In Resolution 222/20, the Secretariat for the Prevention of Money and Asset Laundering (Secretaría de Prevención de Lavado de Dinero o Bienes - “SEPRELAD”) established regulations for the prevention of money laundering and terrorist financing (“ML/TF”) for persons and companies engaged in trading jewels, stones and precious metals ("Reporting Parties").

Scope

The Reporting Parties must implement a comprehensive ML and TF prevention system, even if activities are delegated to intermediaries.

Risk Factors to Consider

Reporting Parties must develop and implement mechanisms and procedures for the identification, evaluation and mitigation of ML/TF risks, considering criteria established both by them and by SEPRELAD. The ML/TF risk assessment must be performed at least every two years, and the associated mechanisms must be verified at least every four years and take into account at least the following risk factors:

  • Clients: ML/TF risks associated with clients, be they individuals or legal entities, their background, activity and behavior at the start of or throughout the commercial relationship.
  • Products and/or services: ML/TF risks associated with the products and/or services that the Reporting Party subject offers on its own during the entire design or development stage.
  • Distribution channels: ML/TF risks associated with the different models and means of distribution.
  • Geographic area: ML/TF risks associated with the geographic areas in which the Reporting Party offers its products and/or services, both locally and internationally, taking into account the characteristics related to security, crime rates, economic-financial and socio-demographic characteristics of same, and the provisions that the competent authorities in matters of ML/TF or the International Financial Action Group (FATF) issue with respect to said jurisdictions, among others.

In turn, the Reporting Parties must evaluate the level of exposure to ML/TF risks associated with the new products and/or services that they may offer, or if they are going to be marketed using new technologies, in a report that must be made available to SEPRELAD. If the Reporting Parties decide to expand their range of coverage to new geographical areas, they must also prepare an assessment of the level of exposure to ML/TF risks.

Compliance Officer

Reporting Parties must have a Compliance Officer, holding a senior position such as a manager or a director, who must report directly to the highest authority of the entity. The Compliance Officer must have autonomy and independence in the exercise of his or her functions and have sufficient support and resources.

In sole proprietorships, the position of Compliance Officer can be held by the owner.

Head of Compliance (Encargado de Cumplimiento)

Likewise, Reporting Parties may appoint a Head of Compliance (Encargado de Cumplimiento) at their branches, agencies or similar, who must apply the ML/TF prevention policies and procedures at those offices, in coordination with and under the responsibility of the Compliance Officer.

ML/TF Prevention Manual and Code of Ethics

Reporting Parties must compile all their ML/TF prevention policies and the applicable legal regulations in accordance with the Resolution in a manual.

In turn, Reporting Parties must have a Code of Ethics and Conduct, approved by their highest authority, establishing the ethical principles that they must follow.

Audits

Reporting Parties must also conduct an annual internal evaluation of ML/TF prevention procedures, resulting in a report reflecting the verifications carried out and the conclusions reached within the framework of the current provisions, which must be submitted to SEPRELAD within 90 days following close of the fiscal year.

If the annual billings of Reporting Parties exceeds approximately US$ 1,300,000, they must also subject their ML/TF prevention procedures to an external audit, and the respective report must be submitted to SEPRELAD within 180 days following the end of each audited fiscal year.

Know Your Customer ("KYC")

Reporting Parties must implement KYC procedures for clients that carry out transactions equal to or greater than US$ 9,470, through a set of rules and measures to obtain sufficient information to know the identity of its clients and their ultimate beneficiaries, understand the purpose of the relationship and transactions, establish their transaction profile and verify that their transactions are compatible with that profile.

In transactions involving total amounts less than or equal to US$ 15,794 in the last 12 months, an abbreviated KYC regime may apply.

Clients who at the start or during the course of the relationship present a high risk to ML/TF should undergo an extended KYC procedure.

The KYC procedure can be delegated to third parties.

Reports

All suspicious transactions must be reported to SEPRELAD through a Suspicious Transactions Report (Reporte de Operaciones Sospechosas or “ROS”). Reporting Parties must also submit "negative reports" to SEPRELAD if they do not file ROSs in a period of three months.

Sanctions and Legal Effects

Failure to comply with these obligations may entail significant financial and reputational sanctions. Therefore, measures for their compliance should be put in place urgently.