FinCEN defines dealers/retailers of precious metals, precious stones, jewels or other money substitutes

[EXCERPT]

Dealers and certain retailers engaging in the purchase and sale of precious metals, precious stones, or jewels are financial institutions under FinCEN regulations. FinCEN defines a dealer as “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 (i) purchased more than $50,000 in covered goods; and (ii) received more than $50,000 gross proceeds from the sale of covered goods.” 11 FinCEN includes in the definition of “dealer” those persons “… engaged within the United States in the business of sales primarily to the public of covered goods… who 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.”12 The term “covered goods” includes precious metals as listed in 31 CFR § 1027.100(d). Based on your letter, and subject to the monetary threshold and type of supplier considerations explained above, the purchases and sales the Company entered into on its own account would make the Company a dealer in precious metals, and therefore a financial institution subject to FinCEN regulations.

When acting as either a money transmitter or a dealer in precious metals, precious stones, or jewels, the Company must assess the money laundering risk involved in its non-exempt transactions, and implement an anti-money laundering program to mitigate such risk. In addition, the Company must comply with the recordkeeping, reporting, and transaction monitoring requirements under FinCEN regulations. Examples of such requirements include the filing of reports relating to currency in excess of $10,000 received in a trade or business (31 CFR § 1027.330) whenever applicable, general recordkeeping maintenance (31 CFR § 1027.410), and recordkeeping related to the sale of negotiable instruments (31 CFR § 1010.415). Furthermore, to the extent that any of the Company’s transactions constitute a “transmittal of funds” (31 CFR § 1010.100(ddd)) under FinCEN’s regulations, then the Company must also comply with the “Funds Transfer Rule” (31 CFR § 1010.410(e)) and the “Funds Travel Rule” (31 CFR § 1010.410(f)). Additionally, as a money transmitter, the Company must register with FinCEN within 180 days of starting to engage in convertible virtual currency transactions as an exchanger (31 CFR § 1022.380).


Do you agree with this inclusive definition of dealers/retailers as well as precious metals, precious stones, jewels or other money substitutes?


About the Author: Marcus Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses.



 

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How could the Iran-nuclear deal affect your compliance department?

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Assuming your bank performs transactions for people with international connections, Americans are barred from doing most types of transactions with Iran interests because of the economic sanctions. There are several sets of economic sanctions on Iran and only the the set that were implemented because of the nuclear activity were lifted. Practically, very little has changed for your bank, so, very little has changed for your compliance department.

Even, still, the elation alone is building interest in investment and trade activity with Iran. American entities with subsidiaries in Europe are likely to try to get around these sanction by claiming European sovereign rule. But this only works if the subsidiary can prove that it is not controlled by the American umbrella.

There’s no way to prove this. Just the fact that the subsidiary is a subsidiary and not a joint venture or minority interest deems it American jurisdiction on transactions because the net income is accounted for here in the States.

Minority interest is where things get tricky. If a client is doing business with an entity which has American minority interests and does business with Iran, then that’s territory that requires some legal analysis. The reason for the complication is even though there are many situations where Americans may have minority interests in European entities that will do business with Iran, one of those entities could be a fund that is specifically initiated to do that business. Wealth Americans have access to foreign markets without working through the American markets. It is possible that an American investor can buy into a Iran direct investment fund in London using his British assets. If he is able to do this, then he adds a legal entity layer. He will own a majority interest in an entity that is investing into a fund as a minority investor.

Your department will have to decide whether American jurisdiction applies to ownership of legal entities or if business will benefit the American.


About the Author: Marcus Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses.


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