Customs Alert - USA Patriot Act Interim Regulation Covers Jewelry Importers

08.18.2005

On June 3, 2005, the United States Department of the Treasury and the Financial Crimes Enforcement Network (“FinCEN”) announced a USA PATRIOT Act interim regulation that requires certain dealers in precious metals, precious stones or jewels to establish anti-money laundering (“AML”) programs to detect and prevent money laundering and the financing of terrorism. The interim regulation will take effect on July 11, 2005, and persons will have until January 1, 2006 to be in compliance.   

I. Interim Regulation  

The interim regulation concerns an amendment to Section 352 of the USA PATRIOT Act, which requires all “financial institutions” to establish AML programs. The regulation expands the scope of “financial institutions” to include dealers “in precious metals, stones or jewels.”  The interim regulation defines a “dealer” as any person within the United States who has both purchased and sold at least $50,000 of “covered goods” during the preceding year. â€œCovered goods” includes jewels, precious metals, precious stones, and finished goods including jewelry. The regulation covers such entities as manufacturers, refiners, wholesalers, retailers, and any other entity (i.e. importers) engaged in the business of purchasing and selling jewels, precious metals, precious stones, or jewelry. 

II. Exceptions  

There are limited exceptions to the definition of “dealer,” which exclude certain retailers who purchase their goods from U.S. dealers already covered by the rule or those that do not meet the $50,000 minimum threshold. Registered pawnbrokers are also exempted from the definition of “dealer.”   

III. Anti-Money Laundering Program  

Covered persons are required to establish an AML program by January 1, 2006. The AML program, at a minimum, should include:  

i.           written policies and procedures;
ii.          internal controls;
iii.         appointment of a corporate compliance officer;
iv.         employee training;
v.          risk assessment; and
vi.         periodic independent testing to insure proper functioning of
             the program.  

If you would like additional information on the interim regulation or details on establishing an approved anti-money laundering program, please contact: C.J. Erickson, (212) 790-9274 or Carl R. Soller, (212) 790-9231.