Patriot Act Regs Effective July 4; Retailers Mostly Exempted


June 7, 2005

Patriot Act Regs Effective July 4; Retailers Mostly Exempted

On June 3, the U.S. Treasury Department issued the Interim Final Rule pertaining to Section 352 of the USA Patriot Act effective July 4, the Jewelers Vigilance Committee announced. The act mandates jewelry businesses institute anti-money laundering programs to detect and prevent exploitation by those with criminal intent. Dealers have until Jan. 1, 2006, to come into compliance with the final regulations.

To help jewelry companies design and implement effective anti-money laundering programs, JVC developed the USA Patriot Act Compliance Kit. The kit provides guidance creating a successful compliance program, including how to perform risk assessment, templates of written policy and programs, employee training modules, and all the information needed for a business to comply. JVC's anti-money laundering compliance kit can be purchased on JVC's secure website, wwwjvclegal.org.

"These rules call for jewelry industry dealers with purchases of over $50,000 and sales of over $50,000 of jewels, precious stones, precious metals or finished goods to comply with federal regulations guarding against money laundering schemes," says Cecilia Gardner, JVC's executive director and general counsel. "Our industry's anti-money laundering programs will require five elements: Self-assessment of risk for money laundering; written policies and procedures; the designation of an employee as compliance officer, training for other employees, and periodic testing of the program to ensure that it is operating effectively."

Retailers who purchase their covered goods from U.S.-based dealers already covered by the new rules or from other retailers will not be required to establish anti-money laundering programs. Retailers who both purchase more than $50,000 in goods covered by the rules from non U.S.-based dealers or members of the public, and sell more than $50,000 in goods covered by the rules, are deemed to be "dealers" for the purposes of the rule. These retailers will need to establish an anti- money laundering program, says JVC. Retailers do not need to calculate trade-ins towards the $50,000 threshold, as long as no monetary refund is given to the customer.

Jewelers Mutual Insurance Co., Neenah, WI, funded part of the production of JVC's Compliance Kit. "JVC represented the jewelry industry before the Treasury Department in explaining the diversity of our industry. As the legal arm of the jewelry industry, JVC has the expertise to interpret and provide guidance for compliance with these new regulations. Its kit provides important information in a step-by-step format thatıs easy to follow and put into practice," says Ronald Harder, CEO.

A final note: JVC says the Treasury Department's Financial Crimes Enforcement Network, often called FinCen, is soliciting comments on four particular aspects of the rules for 45 days. The four aspects are:

1. Should silver be removed from the definition of a "precious metal?"
2. Should "precious stones" and "jewels" be defined more specifically, for example, by reference to a minimum price per carat, and if so, how?
3. Is 50% the appropriate value threshold for determining whether finished goods (including jewelry) containing jewels, precious metals or precious stones should be subject to the rule?
4. What is the potential impact of the rule on small businesses (including manufacturers, dealers, wholesalers, distributors and retailers) that may be considered "dealers" and thus subjected to the provisions of the rule?

JVC asks members of the industry to email their comments on these four questions to clgjvc@aol.com, uwjvc@aol.com, or agjvc@aol.com. JVC will then organize the comments for submission to FinCen.

by Peggy Jo Donahue

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