Money laundering is a pervasive problem that has long plagued the global financial system. In the United Arab Emirates (UAE), the government has taken several measures to combat money laundering, including the implementation of robust anti-money laundering (AML) regulations.

In recent years, the UAE’s gems and jewellery industry has come under scrutiny due to concerns over the potential use of these luxury items for money laundering purposes. This increased scrutiny is not unique to the UAE, as the Financial Action Task Force (FATF) has been exerting pressure on governments around the world to strengthen their AML/CFT regimes and enforce AML provisions on dealers in precious stones and metals. As a result, many countries have introduced new regulations and reporting requirements aimed at mitigating the risk of money laundering and terrorist financing in the gem and jewellery industry. In this context, the UAE’s efforts to enhance its AML/CFT regime and ensure compliance with international standards are a necessary step in protecting the integrity of the global financial system.

The Scope of the UAE Gems & Jewellery Industry

The UAE is renowned for its high-quality gems and jewellery products, which are exported to various parts of the world. The country has a thriving gems and jewellery industry, with the Dubai Gold and Jewellery Group estimating the industry’s value to be around USD 75 billion. The industry has also contributed significantly to the UAE’s economy, generating employment opportunities and attracting foreign investment.

The Issue of Money Laundering in the Gems & Jewellery Industry

The gems and jewellery industry has been identified as a high-risk sector for money laundering due to its unregulated nature and the use of cash transactions. The industry has been associated with several high-profile cases of money laundering, which have led to increased scrutiny by regulatory authorities. In response, the UAE government has introduced a range of AML regulations to prevent the use of the industry for illicit activities.

Impact of AML Regulations on the Gems & Jewellery Industry

The introduction of AML regulations has had a significant impact on the gems and jewellery industry in the UAE. The regulations require industry players to implement strict compliance measures, including customer due diligence, transaction monitoring, and reporting of suspicious activities. Some of the notable impacts of AML regulations on the industry are:

• Increased Compliance Costs: Compliance with AML regulations requires significant investments in resources and technology, which has increased the overall cost of doing business in the industry.
• Stricter Enforcement: Regulatory authorities have increased their enforcement efforts, leading to greater scrutiny of industry players and increased penalties for non-compliance.
• Reputation Risk: The industry’s association with money laundering has led to reputational damage, which could affect customer trust and investor confidence in the sector.

Implications for Stakeholders in the Gems & Jewellery Industry

The GO-AML platform is an innovative system designed to enhance the capacity of financial institutions and designated non-financial businesses and professions (DNFBPs) to comply with Anti-Money Laundering (AML) and Counter Financing of Terrorism (CFT) requirements. The platform provides a secure and efficient means of submitting suspicious transaction reports (STRs) and Currency Transaction Reports (CTRs) to the relevant authorities in the United Arab Emirates (UAE). The GO-AML platform is an integral part of the UAE’s AML/CFT regime and is mandatory for all DNFBPs operating in the country. Through the GO-AML platform, DNFBPs can fulfill their reporting obligations in a timely and efficient manner, while also contributing to the overall effort to combat money laundering and terrorist financing.

Dealers in precious metals and stones are also subject to AML/CFT reporting requirements for any transactions over AED 55,000 under the Dealers in Precious Metals and Stones Report (DPMSR) of theUAE’s new regulatory framework. DPMS are also required to submit STRs and CTRs to the relevant authorities through the GO-AML platform.

Transactions to be reported in the DPMSR:

• Cash transactions with resident individuals equal to or exceeding AED 55,000
• Cash transactions with non-resident individuals equal to or exceeding AED 55,000
• Cash transactions with corporate entities (legal persons) equal to or exceeding AED 55,000
• Transactions with corporate entities (legal persons) involving international wire transfers equal to or exceeding AED 55,000
• Local wire transfers made through an exchange house
• Instalment transactions in cash equal to or exceeding AED 55,000, to be reported at the time of receiving funds
• Unfixed gold transaction involving cash equal to or exceeding AED 55,000
• Advance payment in cash equal to or exceeding AED 55,000, to be reported at the time of receiving funds
• Wire transfers from a mainland/onshore company to a Free zone company (not part of the same company)
• Transaction between two Free Zone companies, settling the payment in USD through the international wire transfer

Transactions exempt from DPMSR:

• Credit card, cheque, or bank transaction with an individual, irrespective of the amount
• Exchange of old gold or gold-to-gold transaction, not involving cash equal to or exceeding AED 55,000
• Local wire transfers and cheque transactions from a local bank in the UAE
• Payment towards Margin calls, Loans with banks
• Intra-company transfers or purchase/sell transactions in cash, irrespective of the amount
• Transactions through the Letter of Credit issued by banks
• Transaction between two Free Zone companies, settling the payment through the bank accounts in the same bank in UAE
• Physical trade of precious metals or stones with commercial banks operating & regulated outside the UAE

These reporting requirements are part of the UAE’s efforts to prevent the use of precious stones and metals as a means of financing terrorism and money laundering. By requiring dealers in precious stones and metals to report suspicious transactions and high-value cash transactions, the UAE authorities can identify and investigate potential cases of money laundering and terrorist financing in the gem and jewellery industry. Through compliance with these reporting requirements, dealers in precious stones and metals can play a crucial role in safeguarding the integrity of the UAE’s financial system and protecting it from abuse by illicit actors.

The UAE’s gems and jewellery industry has long been associated with money laundering risks, which have prompted regulatory authorities to introduce AML regulations to mitigate these risks. The impact of these regulations has been significant, with industry players facing increased compliance costs, stricter enforcement, and reputation risks. However, compliance with AML regulations could lead to increased transparency, improved governance, and enhanced reputation for the industry. As the industry navigates these challenges, stakeholders must remain vigilant and committed to upholding the highest standards of compliance and integrity.