AML Compliance for Precious Metal Dealers

Last Updated on Feb 17, 2026, 2k Views

AML Compliance for Precious Metal Dealers

Precious metal dealers—especially those dealing in gold, silver, platinum, diamonds, and high-value jewelry—are considered high-risk businesses for money laundering and terrorist financing due to the portability, liquidity, and global demand for these assets.

Under global standards set by the Financial Action Task Force (FATF), precious metal and stone dealers fall under the category of Designated Non-Financial Businesses and Professions (DNFBPs) and are subject to AML/CFT obligations in many jurisdictions.

Why Precious Metal Dealers Are High Risk

High-Value, Easily Transportable Assets
- Gold and diamonds are compact and retain high value.
Cash-Intensive Transactions
- Large cash purchases increase ML risks.
Anonymity in Transactions
- Walk-in customers may seek to avoid identity disclosure.
Cross-Border Trade
- Imports/exports create trade-based money laundering risks.
Resale and Conversion
- Precious metals can be melted or re-sold easily.

Global Regulatory Framework

1. FATF Recommendations

The Financial Action Task Force requires countries to regulate precious metal and stone dealers when:

They engage in cash transactions above USD/EUR 15,000 (or equivalent).
They conduct suspicious transactions, regardless of amount.

2. United States

Under the Bank Secrecy Act:

Dealers in precious metals, stones, or jewels must:
- Establish an AML program
- Conduct risk assessments
- File Suspicious Activity Reports (SARs)
- Maintain records
Regulated by Financial Crimes Enforcement Network (FinCEN)

3. India

Under the Prevention of Money Laundering Act (PMLA):

Jewelers are classified as reporting entities if they deal in:
- High-value transactions
They must:
- Conduct KYC
- Maintain transaction records
- Report suspicious transactions to the Financial Intelligence Unit-India (FIU-IND)

Given you’ve been exploring AML topics like PMLA and FATF recently, this area is particularly important in India’s gold and jewelry market, which is one of the largest globally.

Core AML Requirements for Precious Metal Dealers

1. Customer Due Diligence (CDD)

Verify customer identity (KYC)
Identify beneficial owners
Enhanced Due Diligence (EDD) for:
- Politically Exposed Persons (PEPs)
- High-risk jurisdictions

2. Risk-Based Approach

Perform a Business Risk Assessment
Identify risks related to:
- Geography
- Product types
- Customer categories
- Transaction channels

3. Suspicious Transaction Monitoring

Red flags include:

Structuring payments below reporting thresholds
Multiple cash purchases
Third-party payments
Immediate resale requests
Unusual international shipments

4. Recordkeeping

Maintain records for 5+ years (jurisdiction dependent)
Keep:
- KYC documents
- Transaction history
- STR/SAR filings

5. Reporting Obligations

Suspicious Transaction Reports (STRs)
Cash Transaction Reports (CTRs) (where applicable)

Common AML Red Flags in Precious Metals Trade

Risk Indicator	Example
Large Cash Purchases	Customer insists on paying in cash just below reporting limit
Use of Intermediaries	Unknown third party making payment
High-Risk Jurisdictions	Shipment to sanctioned countries
Rapid Resale	Immediate buyback request
Over/Under Invoicing	Trade-based ML schemes

Best Practices for Dealers

✔ Implement automated transaction monitoring
✔ Limit large cash transactions
✔ Conduct periodic AML training
✔ Use sanctions screening tools
✔ Maintain a written AML compliance manual
✔ Appoint a Compliance Officer

Penalties for Non-Compliance

Failure to comply can result in:

Heavy financial penalties
Business license suspension
Criminal liability
Reputational damage

For example:

Fines under the Prevention of Money Laundering Act
Civil and criminal penalties under the Bank Secrecy Act

Emerging AML Risks in 2026

Gold-backed crypto tokens
Informal gold trade channels
Trade-based money laundering via over/under invoicing
Online bullion marketplaces
Synthetic identity fraud

Conclusion

AML compliance for precious metal dealers is no longer optional. Regulatory scrutiny is increasing globally, especially in high-cash markets like jewelry and bullion trade.

For businesses in India, strict adherence to Prevention of Money Laundering Act and reporting to Financial Intelligence Unit-India is critical. Globally, alignment with Financial Action Task Force standards ensures long-term sustainability and reputational trust.