Precious Metals: A Case Study

Precious metals like gold, silver and platinum are commodities outside the control of central banks and are another form of currency. It is effortlessly exchangeable into any currencies, portable and easily altered in appearance. Precious metals are virtually untraceable, can be kept without keeping a record and can maintain a stable price. The real value of the goods can easily be avoided to be declared, hence, minimizing the tax exposure. Therefore, this business type is vulnerable for ML/ TF, Tax Evasion, Corruption and Smuggling, among others; thus increasing the risks faced by firm.

Red flags associated with the client:

- Dealer in precious metals

- Ex-PEP director

- Registered via a company service provider in Labuan

- Unable to determine BO

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o Request of business licenses, permits and approvals.

- Geographical/ Goods, Products, Source of funds and source of wealth/ Services o Review financial strength and audited financial statement of GMT, confirm the legal status and tax reports (since company is registered via a company service provider in Labuan; the profit tax will be low; no sales and services GST for sales transactions; effortless of trading in other currencies; and company’s bank account in Malaysia for personal and the company can be controlled by a single person, which increase the risk of ML, corruption, and tax evasion). o How service is provided (physical store or online) and the types of services offered (retailers of coins, bars or bullion, middle-market distributors, scrap collectors, trading, or others), diversity of GMT’s operations or location, scale and complexity of business. o Requesting bank account statements, balance sheet, number of employee & payroll records (for business operating costs) and landlord subordination agreement (if available).

- Final Destination of