Why the Gold & Jewellery Sector Is Vulnerable to ML
Introduction
The gold and jewellery sector is one of the most lucrative industries in the United Arab Emirates (UAE), contributing significantly to trade and GDP. Dubai, in particular, is known as the “City of Gold,” attracting traders, investors, and buyers from across the globe. While this sector brings immense economic value, it also presents high risks of money laundering (ML) and terrorism financing (TF).
Gold’s portability, high value, and global demand make it an attractive vehicle for criminals to disguise illicit funds. To address these risks, the UAE has imposed strict AML/CTF regulations for Dealers in Precious Metals and Stones (DPMS) and other entities operating in this sector.
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Why the Gold & Jewellery Sector Is High-Risk
1. High Value and Portability
Gold and precious stones pack enormous value into small, easily transportable items. Criminals can convert illicit cash into gold or jewellery, move it across borders, and then sell it to reintroduce “clean” money into the financial system.
2. Cash-Intensive Transactions
Many jewellery businesses in the UAE still conduct a large volume of cash transactions. This creates opportunities for criminals to use illicit cash, bypass financial institutions, and avoid detection.
3. Cross-Border Trade and Global Demand
Gold and jewellery are traded worldwide, with imports, exports, and re-exports forming a major part of the UAE economy. This global nature enables trade-based money laundering (TBML) through false invoicing, misdeclared values, or phantom shipments.
4. Complex Supply Chains
From mining and refining to wholesale and retail, the supply chain often involves multiple intermediaries. This complexity makes it challenging to verify the Ultimate Beneficial Owner (UBO) and to track the source of funds or goods.
5. Liquidity and Ease of Conversion
Gold is one of the most liquid assets in the world. It can be easily converted back into cash or used as collateral for loans. This liquidity makes it attractive for criminals seeking to quickly integrate illicit funds into the legitimate economy.
6. Mixing of Legal and Illegal Goods
Illegally sourced gold can be mixed with legitimate supply during refining or trading. Without strict due diligence, businesses risk unintentionally participating in laundering schemes.
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UAE AML Regulations for Gold & Jewellery Businesses
The UAE has taken strong steps to regulate this high-risk sector:
• Federal Decree-Law No. 20 of 2018 – Main AML-CFT legislation.
• Cabinet Decision No. 10 of 2019 – Implementing regulations.
• Cabinet Decision No. 111 of 2022 – Strengthened DNFBP obligations.
Key Compliance Obligations for Jewellers & Gold Dealers
• Customer Due Diligence (CDD): Mandatory verification of customers engaging in high-value transactions (especially above AED 55,000 in cash).
• Suspicious Transaction Reporting (STRs): Filing reports with the Financial Intelligence Unit (FIU) via the goAML platform.
• Cash Transaction Reporting (CTRs): Any large cash payments must be reported.
• Record Keeping: Maintain customer and transaction records for at least five years.
• Employee Training: Staff must be trained to recognize red flags such as structuring, unusual payments, or third-party involvement.
• Risk-Based Approach: Enhanced due diligence for high-risk clients, jurisdictions, and complex transactions.
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Red Flags for Money Laundering in the Gold & Jewellery Sector
• Customers making unusually large or frequent cash purchases.
• Reluctance to provide identification or beneficial ownership information.
• Transactions structured just below the reporting threshold.
• Cross-border deals with no clear business rationale.
• High-value purchases inconsistent with the client’s profile.
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Conclusion
The gold and jewellery sector’s high value, liquidity, and global demand make it an attractive target for money launderers. For the UAE, which is among the top global gold trading hubs, robust AML compliance in this industry is essential to protect its financial system and international reputation.
By adopting a risk-based approach, implementing strict compliance measures, and cooperating with regulators, gold and jewellery businesses can avoid penalties, protect their credibility, and contribute to the UAE’s fight against financial crime.
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About Sheikh Anwar Accounting and Auditing LLC
At Sheikh Anwar Accounting and Auditing LLC, we specialize in AML compliance for the gold and jewellery sector. Our services include:
• AML risk assessments
• Policy drafting and implementation
• Outsourced MLRO services
• Ongoing monitoring and reporting support
• Employee training and awareness programs
We help businesses meet UAE regulatory requirements while protecting their operations from financial crime risks.
• 📍 Head Office: Dubai, UAE
• 🌐 Website: www.sa-auditors.com
• 📧 Email: info@sa-auditors.com
