AML Compliance FAQs

Jewellers are Dealers in Precious Metals and Stones (DPMS). A DPMS is a person or entity that, in the course of their business activities, buys or sells precious metals, precious stones or jewellery.

A DPMS is considered a Reporting Entity (RE) by FINTRAC and must fulfill their AML Compliance obligations.

Jewellers have several ongoing AML compliance obligations including:

• appointing a compliance officer 
• developing and implementing written compliance policies and procedures 
• conducting and documenting AML risk assessments of your business
• developing and maintaining a written AML compliance employee training program 
• instituting, documenting and delivering ongoing AML compliance training program
• instituting, documenting and carrying out an effectiveness review of your compliance program every two years.

Compliance program requirements for jewellers

Risk assessment guidance

CJA members receive complimentary access to Outlier’s AML Compliance Toolkit, valued at $2000. Outlier also offers consulting services at a discounted rate for members for additional support.

Access Complimentary AML Compliance Tools

A suspicious transaction is when a financial transaction occurs, or is attempted, in the course of your business activities and there are reasonable grounds to suspect that the transaction is related to the commission or the attempted commission of a money laundering or terrorist activity financing offence. A Suspicious Transaction Report (STR) must be filed with FINTRAC.

Reporting suspicious transactions to FINTRAC

A large cash transaction occurs when a business receives $10,000 or more in cash in a single transaction within a 24 hour period.

Cash includes:

• coins and bank notes issued by the Bank of Canada that are intended for circulation in Canada
• coins and bank notes of countries other than Canada
• fiat currency

You must file a Large Cash Transaction Report (LCTR) report with FINTRAC.

Reporting large cash transactions to FINTRAC

The 24‑hour rule is the requirement to aggregate multiple transactions that are the same transaction type when they:

• total $10,000 or more together
• have been made within a consecutive 24‑hour window, and
• have the same aggregation type (conductor, beneficiary or on behalf of (third party))

You must file a Large Cash Transaction (LTR) or Large Virtual Currency Transaction Report (LVCTR) with FINTRAC.

Reporting transactions to FINTRAC: The 24-hour rule

Jewellers must verify the identity of clients for the following:

1. Large cash transactions
2. Large virtual currency  transactions
3. Suspicious transactions

When to verify the identity of persons and entities—Dealers in precious metals and precious stones 

An important part of fulfilling reporting obligations is verifying identity which can be completed by ensuring the information on an ID or from other information sources matches the person or entity who provided it. Jewellers can use any of the 5 methods below to identify a person:

1. Government-issued photo identification method
2. Credit file method
3. Dual-process method
4. Affiliate or member method
5. Reliance method

Methods to verify the identity of persons and entities

A business relationship is a relationship established between a jeweller and a client to conduct financial transactions or provide services related to financial transactions.  

 You must verify the identity of clients for the following:

1. Large cash transactions
2. Large virtual currency transactions
3. Suspicious transactions

As part of your ongoing monitoring requirements for business relationships, you must keep client identification information up to date, at a frequency that will vary based on your risk assessment, and as outlined in your policies and procedures.

Business relationship requirements

Ongoing monitoring requirements

Beneficial owners are the individuals who directly or indirectly own or control at least 25% of a corporation or an entity other than a corporation (such as a partnership).

In the case of a trust, the relevant parties are the trustees, the known beneficiaries and the settlors.

Jewellers must take reasonable measures to confirm the accuracy of the beneficial ownership information when you first obtain it and in the course of conducting ongoing monitoring of your business relationships.

Beneficial ownership requirements

A third party is the person or entity that instructs another person or entity to conduct a transaction or activity on their behalf.

Jewellers must take reasonable measures to make a third party determination when you are required to:  

• report a large cash transaction or keep a large cash transaction record
• report a large virtual currency transaction or keep a large virtual currency transaction record
• keep a signature card or an account operating agreement
• keep an information record

Third party determination requirements

Jewellers must take reasonable measures to determine whether a person with whom they enter into a business relationship is a politically exposed person domestic or foreign, a head of an international organization, a family member of one of those persons, or a close associate of a foreign politically exposed person (in certain circumstances) when you:

• enter into a business relationship
• conduct periodic monitoring of a business relationship, and
• detect a fact that constitutes reasonable grounds to suspect they are politically exposed person or head of an international organization, family member, or close associate

Politically exposed persons and heads of international organizations guidance for non-account-based reporting entity sectors

Indicators are potential red flags that could initiate suspicion or indicate that something may be unusual in the absence of a reasonable explanation. 

Money laundering and terrorist financing indicators—Dealers in precious metals and stones

The Minister of Finance may:

• Issue directives that require reporting entities to apply countermeasures to transactions coming from or going to designated foreign jurisdictions or entities; and
• Recommend the introduction of regulations to restrict reporting entities from entering into a financial transaction coming from or going to designated foreign jurisdictions or entities.

A Ministerial Directive may require a jeweller to apply measures (“countermeasures”) to transactions originating from or destined to designated foreign jurisdictions and entities; and the authority to recommend that the Governor-in-Council issue regulations limiting or prohibiting reporting entities from entering into a financial transaction originating from or destined to designated foreign jurisdictions and entities.

Ministerial directives and transaction restrictions

Sanctions evasion offence means an offence arising from the contravention of a restriction or prohibition established by an order or a regulation made under the United Nations Act, the Special Economic Measures Act or the Justice for Victims of Corrupt Foreign Officials Act (Sergei Magnitsky Law).

Where there are reasonable grounds to suspect sanctions evasion by someone acting on behalf of a sanctioned person, a jeweller must report these transactions to FINTRAC via Suspicious Transaction Reports.

Report suspected sanctions evasion

It is common for sanctions regulations to prohibit or restrict dealings with certain persons (both individuals and entities). In such cases, the relevant sanctions regulation will refer to “listed,” “named,” or “designated” persons. These terms are often used interchangeably when discussing sanctions, although regulations are specific in their usage of the terms.

A listed person or entity is defined as follows:

• a terrorist group under the Criminal Code
• a person or entity that is the subject of an order or regulation made under the United Nations Act
• a person or entity that is the subject of an order or regulation made under the Special Economic Measures Act
• a foreign state that is the subject of an order or regulation made under the Special Economic Measures Act or the United Nations Act
• a person who is the subject of an order or regulation made under section 4 of the Justice for Victims of Corrupt Foreign Officials Act (Sergei Magnitsky Law)

Property is anything owned or controlled by a person or entity, whether tangible or intangible. It includes real and personal property, as well as deeds and instruments that give a title or right to property, or to receive money or goods. It also includes any property that has been converted or exchanged, or acquired from any conversion or exchange.

Reporting listed person or entity property to FINTRAC

FINTRAC has the legislative authority to issue administrative monetary penalties (AMPs) to jewellers that are found to be non-AML compliant.

Penalties for non-compliance

FINTRAC conducts examinations to assess whether jewellers are meeting their requirements under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and associated Regulations.

For more information, consult:

• FINTRAC examinations: your responsibilities and what you can expect from FINTRAC
• FINTRAC assessment manual: The approach and methods used during examinations

Failure to comply with Parts 1 and 1.1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the Act) may result in administrative monetary penalties or criminal charges for non-compliance offences. Administrative monetary penalties and criminal charges for non-compliance offences cannot be issued against the same instances of non-compliance.

Assessment and enforcement