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Draft sector risk assessment for dealers in precious metals and stones
- 19 December 2023
- Money Laundering
- South African Accounting Academy
This sector has been included in item 20 of Schedule 1 of the Financial Intelligence Centre Act, 2001 (Act 38 of 2001) since amendments to the Schedules were implemented in December 2022.
The sector risk assessment serves to assist such dealers in understanding their money laundering and terrorism financing risks and introduce measures that can be adopted by the sector to mitigate and manage such risks.
Although this is the first risk assessment specific to this sector, the FIC in 2019, assessed the inherent money laundering and terrorism financing (ML and TF) risks facing Kruger rand dealers (KRDs) in South Africa. That risk assessment included results of a survey among KRDs to ascertain their views on the sector’s vulnerability to ML and TF. KRDs were rated as high risk for money laundering due to factors such as the low market entry requirements, the ability to purchase coins online and the ease with which they could be transported and changed into another form of value. The TF risk was rated as low.
This first report does not distinguish between the ML and TF risks at the different stages of the value chain, such distinction will be considered in future refinements to the sector risk assessment. The precious metals and precious stones dealers’ sector includes a wide range of activities covering the whole value chain from mining, manufacturing, beneficiation, wholesale, retail as well as importing and exporting,
The report also addresses the terrorist financing risks facing dealers in precious metals and stones.
Click here to download the Draft SRA:
https://www.fic.gov.za/wp-content/uploads/2023/11/2023.11-SRA-dealers-in-precious-metals.pdf
Relevance to Auditors, Independent Reviewers & Accountants:
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The Financial Intelligence Centre Act (FICA) is yet another piece of legislation that your clients must comply with, and which you must assess compliance with. Suppose they don’t comply with the relevant laws and regulations. In that case, you have certain reporting obligations in terms of NOCLAR (NOn-Compliance with Laws And Regulations) – this could include reporting to management, qualifying your audit opinion, reporting a Reportable Irregularity, etc.
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As an auditor and independent reviewer, you need to consider amendments, regulations and guidance that the FIC publishes.
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As an accountant, you should be aware of the inherent money laundering and terrorist financing risks for accountants, and how to assess these risks.
Relevance to Your Clients:
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Relevant entities (specifically accountable institutions) must comply with the FIC Act, otherwise they could be held liable.
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Relevant entities should be aware of amendments, regulations and guidance that the FIC publishes.