From Malaysia to Singapore: Jewelry Industry Faces AML Enforcement Heat

In recent months, the jewellery industry has come under increasing scrutiny for its role in combating money laundering and terrorism financing. On 29 January 2024, Bank Negara Malaysia (BNM) fined Habib Jewels, a well-known jewellery retailer, for failing to adhere to Anti-Money Laundering (AML) guidelines. This enforcement action sends a clear message about the importance of complying with Malaysia’s strict AML regulations, particularly the Customer Due Diligence (CDD) process.

In a significant development on 19 November 2024, a jeweller in Singapore has been fined S$35,000 for failing to perform Customer Due Diligence (CDD) measures, marking the first such case in Singapore. This incident underscores the critical importance of adhering to Anti-Money Laundering (AML) regulations within the precious stones and metals industry.

The jeweller, Kim Heng Jewellers and Goldsmiths, was found to have neglected CDD protocols during transactions amounting to more than S$313,000. These transactions involved several gold chains, a gold pendant, and a gold bar, and were conducted with an individual suspected of money laundering activities. Despite having reason to suspect illicit activities, the jeweller failed to perform the necessary due diligence measures on multiple occasions in September and October 2023.

This case highlights the vulnerabilities within the precious stones and metals sector, which can be exploited for money laundering due to the high value and portability of such items. It serves as a stark reminder for businesses to implement robust AML measures to prevent being unwittingly involved in financial crimes.

The Necessity of Customer Due Diligence (CDD) Procedures

Customer Due Diligence is a cornerstone of AML efforts, ensuring businesses verify the identities of their customers and assess the legitimacy of transactions. For jewellery business owners, CDD involves:

1. Verification of Customer Identity: Collect and validate personal identification documents such as IC, passport, or business registration for corporate clients.
2. Assessing Transaction Purpose: Understand the purpose and source of funds involved in the transaction to identify potential red flags.
3. Monitoring Transactions: Regularly review customer activities to detect unusual patterns, such as cash purchases that deviate from typical spending habits.
4. Reporting Suspicious Transactions: Submit a Suspicious Transaction Report (STR) to BNM when there is suspicion of money laundering or terrorism financing, even if the transaction is below the usual reporting thresholds.

BNM’s AML Guidelines for Jewellery Businesses

BNM’s AML guidelines specifically outline the responsibilities of jewellery business owners to:

• Conduct CDD: At the point of establishing a business relationship or when transactions exceed the specified threshold.
• Maintain Records: Retain documents related to transactions and customer identification for at least six years.
• Submit STRs: Report suspicious transactions promptly to BNM via the Financial Intelligence and Enforcement Department.
• Train Employees: Ensure that staff are aware of AML obligations and can identify red flags and any suspicious behavior.

Failure to comply with these guidelines can result in hefty fines, reputational damage, and even business closures.

A Call to Action for Jewellery Business Owners

The jewellery industry must take proactive steps to comply with AML regulations. Establishing a robust CDD process is not just a legal obligation—it is a safeguard to protect your business from the financial and reputational risks associated with money laundering and terrorism financing.

With the right tools and processes in place, jewellery business owners can confidently navigate these challenges while contributing to a safer, more transparent financial ecosystem in Malaysia.

Let Verity Intelligence help you secure your business. Contact us today to learn more about our AML compliance solutions.

Source:

1. https://www.channelnewsasia.com/singapore/money-laundering-gold-jewellery-customer-due-diligence-check-4756066
2. https://www.bnm.gov.my/enforcement-actions-regulatees