Future AML Risks in Precious Metals and Jewellery

Introduction

The precious metals and jewellery industry has long been considered a high-risk sector for money laundering and terrorist financing. With evolving technology, international trade, and digital payment systems, these risks are expected to increase significantly in the coming years.

In the UAE, where Dubai is one of the world’s largest gold and diamond trading hubs, Dealers in Precious Metals and Stones (DPMS) are subject to strict compliance obligations under Federal Decree-Law No. (20) of 2018 and Cabinet Decision No. (10) of 2019.

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1. Core AML Vulnerabilities in the Sector

• High value and portability – Small quantities of gold or diamonds can hold immense value and are easy to move across borders.

• Cash-based trade – Many dealers still use cash, creating anonymity and record-keeping challenges.

• Subjective valuation – Over- or under-invoicing enables trade-based money laundering (TBML).

• Complex global chains – Multi-jurisdictional sourcing and refining obscure traceability.

• Limited due diligence – Small jewellers may lack structured AML frameworks or staff training.

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2. Future AML Risks and Trends

a. Digitalisation and Online Trade

E-commerce in jewellery and gold trading is rapidly expanding. Remote transactions make customer identification and verification difficult.

Future Risk: Fake identities, online layering, and misuse of payment gateways.

Mitigation: Introduce digital KYC and AML verification tools for online clients.

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b. Cryptocurrency and Tokenised Gold

Virtual assets are increasingly used to buy and sell gold. Some platforms issue gold-backed tokens.

Future Risk: Integration of illicit crypto funds into legitimate metal trades.

Mitigation: Monitor virtual wallet transactions, verify source of funds, and apply FATF guidance on virtual assets.

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c. Trade-Based Money Laundering (TBML)

Complex trade routes and free zone activities can mask illicit trade flows.

Future Risk: Under-invoicing, circular trade, and fake exports.

Mitigation: Verify customs documentation and apply value cross-checking against international gold prices.

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d. Recycled Gold and Secondary Market

Used jewellery and scrap gold are becoming common in the market.

Future Risk: Laundering illicit gold by mixing it with recycled batches.

Mitigation: Maintain provenance records and testing certificates for all recycled materials.

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e. Beneficial Ownership Concealment

Illicit actors often use offshore or front companies to hide UBOs.

Future Risk: Hidden political exposure or sanctioned ownership.

Mitigation: Conduct UBO verification and enhanced due diligence (EDD) for all high-risk entities.

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f. Increased Global Scrutiny

International regulators (FATF, OECD, UN) are intensifying focus on DPMS sectors.

Future Risk: Non-compliant firms may face heavy fines, license suspension, and reputational damage.

Mitigation: Adopt comprehensive AML programs aligned with global standards and UAE regulatory requirements.

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g. ESG and Ethical Sourcing

Global attention is turning to “conflict-free” sourcing of gold and diamonds.

Future Risk: Supply chain opacity may link dealers to conflict minerals or human rights violations.

Mitigation: Implement supply chain due diligence and supplier audits.

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3. Strengthening AML Compliance

Dealers should:

• Prepare an Entity-Wide Risk Assessment (EWRA) as per UAE AML law.

• Maintain updated AML Policies and Procedures tailored to their business.

• Conduct regular staff training on suspicious activity detection.

• Implement ongoing customer monitoring and transaction screening via software tools.

• File Suspicious Activity Reports (SARs) promptly with the FIU via goAML portal.

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Conclusion

The precious metals and jewellery sector faces a rapidly changing AML landscape. Businesses that fail to adapt risk not only financial penalties but also severe reputational damage.

Proactive compliance, technology integration, and continuous training are key to future-proofing against AML risks.

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About Sheikh Anwar Accounting and Auditing LLC

Sheikh Anwar Accounting and Auditing LLC is a Dubai-based firm licensed by the Ministry of Economy (MOE), specializing in Audit, Tax, and AML Compliance Services for DNFBPs, especially those engaged in Gold, Diamond, and Jewellery Trading.

Our team provides:

• AML Policy & Risk Assessment Frameworks

• MLRO Support and Ongoing Monitoring

• VAT & Corporate Tax Filing Services

• Audit and Financial Reporting as per IFRS

📍 Address: Dubai Creek Tower, M35, United Arab Emirates

📞 Phone: +971 55 883 5020

✉️ Email: info@sa-auditors.com

🌐 Website: www.sa-auditors.com