On The Improvement Of Anti-money Laundering System In The Gold Industry

This paper discuss existing anti-money laundering regulation in gold industry and its loophole,and implementation in China for FATF proposals on precious metals dealer(Forty Proposals article 22 and article 23).The author suggest to implement customer due diligence and suspiciouss activity report in banking sector for gold sector in order to fight against money laundering crimesGold output and gold products sales has increased tremendously in recent years,its sales volume could reach to 280 billions RMB Yuan in 2017.But nowadays,the admistration of the gold industry still remain its practice in 1980's,i.e.its practice mainly in the planning economy era,and anti-money laundering regulation and practice is not put into gold industry at all.The FATF Recommendations suggest customer due diligence and suspicious transaction reporting for precious metal transaction,the Anti-money Laundering Law of People's Republic of China request specific non-financial institutions to perform anti-money laundering duty,it is almost blank in implementing the anti-money laundering law for the non-financial institutions in the gold industry.The motivation for this paper is arised when the author defended for a criminal case of engaging in illegal business activities investigated by Lishui city criminal section in Zhejiang province.The paper is based on a case of money laundering through gold purchase and the cases is fully discussed in details.The case,as investigated and revealed by the police department,shows that 810 millions RMB Yuan is laundered outward through gold products purchase within 3 monthes.In this case,the payment for the gold products is done by shadow banking system both in inland cities and Hong Kong.Hong Kong buyer paid the gold to Hong Kong bank account,and inland cities gold seller receive its payment from domestic bank account.After payment is done,gold products is delivered to Hong Kong buyer designated person,and the deal is done repeatedly until the police department followed the banking transaction and approach gold seller account and then the money laundering is stopped.This paper finally discussed the case and anti-money laundering loophole in the administration of gold industry,and propose some improvements based on the FATF Recommendations,such as authorising People's Bank of China to administer gold industry,implementing Knowing Your Client in gold transaction,correcting crime of smuggling precious metal to be crime of money-laundering,to grant People's Bank of China with criminal investigation power,to share information between bank and tax authority and outside FIUs.