In My Legal Opinion….By Leonard M. Weiner, Esq., PhD.

(This is the sixth in a series of columns that deals with contemporary legal and commercial issues that are currently facing the diamond and jewelry industry and I invite reader email responses and dialogue regarding the issues raised. Please see the previous article).

These articles for information and discussion purposes only and should not be construed as legal advice, which advice shall be provided only after entering into a written retainer agreement.)

By now I hope all of you have heard of the requirements under the Patriot Act due from most wholesale companies in the jewelry industry. If you have not heard of it all, or you have done nothing about it, it is imperative that you get in touch with me immediately in order to avoid Federal prosecution and the imposition of fines and penalties. This matter should not be taken lightly. All major banks in NYC are now demanding of its customers both longtime and new customers to provide their Patriot Act Anti-Money Laundering plans and to be up to date with all of its requirements.

Briefly, for those who are not familiar with what the Patriot Act is all about:
Following the attacks on September 11, 2001, the U.S. government enacted the USA PATRIOT ACT, which is designed to prevent the use of the U.S. financial system to help fund terrorism and other crimes. The Act imposes a series of new anti-money-laundering requirements on banks, brokerage firms, insurance companies and other financial institutions. On June 3, 2005, the Financial Crimes Enforcement Network (FinCEN) of the US Department of the Treasury issued the Interim Final Rule implementing section 352 of the USA PATRIOT ACT requiring certain defined dealers in precious metals, stones, or jewels (“Defined Dealers” to be discussed in more detail in the next the Article;) as well to establish an anti-money-laundering program. The Interim Final Rule became effective 30 days after publication in the Federal Register, and all persons covered by the Act were required to come into compliance with the regulation as of January 1, 2006. In accordance with the Act, the Company has undertaken efforts to create, enhance, monitor, test, and improve its policies and procedures.

Under the USA PATRIOT ACT and other regulations, Defined Dealers must establish a compliance program, which includes policies and procedures to detect and report suspicious transactions to the government, as well as ensure compliance with the new laws. Dealer companies must also implement specialized employee-training programs, designate a special compliance officer and conduct independent audits of the effectiveness of the compliance program.

The regulations also impose requirements regarding client information and verification of that information. Under such suggested requirements the Defined Dealers should be prepared to verify the identity of their customers with whom they do business, determine the source of funds used by a customer for the sale or purchase of diamonds, jewelry or precious stones and generally obtain information about the source of a customer’s finances.
If you think you are in compliance simply by purchasing the JVC booklet, and filling in a few empty lines and locking the booklet in a drawer, you are seriously mistaken. The Patriot Act requires all such Defined Dealers in the jewelry industry to have a comprehensive plan, with ongoing, continuing education, personnel training, regular, periodic review and updating of customer and supplier files and compliance with Federal reporting requirements.

(To be continued.)
My Email Address: lenlaw@verizon.net