ANTI-MONEY-LAUNDERING (AML) PROGRAM: COMPLIANCE AND SUPERVISORY PROCEDURES
1. COMPANY POLICY
It is the policy of Gold Alliance (“Company”) to prohibit and actively prevent money laundering and any activity that facilitates money laundering or the funding of terrorist or criminal activities by complying with all applicable requirements under the Bank Secrecy Act (BSA) and its implementing regulations.
Money laundering is generally defined as engaging in acts designed to conceal or disguise the true origins of criminally derived proceeds so that the proceeds appear to have derived from legitimate origins or constitute legitimate assets. Generally, money laundering occurs in three stages. Cash first enters the financial system at the “placement” stage, where the cash generated from criminal activities is converted into monetary instruments, such as money orders or traveler’s checks, or deposited into accounts at financial institutions. At the “layering” stage, the funds are transferred or moved into other accounts or other financial institutions to further separate the money from its criminal origin. At the “integration” stage, the funds are reintroduced into the economy and used to purchase legitimate assets or to fund other criminal activities or legitimate businesses.
Terrorist financing may not involve the proceeds of criminal conduct, but rather an attempt to conceal either the origin of the funds or their intended use, which could be for criminal purposes. Legitimate sources of funds are a key difference between terrorist financiers and traditional criminal organizations. In addition to charitable donations, legitimate sources include foreign government sponsors, business ownership and personal employment. Although the motivation differs between traditional money launderers and terrorist financiers, the actual methods used to fund terrorist operations can be the same as or similar to methods used by other criminals to launder funds. Funding for terrorist attacks does not always require large sums of money and the associated transactions may not be complex.
To assist dealers in precious metals, precious stones, jewels, and finished goods (“Covered Goods”) in the fight against the financing of terrorism and money laundering, various resources have been made available. Among the resources used to prepare this AML program are the following:
- 31 C.F.R. § 1010 (http://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&SID=1d4b7666c253f04d69699bbde806efee&rgn=div5&view=text&node=31:184.108.40.206.2&idno=31)
- 31 C.F.R. § 1027 (http://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&SID=1d4b7666c253f04d69699bbde806efee&rgn=div5&view=text&node=31:220.127.116.11.2&idno=31)
- FinCEN FAQs (https://www.fincen.gov/resources/statutes-regulations/guidance/frequently-asked-questions-0)
- Notice of Proposed Rulemaking (68 FR 8480), February 21, 2003 (https://www.gpo.gov/fdsys/granule/FR-2003-02-21/03-4171/content-detail.html)
- Interim Final Rule, June 9, 2005 (https://www.gpo.gov/fdsys/pkg/FR-2005-06-09/pdf/05-11431.pdf) “For most dealers, the requirements are (1) to establish an anti-money laundering program, (2) to file IRS/FinCEN Form 8300, (3) to file FinCEN Form TD F 90–22.1 [Report of Foreign Bank and Financial Accounts], and (4) to file FinCEN Form 105 [Report of International Transportation of Currency or Monetary Instruments].”
2. RISK ASSESSMENT
Operating through the website https://goldalliance.com, the Company is a precious metals dealer. All client dealings are internet and telephone-based. The Company does not accept cash payments. The Company accepts the following payment methods: bank wire, personal check, bank check. In assessing the money laundering risk exposure of the Company, we have considered all relevant factors including, but not limited to the following:
- a. Products Bought and Sold: As a precious metals dealer, the Company buys and sells gold and silver coins and bars.
- b. Customers: Transactions with repeat customers do occur, but are infrequent. For this reason, our customer base would typically be considered to be “non-established” under BSA regulations.
- c. Suppliers: We purchase Covered Goods from two US suppliers:
• BAYSIDE METAL EXCHANGE: 6701 CENTER DRIVE STE. 840 LOS ANGELES, CA 90045
• DILLION GAGE PRECIOUS METALS: 15301 DALLAS PKWY, ADDISON, TX 75001
- d. Distribution Channels: Our business is conducted over the internet from our websites, and by telephone. Covered Goods are typically shipped from the supplier to the client or to a depository designated by the client.
- e. Geographic Locations: Our customers are located across the U.S. We only sell domestically.
Taking into account these and other considerations, we have developed and implemented the following policies, procedures and internal controls to prevent the Company from being used to facilitate money laundering and the financing of terrorist activities through the purchase and sale of Covered Goods.
3. AML COMPLIANCE PERSON DESIGNATION AND DUTIES
The Company has designated Isaac Nuriani as its Anti-Money Laundering Program Compliance Person (AML Compliance Person), with full responsibility for the Company’s AML program. The AML Compliance Person has a working knowledge of the BSA and its implementing regulations and is qualified by experience, knowledge and training. The duties of the AML Compliance Person will include monitoring the firm’s compliance with AML obligations and overseeing communication and training for employees. The AML Compliance Person will also ensure that the firm keeps and maintains all of the required AML records and will ensure that Suspicious Activity Reports (SARs) are filed with the Financial Crimes Enforcement Network (FinCEN) if or when appropriate. The AML Compliance Person is vested with full responsibility and authority to enforce the firm’s AML program.
When requested by FinCEN, the Company will provide FinCen with contact information for the AML Compliance Person including: (1) name; (2) title; (3) mailing address; (4) email address; (5) telephone number; and (6) facsimile (if any). Following the initial request from FinCEN, the Company will promptly notify FinCEN of any change in this information. (see 31 C.F.R. § 1010.520(a)(3)(iii)).
4. GIVING AML INFORMATION TO FEDERAL LAW ENFORCEMENT AGENCIES AND OTHER FINANCIAL INSTITUTIONS
a. FinCEN Requests Under USA PATRIOT Act Section 314(a)
As required by 31 C.F.R. § 1010.520(a)(3), “upon receiving an information request from FinCEN under section 1020.520, we will expeditiously search our records to determine whether we maintain or have maintained any account for, or have engaged in any transaction with, each individual, entity, or organization named in FinCEN’s request.” If we find a match, our AML Compliance Person will report it to FinCEN via FinCEN’s Web-based 314(a) Secure Information Sharing System within 14 days or within the time requested by FinCEN in the request. If the search parameters differ from those mentioned above (for example, if FinCEN limits the search to a geographic location), our AML Person will structure our search accordingly.
When our AML Compliance Person searches our records and does not find a matching account or transaction, we will not reply to the 314(a) request. We will maintain documentation that we have performed the required search by printing a search self-verification document from FinCEN’s 314(a) Secure Information Sharing System evidencing that that we have searched the 314(a) subject information against our records. We will not disclose the fact that FinCEN has requested or obtained information from us, except to the extent necessary to comply with the information request. Our AML Compliance Person will review, maintain and implement procedures to protect the security and confidentiality of requests from FinCEN similar to those procedures established to satisfy the requirements of Section 501 of the Gramm-Leach-Bliley Act with regard to the protection of customers’ nonpublic information.
We will direct any questions we have about the 314(a) request to the requesting federal law enforcement agency as designated in the request. Unless otherwise stated in the 314(a) request, we will not be required to treat the information request as continuing in nature, and we will not be required to treat the periodic 314(a) Requests as a government provided list of suspected terrorists for purposes of the customer identification and verification requirements.
b. National Security Letters
We understand that the receipt of a National Security Letter (NSL) is highly confidential. We understand that none of our officers, employees or agents may directly or indirectly disclose to any person that the FBI or other federal government authority has sought or obtained access to any of our records. If we file a SAR after receiving an NSL, the SAR will not contain any reference to the receipt or existence of the NSL. The SAR will only contain detailed information about the facts and circumstances of the detected suspicious activity. Resource: FinCEN SAR Activity Review, Trends, Tips & Issues, Issue 8 (National Security Letters and Suspicious Activity Reporting) (4/2005).
c. Grand Jury Subpoenas
We understand that the receipt of a grand jury subpoena concerning a customer does not in itself require that we file a Suspicious Activity Report (SAR). When we receive a grand jury subpoena, we will conduct a risk assessment of the customer subject to the subpoena as well as review the customer’s account activity. If we uncover suspicious activity during our risk assessment and review, we will elevate that customer’s risk assessment and file a SAR in accordance with the SAR filing requirements. We understand that none of our officers, employees or agents may directly or indirectly disclose to the person who is the subject of the subpoena its existence, its contents or the information we used to respond to it. If we file a SAR after receiving a grand jury subpoena, the SAR will not contain any reference to the receipt or existence of the subpoena. The SAR will only contain detailed information about the facts and circumstances of the detected suspicious activity.
d. Voluntary Information Sharing With Other Financial Institutions Under USA PATRIOT Act Section 314(b)
We may share information with other financial institutions regarding individuals, entities, organizations and countries for purposes of identifying and, where appropriate, reporting activities that we suspect may involve possible terrorist activity or money laundering. The AML Compliance Person will ensure that the Company files with FinCEN an initial notice before any sharing occurs and annual notices thereafter. We will use the notice form found at FinCEN’s website. Before we share information with another financial institution, we will take reasonable steps to verify that the other financial institution has submitted the requisite notice to FinCEN, either by obtaining confirmation from the financial institution or by consulting a list of such financial institutions that FinCEN will make available. We understand that this requirement applies even to financial institutions with which we are affiliated, and that we will obtain the requisite notices from affiliates and follow all required procedures.
We will employ strict procedures both to ensure that only relevant information is shared and to protect the security and confidentiality of this information, for example, by segregating it from the firm’s other books and records.
We also will employ procedures to ensure that any information received from another financial institution shall not be used for any purpose other than:
- identifying and, where appropriate, reporting on money laundering or terrorist activities;
- determining whether to establish or maintain an account, or to engage in a transaction; or
- assisting the financial institution in complying with performing such activities.
Rules: 31 C.F.R. § 1010.540. Resources: FinCEN Financial Institution Notification Form; FIN-2009-G002: Guidance on the Scope of Permissible Information Sharing Covered by Section 314(b) Safe Harbor of the USA PATRIOT Act (6/16/2009).
e. Joint Filing of SARs by Company and Other Financial Institutions
If we determine it is appropriate to jointly file a SAR, we understand that we cannot disclose that we have filed a SAR to any financial institution except the financial institution that is filing jointly. If we determine it is not appropriate to file jointly, we understand that we cannot disclose that we have filed a SAR to any other financial institution or insurance company.
Rules: 31 C.F.R. § 1023.320; 31 C.F.R. § 1010.430; 31 C.F.R. § 1010.540. Resources: FinCEN’s BSA E-Filing System.
5. IDENTITY VERIFICATION
We will verify the identities of our customers and suppliers as follows: For any purchase of covered goods in an amount exceeding $20,000 in any calendar year from a non-established supplier*, we shall use the following procedures to verify the identity of the supplier:
For a business entity, we shall record the name, address, and tax identification number. We shall verify the identity of the business by reviewing documents that show the existence of the entity, such as certified articles of incorporation, a government-issued business license, or a partnership agreement. In addition, we will request a copy of the supplier’s written AML policies and procedures.
For an individual, we shall record the name, address, tax identification number and birth date. We shall verify the individual’s identity by reviewing and maintaining a copy of an unexpired, government issued identification.
*To be an “established supplier”, a business must qualify as either a dealer or a retailer as defined in 31 C.F.R. §1027.100.
High Risk Sales
For any high risk (as defined below) sale of covered goods in an amount exceeding $10,000 in any calendar year, we shall use the following procedures to verify the identity of the customer:
We will record the name and address of the customer. We will also verify the individual’s identity by reviewing and maintaining a copy of an unexpired, government issued identification.
For any high risk sale made to a non-established business entity customer, we shall record the name, address, and tax identification number of the entity. We shall verify the identity of the business entity by reviewing documents that show the existence of the entity, such as certified articles of incorporation, a government-issued business license, or a partnership agreement.
6. MONITORING FOR AND RESPONDING TO SUSPICIOUS ACTIVITIES
a. High Risk. We recognize a high risk level and will exercise diligence in the following situations:
- i. When conducting business with parties located in, or transactions for which payment or account reconciliation is routed through accounts located in, jurisdictions that have been identified as particularly vulnerable to money laundering or terrorist financing;
- ii. Unusual payment methods, such as the use of multiple or sequentially numbered money orders, traveler’s checks, or cashier’s checks, or payment from third parties;
- iii. Unwillingness by a customer or supplier to provide complete or accurate contact information, financial references, or business affiliations;
- iv. Attempts by a customer or supplier to maintain an unusual degree of secrecy with respect to the transaction, such as a request that normal business records not be kept;
- v. Purchases or sales that are unusual for the particular customer or supplier, or type of customer or supplier; and
- vi. Purchases or sales that are not in conformity with standard industry practice.
b. Company Policies and Procedures.
- i. Transaction and Customer Due Diligence. Each high risk transaction will be reviewed by our AML Compliance Person. As part of this review, we will make reasonable inquiries to determine whether the transaction may involve money laundering or terrorist financing. If it is determined that a proposed transaction is likely to involve money laundering or terrorist financing, our AML Compliance Person will direct the Company to refuse to consummate, withdraw from, or terminate such transaction. If it is determined that the transaction is not likely to involve money laundering or terrorist financing, our AML Compliance Person will approve the proposed transaction. We will document our review of and our reasons for approving the transaction.
- ii. Supplier Due Diligence (see FinCEN FAQ #3, (https://www.fincen.gov/resources/statutes-regulations/guidance/frequently-asked-questions-0) We will take reasonable steps to determine whether a supplier of Covered Goods is a dealer as defined by 31 C.F.R. § 1027.100 or whether the supplier is eligible for the retailer exemption. Reasonable steps will depend on the nature of our relationship with the supplier. In most cases, verbal or written representations of the supplier will be sufficient. In other cases, additional due diligence will be required.
c. Reporting Suspicious Activities. FinCEN has explained that “[t]he interim final rule… does not require dealers to file reports of suspicious activity with FinCEN.” When we determine that a proposed transaction is likely to involve money laundering or terrorist financing, our AML Compliance Person will direct the Company to refuse to consummate, withdraw from, or terminate such transaction. In addition, if our AML Compliance Person believes that it would be appropriate to report the proposed transaction to law enforcement authorities, our AML Compliance Person may take any one or more of the following actions:
- i. Contact local or federal law enforcement authorities;
- ii. File a suspicious activity report with FinCEN;
- iii. Unwillingness by a customer or supplier to provide complete or accurate contact information, financial references, or business affiliations;
- iii. Check the “suspicious activity” box on a Form 8300 filed on a particular transaction; or
- iv. Report suspected terrorist activities to FinCEN using its Financial Institutions Hotline (866-556-3974).
If we file a SAR, no officer, director, employee, or agent of Company shall notify any person involved in the reported transaction that a SAR has been filed.
7. BSA REPORTING
a. Filing of FinCEN Form 8300 (31 C.F.R. § 1010.330). If, in the course of our business, we receive currency in excess of $10,000 in 1 transaction (or 2 or more related transactions), we will file FinCEN Form 8300 to report the receipt of such currency. We will file Form 8300 by the 15th day after the date the currency was received. b. Foreign Bank and Financial Accounts Reports (31 C.F.R. § 1010.350). We will file a FinCEN Form 114, Report of Foreign Bank and Financial Accounts (“FBAR”), or any successor form, with the Department of Treasury for any financial accounts of more than $10,000 that we hold, or for which we have signature or other authority over, in a foreign country. c. Currency and Monetary Instrument Transportation Reports (31 C.F.R. § 1010.340). The Company prohibits both the receipt of currency or other monetary instruments that have been transported, mailed or shipped to us from outside of the United States, and the physical transportation, mailing or shipment of currency or other monetary instruments by any means other than through the postal service or by common carrier. We will file a CMIR with the Commissioner of Customs if we discover that we have received or caused or attempted to receive from outside of the U.S. currency or other monetary instruments in an aggregate amount exceeding $10,000 at one time (on one calendar day or, if for the purposes of evading reporting requirements, on one or more days). We will also file a CMIR if we discover that we have physically transported, mailed or shipped or caused or attempted to physically transport, mail or ship by any means other than through the postal service or by common carrier currency or other monetary instruments of more than $10,000 at one time (on one calendar day or, if for the purpose of evading the reporting requirements, on one or more days).
8. AML RECORDKEEPING
In its release of the interim final rule, FinCEN wrote: “The collection of information is the recordkeeping requirement in section [1027.210(a)]. The information will be used by Federal agencies to verify compliance by dealers with the provisions of sections [1027.100 and 1027.210]. The collection of information is mandatory.”
a. Responsibility to Retain Required Records. Our AML Compliance Person or designee will be responsible for ensuring that AML records are maintained properly. To satisfy BSA recordkeeping requirements, we will create and retain copies of SARs, FinCEN Form 8300s, FinCEN Form 114s (FBARs), CMIRs, training materials, lists of training recipients, identity verification documentation for new customers, identity verification documentation for non-regulated suppliers, reviews of high risk transactions, and any other records required to be made under BSA regulations. We will retain these records and their accompanying documentation for at least five years.
b. Confidentiality of SARs. We will hold SARs and any supporting documentation confidential. We will not inform anyone outside of FinCEN or another authorized agency about a SAR. We will refuse any subpoena requests for SARs or for information that would disclose that a SAR has been prepared or filed and immediately notify FinCEN of any such subpoena requests that we receive. We will segregate SAR filings and copies of supporting documentation from other firm books and records to avoid disclosing SAR filings. Our AML Compliance Person will handle all subpoenas or other requests for SARs.
9. TRAINING PROGRAMS
We will develop ongoing employee training under the leadership of the AML Compliance Person and senior management. Our training will occur on at least an annual basis. It will be based on our Company’s size, its customer base, and its resources and be updated as necessary to reflect any new developments in the law.
Our training will include, at a minimum: (1) a review of BSA regulations governing the precious metals, precious stones, and jewels industry; (2) a description of the money laundering risks found in our business model; and (3) what to do when suspicious activity is encountered.
We will develop training in our Company, or contract for it. Delivery of the training may include educational pamphlets, videos, intranet systems, in-person lectures and explanatory memos. We will maintain records to show the persons trained, the dates of training and the subject matter of their training.
Rule: 31 CFR § 1023.210(b)(4)
10. PROGRAM TO INDEPENDENTLY TEST AML PROGRAM
a. Staffing The testing of our AML program will be performed by an independent third party. We will evaluate the qualifications of the independent third party to ensure they have a working knowledge of applicable requirements under the BSA and its implementing regulations.
Rules: 31 C.F.R. § 1023.210(b)(4)
b. Evaluation and Reporting
After we have completed the independent testing, staff will report its findings to senior management. We will promptly address each of the resulting recommendations and keep a record of how each noted deficiency was resolved.
Rules: 31 C.F.R. § 1023.210(b)(4)
11. CONFIDENTIAL REPORTING OF AML NON-COMPLIANCE
Employees will promptly report any potential violations of the firm’s AML compliance program to the AML Compliance Person, unless the violations implicate the AML Compliance Person, in which case the employee shall report to another member of senior management. Such reports will be confidential, and the employee will suffer no retaliation for making them.
Rule: 31 C.F.R. § 1023.210
12. SENIOR MANAGER APPROVAL
Senior management has approved this AML compliance program in writing as reasonably designed to achieve and monitor our firm’s ongoing compliance with the requirements of the BSA and the implementing regulations under it. This approval is indicated by signatures below.
Rule: 31 C.F.R. § 1023.210