant regulations. Our dedicated team of compliance officers has the knowledge and experience to support and guide you through the complexities of DNFBP regulations and help you avoid any potential penalties or legal issues ensuring compliance with the relevant regulatory framework.
Contact us today to learn more about how we can help your business succeed.