FBR AML/CFT Guidelines for Dealers in Precious Metals and Stones (DPMS) Federal Board of Revenue Anti-Money Laundering and Counter Financing of Terrorism Guidelines for Dealers in Precious Metals and Stones January 2021 1 | P a g e FBR AML/CFT Guidelines for Dealers in Precious Metals and Stones (DPMS) Table of Contents Acronyms/terms ..................................................................................................................................................... 5 1. Introduction .................................................................................................................................................... 7 1.1 Purpose ................................................................................................................................................... 7 1.2 Target audience .................................................................................................................................... 7 1.3 Scope and terminology ........................................................................................................................ 7 1.4 Structure ................................................................................................................................................ 8 2. Background .................................................................................................................................................. 10 2.1 Why are DPMS required to comply with AML / CFT? .................................................................. 10 2.2 Financial Action Task Force (FATF) ............................................................................................... 10 2.3 Asia/Pacific Group on Money Laundering (APG) .......................................................................... 10 2.4 The FATF grey list .............................................................................................................................. 10 2.5 Money laundering ............................................................................................................................... 10 2.6 Terrorism financing............................................................................................................................ 11 2.7 Differences between money laundering and terrorism financing .......................................... 11 3. Pakistan AML/CFT Regulatory Regime ................................................................................................. 12 3.1 AML/CFT regulatory regime in Pakistan ........................................................................................ 12 3.2 Government authorities responsible for DPMS ............................................................................ 13 4. Dealers in Precious Stones and Metals (DPSM) Subject to AML/CFT .......................................... 14 4.1 Businesses subject to AML/CFT ....................................................................................................... 14 4.2 Sales transactions subject to AML/CFT ......................................................................................... 15 4.3 Customers subject to AML/CFT ....................................................................................................... 16 4.4 Sales transactions not subject to AML/CFT .................................................................................. 18 4.5 Support and guidance on AML/CFT ................................................................................................ 18 5. Risk Assessment and Mitigation ............................................................................................................ 19 5.1 Statutory requirements under AML/CFT legislations ................................................................. 19 5.2 Sanctions for non-compliance ......................................................................................................... 19 5.3 ML/TF risks and DPMS ........................................................................................................................ 19 5.4 ML/TF enterprise risk assessment .................................................................................................. 20 5.5 Difference between an inherent and residual enterprise risk assessment .......................... 20 5.6 How to conduct the ML/TF enterprise risk assessment ............................................................ 21 5.7 Quantitative and qualitative information for enterprise risk assessment ............................ 25 5.8 Example of an enterprise risk assessment template ................................................................. 25 6. AML/CFT Programme, Policies and Procedures ................................................................................ 29 6.1 Statutory requirements under AML/CFT legislations ................................................................. 29 6.2 Sanctions for non-compliance ......................................................................................................... 29 6.3 Role of senior management ............................................................................................................. 30 6.4 Compliance officer ............................................................................................................................. 30 6.5 Written policies and procedures..................................................................................................... 31 6.6 Group compliance .............................................................................................................................. 32 2 | P a g e FBR AML/CFT Guidelines for Dealers in Precious Metals and Stones (DPMS) 6.7 Staff vetting and employment ......................................................................................................... 32 6.8 AML/CFT training ................................................................................................................................ 32 6.9 Monitoring and review of AML/CFT programme .......................................................................... 33 6.10 Independent audit function ............................................................................................................. 33 7. Risk Based Customer Due Diligence (CDD) ............................................................................................ 36 7.1 Statutory requirements under AML/CFT legislations ................................................................. 36 7.2 Sanctions for non-compliance ......................................................................................................... 36 7.3 Who to conduct CDD on .................................................................................................................... 37 7.4 Timing of CDD ...................................................................................................................................... 37 7.5 CDD identification and verification ................................................................................................ 39 7.6 Verification using reliable and independent documents, data or information ................... 41 7.7 Identifying and verifying beneficial ownership ........................................................................... 42 7.8 Politically Exposed Person (PEP) .................................................................................................... 54 7.9 Source of wealth or funds ................................................................................................................ 58 7.10 Enterprise risk assessment and customer risk assessment ...................................................... 59 7.11 Customer risk assessment and rating ............................................................................................ 60 7.12 Three categories of CDD ................................................................................................................... 62 7.13 Simplified CDD ..................................................................................................................................... 62 7.14 Standard CDD ....................................................................................................................................... 63 7.15 Enhanced CDD ..................................................................................................................................... 63 7.16 Examples of standard and enhanced CDD .................................................................................... 64 7.17 Prohibited customers and risk screening ..................................................................................... 68 7.18 Delayed verification ........................................................................................................................... 68 7.19 Unable to complete CDD ................................................................................................................... 69 7.20 CDD and tipping off ............................................................................................................................ 70 7.21 Ongoing monitoring of new customers .......................................................................................... 70 7.22 Existing customers ............................................................................................................................