Terrorist financing, money laundering, and the Canadian jewellery industry (Part 3)

How’s your compliance regime?

Part 3 of 9

By Ken Brander

As a reporting entity, every dealer in precious metals and stones (DPMS), regardless of how large or small, must comply with the act and regulations. With the exception of a few elements, a DPMS reporting entity must have essentially the same compliance regime as Canada’s other reporting entities, such as financial institutions, securities dealers, and casinos.

Definitions are very important in law. The Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and regulations are interpreted and applied according to the strict meanings of key words and phrases. FINTRAC applies these definitions using these specific meanings. For instance, in the context of the act and regulations, there are six types of precious stones, no more and no less. In terms of your compliance regime, you must adopt this definition, too. It is crucial for you as a DPMS reporting entity to recognize the business activities, products, and services you offer that draw you into this legal regime. The first step is to understand the legislation’s key terms. The following definitions are found in Section 1 of the act.

• Precious metal means (only) gold, silver, palladium, or platinum in the form of coins, bars, ingots or granules, or in any other similar form.

• Precious stones means (only) diamonds, sapphires, emeralds, tanzanite, rubies, or alexandrite.

• Jewellery means objects made of gold, silver, palladium, platinum, pearls, or precious stones intended to be worn as a personal adornment.

Section 1 of the regulations defines a DPMS to mean: “a person or an entity that buys or sells precious metals, precious stones, or jewellery in the course of business activities.” There are three elements to the definition:

• A person or entity;

• That buys or sells; and

• Precious metals, precious stones, or jewellery in the course of business activities.

The definition of DPMS, by design, is very broad and applies to the business activities of people and entities, not their particular role or function in the jewellery industry. There is not one set of rules for retailers and another for wholesalers, for instance. Refiners and cash-for-gold operations are likewise not distinct.

If you meet these three criteria, then you as a ‘person’ or your company as an ‘entity’ are in fact a DPMS reporting entity.

For sales agents and sales agencies selling products on behalf of a supplier, your standing as a DPMS is entirely dependent on your particular business practices and the arrangements you have with the company you represent. A key consideration is whether you physically conduct the transaction. If you provide the product on behalf of the supplier and receive payment from a customer, you are deemed a DPMS. Even in circumstances where the AML compliance responsibilities might fall on the company whose products you are selling, some reporting requirements, such as client identification, suspicious transaction reports, and large cash transaction reports, might fall on you. If you are conducting transactions on behalf of some other entity, you need to co-ordinate your AML obligations and above all, have this arrangement documented in writing. If in doubt, seek clarification.

More to come of this story in Part 4.

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Terrorist financing, money laundering, and the Canadian jewellery industry (Part 2)

How’s your compliance regime?

Part 2 of 9

By Ken Brander

Canada’s anti-money laundering (AML) legislation is by no means unique in the world. In fact, you might be interested to know most countries have very similar laws in place. This is not just a coincidence. Canada is part of the global anti-money laundering and terrorist-financing (TF) regime that took hold in 1989 with the advent of the Financial Action Task Force (FATF), an inter-governmental body formed by the Group of Seven (G7) countries. Canada is a member state of both the G7 and FATF, and has a great deal of national pride and actual resources invested in these organizations. Each has become a permanent fixture in geo-economic politics, which means AML/TF compliance is not a transient affair. It’s here to stay and if anything, enforcement, regulations, and monetary fines are on the rise in Canada and internationally.

The G7 leaders created FATF in response to the gross amounts of money laundering transactions chartered banks were conducting on behalf of organized crime during the 1970s and 1980s, most notably Colombia’s drug cartels. After the 9/11 attacks, FATF also became involved in recommending actions to identify terrorist financing. As a G7 and FATF member, Canada has, therefore, long been involved in the effort to keep proceeds of crime and terrorist financing out of the world’s legitimate financial system.

FATF is the global authority on anti-money laundering and terrorist financing regulatory framework. As such, it makes recommendations, sets policies and procedures, and assesses AML regimes of member states. Currently, there are 34 FATF member states, eight regional FATF-style organizations (e.g. Eastern and Southern Africa Anti-Money Laundering Group [ESAAMLG]), and 25 FATF observers, including the United Nations, World Bank, and Interpol. FATF has made 40 recommendations that member states are expected to adopt fully into domestic legislation. They address the following:

• Anti-money laundering and terrorist-financing policy and co-ordination;

• Laws relating to money laundering and confiscation of proceeds of crime;

• Financial activities related to the funding and proliferation of terrorism;

• Preventative measures, including customer due diligence, record keeping, etc.;

• Transparency and beneficial ownership;

• Powers and responsibilities of competent authorities, including financial intelligence units (FIUs); and

• International co-operation.

To be compliant with FATF’s recommendations, Canada has enacted federal legislation that directly affects you as a dealer in precious metals and stones (DPMS). Specifically:

• In 2000, Canada passed the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. There have been a number of amendments over the years.

• The act establishes the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) as the country’s financial intelligence unit.

• The act establishes 10 types of business sectors in Canada required to be in compliance. These businesses are termed ‘reporting entities’ (RE).

• Among other things, FINTRAC conducts examinations on Canada’s reporting entities to evaluate and ensure compliance with the act and regulations.

• FINTRAC has authority to assess administrative monetary fines and recommend criminal charges against individuals and reporting entities found to be in non-compliance with the act and regulations.

• FINTRAC receives reports from reporting entities, analyzes those reports, and creates intelligence packages that assist domestic and international law enforcement agencies investigate money laundering and terrorist financing.

• DPMSs became reporting entities and subject to the act and regulations in 2008.

More to come of this story in Part 3.

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Terrorist financing, money laundering, and the Canadian jewellery industry (Part 1)

How’s your compliance regime?

Part 1 of 9

By Ken Brander

If, after reading the title of this article, your chest tightened a bit, your pulse rate spiked, and you had a hard time swallowing, rest assured, these are not uncommon responses. There’s no need to speed dial your physician quite yet. However, you should keep reading, since just like a lingering health concern, your anti-money laundering compliance program requires your ongoing attention, lest it flare up and cause you some serious grief.

Money laundering, terrorist financing, compliance regimes, administrative monetary penalties, and criminal charges may seem out of place in the jewellery industry. However, since 2008, Canada’s dealers in precious metals and stones (DPMSs) have been deemed one of the 10 reporting entities of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its regulations. As such, you have a number of legal obligations with which you must comply. These requirements are not optional and you ought to consider them as another cost of doing business, similar to insurance and advertising.

As a former officer with the Edmonton Police Service, I spent 25 years investigating fraud, corruption, and money laundering in Canada and internationally.

In this article, I am going to help you understand how and why this law came about and the implications for you and your business. I’ll also share my thoughts on what you can expect from regulators, as well as some common misconceptions jewellers have that could lead them into serious trouble.

More to come of this story in Part 2.

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Jewelers Mutual introduces victim services

Victims of a jewellery store robbery or a natural disaster will now have access to counselling as part of a business’s coverage with Jewelers Mutual Insurance Co.

“Jewellers work in a dangerous industry, and I think I speak for everyone at Jewelers Mutual when I say there is nothing more heart-wrenching than news one of our jewellers has been involved in an armed robbery or a shooting or another traumatic situation,” said Darwin Copeman, president and chief executive officer (CEO) of Jewelers Mutual.

“At Jewelers Mutual, we want to do more for you than pay for your stolen goods or repair your store. We want to help you and your employees recover however we can, so you can move forward with your lives and resume your life’s work.”

Called the RELI(E)VE Program, the new benefit is the result of a partnership between Jewelers Mutual and Ceridian LifeWorks, a provider of employee assistance programs, work-life, wellness, and crisis support services in the United States and Canada.

Services include 24-7 telephone access to LifeWorks’ masters-level counsellors, face-to-face sessions with a qualified local counselling professional, and onsite crisis support in the form of one-on-one and group counselling sessions.

The following are signs an individual could be having difficulty recovering from psychological trauma:

• vivid and frequent flashbacks;

• a pervasive change in personality or demeanor;

• dramatic emotional swings;

• anxiety or paranoia;

• insomnia or fitful sleep;

• depression; and/or

• heightened feelings of stress.

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Canadian jewellery industry gathers for 24 Karat Club gala

Jewellery Business managing editor Jacquie De Almeida; Chris Kundakci, owner of Designed By Chris Jewellers; and Jewellery Business publisher and 24 Karat Club member, Erik Tolles.

The marble décor of Toronto’s Fairmont Royal York Hotel set the scene for the 57th annual Canadian Jewellers 24 Karat Club’s yearly gala dinner.

A who’s who of the Canadian jewellery industry—including Jewellery Business publisher and 24 Karat Club member, Erik Tolles, and managing editor, Jacquie De Almeida—attended the fête on Oct. 18, which coincided with the group’s annual general meeting.

Members and their guests from across the country converged on the Royal York’s elegant Imperial Room after enjoying a cocktail reception. Following dinner, Canadian jazz musician/vocalist Matt Dusk took to the stage with his renditions of classics like “The way you look tonight.”

“For 57 years, members have been gathering to celebrate friendship and camaraderie within Canada’s jewellery industry,” said Gino DeVuono, president of the Canadian Jewellers 24 Karat Club. “It’s an evening enjoyed by all.”

Founded in 1957, the Canadian Jewellers 24 Karat Club was designed to be a fellowship that brought together members, retailers, and suppliers in a social environment. Although it was originally Ontario-based, the club now has members across the country.

Membership—which is capped at 75 active members—is by invitation-only.

The annual general meeting saw the following named to the executive for the coming year:

• Gino DeVuono, director of sales at Movado Group, as president;

• Jay Cameron, vice-president of sales and marketing at Fiori Watch Canada, as vice-president;

• Darrell King, president and chief executive officer (CEO) of Gunther Mele, as treasurer;

• Jason Kelly, president and CEO of Cachet Consulting & Management Services, as secretary; and

• Joe Gonçalves, owner of Time Central, as immediate past-president.

24 Karat Club past-president Tim Bromwich, Ryan Gonçalves of Time Central, and Tibor Finesz, owner of Right Time Inc., were appointed to the board of directors for this year.

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Midore named official Canadian distributor for Festina

Photo courtesy Festina Group

Festina Group has appointed Montreal-based Midore as its Canadian distributor.

The official timekeeper of the Tour de France, Festina is available in more than 90 countries.

“We see Canada as the perfect market for our watches, be it for our large, sporty men’s chronographs or our fashionable ladies’ feminine timepieces,” says Manon Colombies, Festina Group’s general manager.

“Canada has a spectacular range of demographics, and a multifaceted lifestyle brand is ideal for the market.”

Michael Negreanu, co-founder of Midore, says the introduction of a ladies’ line and downsized cases in the men’s collection will help create better appeal among consumers, as will lower price points. The Canadian-specific models range from $135 to $455, with 90 per cent of the watches priced from $149 to $265.

Negreanu says Midore’s established dealer network of more than 400 stores and a sales force across the country helped seal the deal.

“Festina has seen in Midore a worthy representative of the brand in this market, a company having both the capacity and understanding of the Canadian consumer,” he explains.

“As the exclusive Canadian distributor, we see great potential in the Festina brand for its attractive price points and value. We are confident we can mirror the success the group has had in other markets.”

 

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