BY DAVE GRIFFITHS, THE AML GURUS FORMERLY THE CONSULTANTS, LLC
Compliance for pawnbrokers is not new, either as legislation or to anyone who has been an NPA member for more than a couple of years. Although the USA PATRIOT Act is not the entire focus of a complete Anti-Money Laundering (AML) Program, it has been in play since October 26, 2001, and ignorance can be a financially painful experience if you draw an IRS Title 31 exam.
Since we see many of the same errors, I thought we should bring them to everyone’s attention. Here are six of the most common things you can watch for to protect your business:
#1: NOT CHECKING CUSTOMERS AGAINST THE OFAC SDN LIST
No customer is to be given money if they appear on this list that changes upwards of 120 times a year. Most software programs will check this, but you must follow through and document that checks were performed. The burden of proof lies on your shoulders and not on your software company.
#2: HAVING AN AML PROGRAM, BUT NOT USING IT
Standing in a garage does not make you a car. Buying an AML Program does not make you compliant. You must actually incorporate the recommendations and keep it up to date!
#3: NOT PERFORMING ROUTINE INTERNAL MONITORING
The purpose of an AML Program is to keep your company from engaging in money laundering or terrorist financing activities. To do that, you must perform routine monitoring of high dollar transactions to ensure no nefarious behavior is occurring. By definition, a single event does not a pattern or a trend make. You must have several data points to work from. Monthly monitoring of all transactions in your company over a certain amount should be tracked and compared against prior months. Form 8300 filings ($10,000+) are verified to make sure none are missed and confirmed for accuracy and timeliness of submission.
#4: NOT PROVIDING ANNUAL REFRESHER OR INITIAL TRAINING OF STAFF
This is specific training that addresses the policies and procedures found in your AML Program. Staff who will be dealing with customers at the pawn counter or sales floor are required to have this training within 30 days of hire, and then every year thereafter as a refresher. Training must be documented, and a log kept of the material covered and those in attendance for five years.
#5: CUSTOMER 8300 NOTIFICATION LETTERS NOT SENT
All customers who have an 8300 filed for a transaction must be notified by mail no later than January 31 of the year following the filing. A copy of the letter must be made and retained with the store’s copy of the 8300 file for five years.
#6: NOT HAVING AN INDEPENDENT REVIEW PERFORMED ANNUALLY
Sometimes it is like pulling teeth to get people to submit to these reviews, but you have to look at them as a dry run for the IRS event that we hope never happens. We ask all the same questions they ask and put you on the right path to getting the “all clear” from them in the event you do go through an exam.
After twenty years of being required, the IRS gives no passes for ignorance of the law. Instead, they look at neglect as willful non-compliance. If deemed egregious enough, the fines start at 6 figures! The goal is to provide a crystal-clear picture of your operation to folks who have never stepped in a pawnshop before. Better that you hand them a full color portrait than let them operate from their stick-figure drawing. The illusion is yours to produce. The successfulness of your visit with the IRS or ability to keep your bank account (or obtain a new one) is based on your illusion. Make it a good one!