AML Requirements for Dealers in Precious Stones

The United Arab Emirates (UAE) is one of the world’s leading hubs for diamonds, gemstones, and luxury jewelry. The country’s strategic location, robust trade networks, and reputation as a global marketplace have attracted significant business activity in precious stones. However, the high value, portability, and cross-border nature of these assets also make them vulnerable to money laundering (ML) and terrorist financing (TF) risks.

To address these concerns and align with Financial Action Task Force (FATF) recommendations, the UAE government has imposed strict Anti-Money Laundering (AML) requirements on dealers in precious stones (DPS).

At Sheikh Anwar Accounting and Auditing LLC, Dubai (MOE Registered Auditor – Entry No. 5817), we support jewelry businesses, diamond traders, and precious stone dealers in building robust AML compliance frameworks to meet these obligations.

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1. Why Precious Stones Are High-Risk

Precious stones such as diamonds, rubies, emeralds, and sapphires are considered high-risk for ML/TF due to:

• High value in small volume: Easy to transport and conceal.

• Cross-border transactions: Commonly traded internationally.

• Cash-intensive sales: Risk of anonymity in large cash transactions.

• Potential misuse in trade-based money laundering (TBML): Stones can be mispriced or disguised in customs documentation.

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2. Legal and Regulatory Framework

Dealers in Precious Stones (DPS) are classified as Designated Non-Financial Businesses and Professions (DNFBPs) under UAE law. Key regulations include:

• Federal Decree-Law No. 20 of 2018 on AML/CFT.

• Cabinet Decision No. 10 of 2019 (Implementing Regulations).

• Cabinet Decision No. 16 of 2021 on regulation of the precious metals and stones sector.

• Cabinet Decision No. 58 of 2020 on Ultimate Beneficial Ownership (UBO).

• Guidance and inspections by the Ministry of Economy (MOE).

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3. Core AML Obligations for Dealers in Precious Stones

a) Customer Due Diligence (CDD)

• Verify customer identity for transactions above AED 55,000 (cash or equivalent).

• Apply Enhanced Due Diligence (EDD) for high-risk customers, politically exposed persons (PEPs), and cross-border deals.

• Obtain details on the source of funds used in transactions.

b) Beneficial Ownership (UBO)

• Identify and verify the Ultimate Beneficial Owner (UBO) behind companies or trusts buying precious stones.

• Maintain up-to-date ownership records in compliance with Cabinet Decision No. 58 of 2020.

c) Record-Keeping

• Maintain transaction records, invoices, and client identification documents for at least five years.

• Ensure records are readily available for audits and MOE inspections.

d) Suspicious Transaction Reporting (STR)

• Detect and report unusual transactions, such as:

o Cash purchases exceeding normal thresholds.

o Over- or under-invoicing of precious stones.

o Transactions involving high-risk jurisdictions.

• File STRs through the goAML platform managed by the UAE Financial Intelligence Unit (FIU).

e) Internal AML Programs

• Appoint a Money Laundering Reporting Officer (MLRO).

• Establish written AML compliance policies and internal controls.

• Provide regular AML training for staff handling sales and trade documentation.

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4. Red Flags for Dealers in Precious Stones

Some common warning signs include:

• Clients who insist on anonymity or third-party payments.

• Transactions with no clear commercial rationale.

• Buyers unwilling to provide identification or disclose UBO.

• Frequent high-value purchases by clients with no known financial background.

• Unexplained payments from offshore accounts.

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5. Penalties for Non-Compliance

Failure to comply with AML laws can lead to:

• Administrative fines from AED 50,000 to AED 5 million.

• Suspension or revocation of business licenses.

• Public disclosure of violations, leading to reputational damage.

• Increased regulatory scrutiny and loss of trust among global trading partners.

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6. How Precious Stone Dealers Can Stay Compliant

To protect their business and reputation, DPS should:

• Conduct periodic AML risk assessments.

• Adopt digital KYC tools to streamline customer verification.

• Implement clear policies for handling large cash transactions.

• Train staff regularly on AML red flags and reporting requirements.

• Engage professional advisors like Sheikh Anwar Accounting and Auditing LLC for compliance audits, goAML registration, and policy development.

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Conclusion

The UAE’s AML framework for the precious stones sector reflects its commitment to international standards and FATF guidelines. For dealers in precious stones, compliance is not just a regulatory requirement — it is essential for safeguarding their business, protecting their reputation, and contributing to the integrity of the UAE’s financial system.

At Sheikh Anwar Accounting and Auditing LLC, we help precious stone dealers implement AML policies, conduct training, and prepare for Ministry of Economy inspections to ensure full compliance.

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