Guidance for High Value Dealers in Gibraltar
Contributed by Fiduciary Group
14 January, 2020
Are you a High Value Dealer (HVD) or High Risk Dealer (HRD)? Not sure? Why might this matter?
If you run a business that deals in goods over a certain value or goods that are considered "high risk", you will likely be classified as an HVD or HRD. However, do you fully understand what this means, and if not where do you turn for assistance and guidance?
An HVD is a business that accepts cash payments (in any currency) equal to, or greater than EUR 10,000 (GBP 8,000) in exchange for goods. HRDs are the following: dealers in precious stones and metals, car and motorbike dealers, marine craft dealers and antique and arts dealers.
Ok, so what?
The Proceeds of Crimes Act 2015 (POCA) and the Terrorism Act 2018 in Gibraltar set out the laws in relation to money laundering and terrorist financing (ML/TF) and are also where an HVD is defined. If a business is therefore "captured" under the above definitions, there are a number of legal obligations that apply. The Office of Fair Trading in Gibraltar is the supervisory authority for HVDs/HRDs and monitors and ensures compliance with these obligations.
Whilst the natural tendency may be to start by drafting and implementing policies to comply with the statutes, it is important for a business to fully understand the risks that it faces. This will ensure that any measures put in place to safeguard against ML/TF are appropriately tailored and effective. A risk assessment is therefore the more appropriate place to start. Questions such as what kinds of goods do I offer, can these be easily resold, do they hold their value, are they highly sought after, are they easily transportable across borders, what type of clientele typically purchases such goods, where are they from, do they purchase in person or online/via a third party, are just some of the questions that could inform a business's risk assessment.
A risk-based approach underpins the requirements under POCA. A business is expected to have appropriately documented policies and procedures that are scalable dependent on the calculated risk. The assessed risk will determine amongst other things, the Customer Due Diligence (CDD) requirements, i.e. the documentation necessary to identify the customer and validate their source of wealth and the funds presented.
The net result of these obligations, however, should not simply be the implementation of a binary tick box pass/fail system resulting in the acceptance or rejection of business. This type of system would likely fall short of the POCA obligations and result in one of two things. The first would be that the business is not effective in meeting the requirements, and the second the business being unnecessarily risk adverse, resulting in the unnecessary loss of revenue and income. A business can have a high-risk appetite, providing its systems and controls are thorough, robust and effective.
The requirement therefore is that the business as a whole understands the risks of ML/TF, communicates to all staff its policies on risk and that staff are trained to recognise "red flags". A business is also required to appoint a senior individual who is generally responsible for ML/TF policies and procedures and who is to be the point of contact in the first instance for all staff who suspect an instance of ML.
The list of requirements under POCA are much more extensive than just those that have been outlined in this short article. Screening of customers, linked transactions, ongoing monitoring and record keeping are further requirements that may require businesses to adapt and adjust policy and procedural measures to ensure compliance.
Financial service firms are accustomed to strict regulatory and operating environments and generally will have a team of experienced compliance staff to address these requirements; HVDs/HRDs may not, exposing them to a risk of ML/TF activity. Compliance can be costly, so businesses may wish to consider outsourcing some of these functions. Outsourcing may prove to be a more efficient, effective and economical way of meeting these obligations for some businesses.
The information contained in these guidance notes is not intended to be legal or regulatory advice and is for guidance and information purposes only.
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