Why Dealers in Precious Metals and Stones are exposed to financial crime risk
Dealers in Precious Metals and Stones are attractive to organised criminal networks because they trade in high-value, easily portable and globally recognised commodities that can be quickly converted into cash or moved across borders with limited traceability.
Criminals may exploit these businesses through cash purchases, trade-based money laundering or the use of intermediaries and front companies to disguise the source and ownership of illicit funds. To mitigate these risks, it is essential that dealers in precious metals and stones maintain a robust, enterprise-wide money laundering, terrorism and proliferation financing risk assessment framework.
By systematically identifying and assessing their exposure to financial crime risks and by evaluating the design and operational effectiveness of their mitigating controls in a manner appropriate and proportionate to their nature, size and complexity, they can enhance compliance, protect their reputation and uphold the integrity and transparency of the precious metals and stones trade.
For Money Laundering Reporting Officers (MLROs) and senior compliance leaders at Precious Metals and Stone Dealers, the task isn’t simply to satisfy minimum requirements – it’s to demonstrate a deep, defensible understanding of risk that stands up to regulatory review, supports business decision-making and drives proportionate control execution.
Arctic Intelligence’s ML/TF/PF Risk and Control Assessment Solution has been developed specifically for Dealers in Precious Metals and Stones. It supports them in meeting regulatory expectations, providing a structured, evidence based, regulator-ready framework that empowers teams to identify, assess and govern financial crime risk across every line of business.
Why Dealers in Precious Metals and Stones are targeted by organised criminal networks
Dealers in Precious Metals and Stones are inherently exposed to financial crime risk for several reasons:
- Central Role in Converting Cash into Portable High-Value Assets: Precious metals and gemstones provide one of the most efficient mechanisms for converting illicit cash into compact, transportable and universally liquid assets that can be stored, transported and resold with minimal traceability.
- Cash-Intensive and High-Value Transaction Profiles: Gold, diamonds and gemstones are frequently purchased through large cash transactions, split payments and structured deposits, creating ideal conditions for layering and integration of illicit funds.
- Highly Liquid Secondary and Global Resale Markets: Precious metals and stones can be rapidly resold through bullion markets, auctions, pawnbrokers, refineries and international trading hubs, enabling fast conversion back into cash or digital value.
- Cross-Border Trading and Free-Trade Zone Exposure: International trading hubs, freeports, bonded warehouses and offshore storage facilities increase exposure to high-risk jurisdictions, sanctions regimes and proliferation financing corridors.
- Use of Nominees and Trade Intermediaries: Purchases are often made through brokers, dealers, shell companies and family members, obscuring beneficial ownership, source of funds and economic purpose.
- Deferred Delivery, Refining and Consignment Models: Delayed delivery, metal refining, consignment and buy-back structures create further opportunities to disguise fund origins and cycle assets through legitimate-appearing trade flows.
- Digital Marketplaces and Remote Trading Channels: Online bullion platforms, digital auctions and remote onboarding models introduce additional entry points for illicit funds if not governed through integrated AML/CTF frameworks.
Taken together, these features make Dealers in Precious Metals and Stones a primary target for organised criminal networks and place enterprise-wide, evidence-based ML/TF/PF risk assessment at the centre of regulatory expectations.
Introducing Arctic Intelligence’s ML/TF/PF Risk and Control Module for Dealers in Precious Metals and Stones
Arctic Intelligence’s Dealers in Precious Metals and Stones Risk and Control Module provides a comprehensive and configurable foundation for conducting robust, enterprise-wide ML/TF/PF risk assessments tailored to this sector.
This module enables Dealers in Precious Metals and Stones Providers to:
- Identify and Prioritise ML/TF/PF Risks: Using high-value-goods and precious-commodities-specific risk taxonomies aligned to FATF and supervisory expectations, the module guides dealers through identifying the highest-impact risk areas across customer and beneficial ownership profiles, precious metal and gemstone product types, wholesale and retail sales channels, cash and trade-finance payment flows, storage and custody arrangements, and geographic and jurisdictional exposures.
- Assess Controls and Operational Effectiveness: Moving beyond static compliance checklists, the solution maps controls to real precious-goods trade risk drivers and enables testing of both design and operational effectiveness allowing dealers to demonstrate, with evidence, that controls are operating as intended.
- Calculate Residual Risk Transparently: Residual risk reflects a dealer’s true financial crime exposure. Arctic’s module aggregates inherent risk indicators with control performance data to produce defensible residual risk ratings that are directly aligned to risk appetite, escalation thresholds and governance frameworks.
- Produce Audit-Ready Documentation: Built-in audit trails, version history, structured review workflows and aggregated reporting provide regulators, internal audit and trustees with transparent, evidence-based documentation explaining how financial crime risk conclusions were reached and governed.
This solution embeds industry specific typologies, regulatory best practice and global risk methodologies into a scalable, configurable risk and control platform that supports consistent application across business lines, geographies and legal entities.
The built-in audit trail, review logs and Board-ready reporting enable stronger governance oversight while making complex risk outcomes digestible for executives and boards.
Who does this module apply to?
The money laundering, terrorism and proliferation financing risk and control module contains a library of risks, controls and control tests designed specifically for different types of Dealers in Precious Metals and Stones:
| Bullion Dealers | Jewellery-Grade Metals Dealers |
| Bullion Investment Companies | Metal Refiners and Assayers |
| Diamond and Gemstone Dealers | Precious Commodities Traders |
| Gem Merchants | Silver and Platinum Dealers |
| Gold Traders | Wholesale Gem Suppliers |
What does this module contain?
A. Enterprise-wide ML/TF/PF risk assessment, covering the following risk groups:
- Environmental Risk – covering exposure to internal and external risk indicators.
- Customer Risk – covering customer base profile, customer location risk, legal form risk, industry / occupation risk, PEP risk and customer activity risk.
- Product and Services Risk – covering the services provided by Dealers in Precious Metals and Stones that are subject to AML/CTF laws and the inherent risk characteristics of each of these.
- Channel Risk – covering face-to-face and non-face-to-face customer onboarding and transaction channels.
- Industry Red Flag Risks – covering customer behaviour and due diligence evasion, ownership and identity concealment, transactional red flags and unusual or complex business structures.
- Transaction Risk – covering higher risk transaction types.
- Country Risk – covering higher risk country risk exposures based on the residency, nationality or citizenship (Individuals) and country of registration, incorporation, domicile or operations (Entities).
These modules also include a comprehensive library of suggested controls and control tests to support design and operational effectiveness testing.
Dealers in Precious Metals and Stones can deploy the content module out-of-the-box or tailor it to their methodology, eliminating the need to start from scratch while maintaining full ownership of their risk model. It also allows firms to import their own risk indicators and controls or enhance the expert-built libraries to suit their bespoke risk methodology and regulatory environment.
B. Product and Services ML/TF/PF risk assessment module, covering different products and services, with inherent ML/TF/PF risk attributes of each over the following inherent risks:
- Buying, selling, or importing/exporting precious stones
- Buying, refining, or reselling raw or scrap precious metals
- Buying or selling precious metal or stone items exceeding $10,000 (or equivalent)
- Buying or selling precious metals (bullion, gold, silver, platinum) for cash or value transfer
- Dealing in precious stones or jewellery made of such stones/metals when transacted above threshold
- Facilitating high-value sales of precious metals/stones through online channels
C. Channel ML/TF/PF risk assessment module, covering over 30 different inherent ML/TF/PF risk attributes of each over the following risk groups:
- Face-to-Face Channels – covering Internal Physical Channels; Relationship Managed Physical Channels and External Physical Channels.
- Non-Face-to-Face Channels – covering Internal Remote Assisted Channels; Internal Manual Channels; Internal Digital Self-Service Channels; Internal Programmatic / Embedded Access Channels; External Interbank and Payment Infrastructure Channels and External Digital Channels.
- Face-to-Face or Non-Face-to-Face Channels – External Partner Intermediary Channels.
- Customer Onboarding Channels (General) – Channel type; onboarding through face-to-face channels and non-face-to-face channels and customer onboarding through intermediaries.
- Transaction and Delivery Channels – Value of transactions by delivery channel type.
- General Channel Risks – Higher channel risk indicators.
Get started with Arctic Intelligence
Whether you are establishing your first enterprise-wide ML/TF/PF risk assessment or upgrading a legacy spreadsheet-based program, Arctic Intelligence’s Dealers in Precious Metals and Stones Risk and Control Module is a scalable, defendable and configurable solution that meets the needs of modern compliance teams.
Book a demo or contact us to explore how our platform can help your business strengthen compliance, mitigate financial crime risk and build a risk program that stands up to regulatory scrutiny.
Or visit our website to learn more.
