Non-financial institutions companies often think that money laundering is not about them. However, this is a false assumption. The latest directives of the European Union prove that this is invalid. According to these directives, money laundering is a risk, especially for the luxury and jewelry sector, and they should take precautions in this regard.
Introduction to Money Laundering in the Jewelry Business
Money laundering processes generally consist of very well-camouflaged steps. However, because they are cross-border transactions, they become difficult to detect. Due to this complex structure, strict control and advanced technological measures must be taken. Supervisory authorities depend on the cooperation of various businesses for better anti-money laundering measures. These businesses are often thought of as financial institutions but actually include retailers who trade high-value products. These industries fall under the category of those most likely to deposit money from illegal sources. These industries play an essential role for two reasons. The first is to prevent unlawful acts, report suspicious actions to the authorities, and protect businesses from fraudulent activity and possible financial losses.
In general, precious metals and jewelry are a convenient way to launder money. Criminals have used especially high prices such as gold in international money laundering since old times. As gold is also a global tool, it can be easily used in cross-border activities. Apart from gold, diamond is another metal that is widely used in money laundering activities. The size of the diamond is an element that makes it easy to use. The use of diamonds for money laundering and terrorist financing goes back a long way. There is a movie called "Blood Diamond" in 2006 about this. As can be seen from the film, the diamond industry is a place that can provide an environment for all kinds of financial crime. Today, the Kimberley Process commitment, represented by the World Diamond Council, is in effect to protect this sector. With the law, possible diamond crimes were tried to be prevented.
The Role of Precious Metals and Gems in Money Laundering
Precious metals and gems have been long used in money laundering due to their high value, portability, and ease of conversion into cash or other assets. Here are some ways in which they are commonly used:
- Acquiring high-value items: Unlawfully obtained funds are utilized by wrongdoers to acquire precious metals, which are later sold to transform the proceeds into legitimate funds.
- Smuggling: Precious metals and gems can be smuggled across borders without detection and sold for cash, effectively "laundering" the proceeds of crime.
- Trading: Criminals can use precious metals and gems to trade with others in a way that is difficult to trace or detect.
- False invoicing: Criminals can use fraudulent invoices for precious metals and gems to move money across borders and hide the proceeds of crime.
Overall, the use of precious metals and gems in money laundering highlights the need for vigilant monitoring and regulation in the jewelry industry.
Common Money Laundering Techniques Used in the Jewelry Business
The jewelry business provides ample opportunities for money laundering, and criminals often use a combination of techniques to conceal the source of their funds. Here are some common money laundering techniques used in the jewelry business:
- Structuring transactions: Criminals may structure transactions to avoid reporting requirements, such as making multiple small deposits or purchases to avoid triggering cash transaction reporting thresholds.
- Mixing illicit funds with legitimate funds: Criminals may mix illicit funds with legitimate funds by using the proceeds of crime to purchase legitimate goods, such as jewelry, and then sell them for cash.
- False invoicing: Criminals can use fraudulent invoices to overstate the value of precious metals, effectively "laundering" the proceeds of crime.
- Cash purchases: Criminals may use cash to purchase high-value items, such as jewelry, to conceal the source of their funds.
- Smuggling: Criminals can smuggle precious metals and gems across borders to sell for cash, effectively "laundering" the proceeds of crime.
- Trade-based money laundering: Criminals can use precious metals and gems to trade with others in a way that is difficult to trace or detect.
It is important for businesses in the jewelry industry to be aware of these common money laundering techniques and implement anti-money laundering measures to prevent their use.
Regulatory Challenges
As it is known, new directives are echoed by the European Parliament. According to these directives, institutions are changing their AML policies. Parliament has the right to check and readjust the requirements for the obliged parties.
Whether the amount of money laundering is large or small, it hurts businesses. In addition to financial results, it enables companies to lose their credibility and reputation. Companies must take measures to protect themselves from such consequences. Since money laundering is a system that is constantly changing, and new challenges are added, regulators are expected to improve themselves in this sense continuously. At the same time, companies should take measures in addition to the recommendations of regulators. Retailers in the jewelry industry need to check bank transfers initiated by buyers for items purchased before shipment. Therefore, it is recommended that the compliance unit's awareness is high or automatic prevention software.
Cash flows in retailers in the luxury and jewelry market should be limited and perhaps abolished. For transactions exceeding a certain amount, there must be a customer identification process, as well as systems for tracking incoming and outgoing payments. This is called transaction monitoring. By doing so, immediate access to transaction activities and potential high-risk transfers can be averted. If such measures are not taken, money laundering may become widespread in the jewelry sector, which is a highly exploitable sector.
Sanction Scanner's Solutions For Luxury Brands & Jewelry
As we mentioned above, luxury brands are a sector preferred by criminals very easily. Since the prices of the products are high, there are high sums in shopping. As a result, brands can host financial crimes. To circumvent this issue, brands should have a profound understanding of their clientele and effectively oversee their payment procedures. Thanks to Sanction Scanner's Transaction Monitoring software, you can segment your customers, set specific rules for each segment, and automatically prevent purchases over the price you specify.
There are similar problems in precious metal exchanges. A high amount of shopping should be monitored, and customers should be well-known. Within the scope of recognizing customers, you can check whether each customer has a criminal record and whether they are searched on terrorist lists with Sanction Scanner's Name Screening software.
