2.1.2 Features of DPMS that Increase Risk
Not all DPMS pose equal risk. A DPMS is likely to be considered higher risk when it provides products or services that are attractive to illicit actors, has operations in high-risk jurisdictions, or does not apply appropriate anti-money laundering/combatting the financing of terrorism (AML/CFT) controls.
2.1.2.1 Regulatory Environment
In many jurisdictions, DPMS are not required to comply with requirements related to identification of customers and reporting suspicious activities. In other jurisdictions, these requirements are nominally in place, but DPMS are not subject to effective supervision and enforcement. Even in a jurisdiction that imposes and enforces such requirements, they frequently apply only to DPMS that engage in cash transactions above a certain value threshold. Where DPMS are unregulated or under-regulated, they are unlikely to be taking effective measures to protect themselves from abuse.
In contrast, an effective AML/CFT framework and supervisory regime for DPMS can protect DPMS and LFIs that serve them by effectively imposing AML/CFT requirements and by detecting, deterring, and prosecuting ML/TF crimes. It is important to note that, like LFIs, certain DPMS in the UAE are required to comply with all requirements of AML-CFT Decision, including the requirement to perform Customer Due Diligence (CDD) and report suspicious transactions (see section 2.1.4).
2.1.2.2 Products, Services, and Delivery Channels
Products, services, and delivery channels that facilitate the rapid, efficient, anonymous movement of value on a large scale will be more attractive to illicit actors and may put a DPMS at a higher risk of abuse. Such products, services, and delivery channels may include:
• Products (such as bullion and uncut stones) that are particularly hard to trace, retain or even increase in value despite being transformed into new forms (melted down, re-cut, etc.), and offer high value by weight. • Services, such as metal accounts, that allow customers to rapidly purchase and sell precious metals or stones. • Delivery channels that allow transactions to be carried out quickly and anonymously, such as accepting cash or virtual assets and conducting transactions online or through intermediaries.
2.1.2.3 Customer Base
The types of customers that a DPMS serves can also impact risk. For example, a DPMS that primarily deals with PEPs may be higher risk than one that serves a lower-profile clientele.
2.1.2.4 Geography
DPMS may be based, or may trade internationally, in jurisdictions that are higher risk for money laundering, the financing of terrorism, and the financing of proliferation. Such DPMS may pose heightened risk to LFIs. Higher-risk jurisdictions may be characterized by:
• A low level of government oversight and regulation of the precious metal and stone value chain;
• Low economic and political stability;
• High use of the informal banking system;
• High levels of corruption;
• The presence of terrorist and other non-state armed groups;
• Weak border control measures; and/or
• Sanctions and embargoes
Where a DPMS is based in a high-risk jurisdiction, LFIs are required by AML-CFT Decision to perform Enhanced Due Diligence.