Risk insights and indicators of suspicious activity for dealers in precious stones, metals and other products

Discover our latest risk insights and what suspicious activity indicators to look for if you’re a dealer in precious stones, metals and other products.

On this page

• Background
• Who may exploit your services
• Providing designated services
• Definition of precious metals, stones and products
• Main risks and their indicators
• Kinds of customers
• Kinds of services
• Delivery channel risk
• Foreign jurisdiction risk
• Related pages

From 1 July 2026, anti-money laundering and counter-terrorism financing (AML/CTF) obligations apply to dealers in precious stones, metals and other products. 

As part of these obligations, you need to conduct a money laundering and terrorism financing (ML/TF) risk assessment and know what suspicious activity to look for with your customers. The following suspicious activity indicators will help you to identify potential ML/TF as well as other serious criminal activities. 

This page provides an overview and does not cover every risk, or every product or service, relevant to dealers in precious stones, metals and other products.

You must consider information we’ve communicated to you that’s relevant to your money laundering, terrorism financing and proliferation financing risks.

This information will help you to:

• understand money laundering risks in your sector
• inform your ML/TF risk assessments
• strengthen your AML/CTF policies
• identify suspicious activity. 

Background

Our money laundering national risk assessment found services provided by the retail jewellery sector pose a high money laundering risk in Australia. 

While our risk assessments on terrorism financing and proliferation financing identified no specific risks for dealers in precious stones, metals and other products, your awareness of these risk environments is essential. 

This page focuses on the money laundering risks for dealers in precious stones, metals and other products.

Who may exploit your services

Dealers in precious stones and metals are among the most at risk of being used for money laundering in Australia. Authorities often find Australian criminals – ranging from low-level to sophisticated – with jewellery and luxury watches containing precious stones and metals, especially diamonds. Loose precious stones are detected less often. This may be because they need expertise to authenticate and cannot be used to display wealth.

High-value precious stones and metals make them popular for criminals to store and invest in. Both legitimate investors and criminals see precious jewellery as a hedge against economic and political uncertainty.

These goods are vulnerable to money laundering because they can be:

• bought and sold readily and anonymously using cash or virtual assets
• bought and sold without having to prove they own them
• used to buy illicit goods and services anonymously
• easy to conceal and move domestically or offshore
• difficult to trace or detect
• easy to reshape, alter, remodel, melt, refine or hide in common objects
• easy to convert back to legitimate funds
• under- or over-valued.

Providing designated services

Dealers in precious stones, metals and other products are subject to AML/CTF obligations when they provide designated services to their customers.

Learn more about the designated services dealers in precious stones, metals and other products provide.

Definition of precious metals, stones and products

Read our definitions of precious metals, stones and products. Bullion isn’t included, as it’s a separate designated service.

Learn more about the risk assessment for bullion dealers.

Precious metal definition

Precious metals include but aren’t limited to: 

• gold
• silver
• platinum
• iridium
• osmium
• palladium
• rhodium
• ruthenium
• an alloy with at least 2% in weight of any of these substances.

Precious stone definition

Precious stones are defined as a substance with gem quality, and have market-recognised beauty, rarity and value. 

Examples of precious stones include: 

• diamonds
• rubies
• sapphires
• emeralds
• pearls
• opals
• beryl
• corundum
• garnets
• topaz
• jadeite jade. 

In addition to loose stones, this page considers precious products. 

Precious products definition

A precious product is made of, contains or has attached, any precious metal and/or precious stone, such as:

• jewellery
• watches
• another object of personal adornment
• goldsmith or silversmith wares, including ornaments, tableware, smokers’ accessories and other personal, household, office or religious items.

Main risks and their indicators

The 4 areas of money laundering risks and suspicious indicators are: 

• Kinds of customers
• Kinds of services
• Delivery channel risk
• Foreign jurisdiction risk

Kinds of customers

Australia has a thriving retail and wholesale jewellery sector. There’s also a major second-hand jewellery market, with one retail chain operating more than 150 stores. 

Customers posing a higher money laundering risk include:

• known or suspected criminals

• non-residents, especially from high-risk jurisdictions 

• politically exposed persons (PEP), because of exposure to fraud, bribery, corruption and links to high-risk jurisdictions. You must always treat foreign PEPs as high-risk customers

• companies, trusts and other legal entities where it’s difficult to identify beneficial ownership

• jewellers 

• scrap metal dealers, as it’s difficult to trace the jewellery’s origin. 

Overseas customers

There are different levels, and types of risks, when you’re dealing with foreign-based customers and PEPs. 

These include cross-border money movements and digital-only transactions that are difficult to trace. International funds transfers are also difficult for law enforcement to investigate.

Working with foreign nationals can increase your exposure to countries with high levels of criminality and poor regulation. 

Legal structures can also be a risk

Companies, trusts and other legal entities are attractive avenues for money laundering. These structures help hide beneficial ownership. 

Using companies, trusts and other legal entities can make identifying your customer difficult. It also makes it difficult to know the end-use of products and services. 

Companies, trusts and other legal entities often conduct larger and more frequent transactions. This can make it hard to detect suspicious activity and can hide the source, destination and beneficial ownership of funds. 

While not unique to this sector, criminals will take advantage of any company’s vulnerabilities to launder illicit funds. For example:

• criminals may use a family member or ‘cleanskin’ associate as a director or shareholder to distance themselves from the company
• criminals can use stolen identities to start a company and launder money
• foreign nationals can register Australian companies. Transnational, serious and organised crime groups force or pay individuals on temporary visas to set up companies they then use to launder money.

Company shareholders may also be protected from being held liable for the actions of a company, its employees or directors. This makes it harder for authorities to restrain assets and proceeds derived from criminal activities.

Jewellers have a higher risk

Jewellers are identified as having a higher money laundering risk because the luxury goods they sell: 

• are easily transported across domestic and international borders
• are of high value
• can be bought using cash. 

Scrap metal dealers have an increased risk

Scrap metal dealers are exposed to increased money laundering risk as it’s difficult to trace the true source of the scrap jewellery. It could be stolen or be used as part of a money laundering scheme. Once repurposed, the true source of metals and stones bought as scrap jewellery becomes difficult to trace.

If you have continuing relationships with customers you’re well placed to spot suspicious activity. 

Indicators of suspicious customers

Red flag indicators of suspicious financial activity are valuable tools for detecting illicit behaviour linked to ML/TF and other crimes. Below are red flags you should be aware of.

On their own, one of these indicators may not suggest suspicious activity. If you’re unsure whether there are reasonable grounds for a suspicion, you should conduct further monitoring and examination, including applying enhanced customer due diligence measures.

Customer behaviour indicators

It could be a red flag if your customer:

• tries to avoid know your customer (KYC) processes
• seeks anonymity to a high or unusual degree
• uses cash to buy precious stones, metals or other precious products
• uses or includes a third party in transactions
• quickly sells products or re-sells to the dealer.

Customer profile indicators

The client profile could raise red flags when they:

• or a third party they’re buying for, have been subject to negative media reports or other adverse information from a reliable source, connecting them to profit-generating criminal activity
• are a politically-exposed person or closely linked to one. You must always treat foreign PEPs as high-risk customers
• have a long-term relationship with your business and often changes their bank details, addresses, business names, contact details and/or intermediaries between transactions
• make high-volume purchases
• don’t appear to understand, or have experience with, the precious metals and stones industry. They aren’t interested in the product and may be buying it to store value
• have a business that doesn’t usually deal in precious metals or stones. Or their business doesn’t seem active
• appears to be working for a third party. 

Another red flag is if the customer is from, or is present in, a high-risk country due to associations with: 

• money laundering, including organised crime
• terrorist acts or terrorism financing, including providing money or support for terrorist activities
• proliferation of weapons of mass destruction
• corruption
• serious fraud.

Kinds of services

You provide services criminals can exploit. It can be difficult to tell money laundering apart from legitimate transactions involving precious stones and metals. You could unknowingly be involved in money laundering.

Cash transactions are a major risk factor for money laundering. It’s easy to use cash proceeds of crime to buy expensive jewellery and watches.

Although criminals exploit a variety of industries, authorities have found higher levels of infiltration in sectors such as luxury goods retailers, including dealers in precious stones and metals. 

Indicators of suspicious customer activity 

Red-flag indicators may help you identify suspicious customer activities in relation to the services you provide.

Source of funds or wealth

It could be a red flag if your customer:

• seems nervous or reluctant during the customer due diligence process
• has an unknown source of wealth, or is unable to explain their source of funds or wealth
• has an unusual level of knowledge about AML/CTF requirements
• makes large cash payments. 

Unusual transactions and requests

The customer: 

• pays below transaction reporting thresholds or obligations
• has unusual transaction methods
• conducts a transaction which doesn’t match their customer profile
• uses a complex company ownership structure for transactions.

Delivery channel risk

Delivery channels refers to how you deliver products and services to your customers. Face-to-face contact can help you identify potential red flags, but online or phone transactions increase money laundering risks. 

This is because remote or online transactions can be anonymous. This can also increase your exposure to customers in high-risk countries.

Dealers in precious stones and metals generally have a high rate of in-person contact. This is partly because many people prefer to buy these products in person, especially for smaller transactions and when using cash. 

This sector also has a relatively low level of outsourcing product delivery through couriers or postal services. Outsourcing creates money laundering and terrorism financing risks by lengthening and complicating the delivery chain. 

Delivery channel suspicious indicators 

Red-flag indicators can help you to identify suspicious circumstances relevant to customer interactions. These could include, if the customer: 

• avoids face-to-face meetings
• insists on online identity verification
• is reluctant to provide identity information or details about their money
• is nervous during the customer due diligence process
• engages you through a third party with no reason.

Foreign jurisdiction risk

You may deal with customers, transactions and activities with links in foreign jurisdictions. Exposure to foreign jurisdictions creates ML/TF risks. It provides opportunities: 

• for illicit funds to move overseas that are proceeds of crimes committed in Australia
• to fund terrorist activity or proliferation of weapons of mass destruction
• for the proceeds of foreign money laundering to be brought into Australia. 

International transactions can also: 

• add complexity
• hide beneficial ownership and the true customer’s identity
• increase the risk of tax evasion
• make it harder for authorities to investigate or prosecute alleged criminal activity.

Factors that increase ML/TF risks include links to a country:

• with weak governance or AML/CTF regulations, or that is a tax haven or secrecy jurisdiction
• with high rates of corruption, tax evasion, or other serious crime
• subject to Australian sanction laws or similar restrictive measures. This includes countries believed to be high-risk or non-cooperative by the Financial Action Task Force (FATF)
• financing or supporting terrorist acts, or associated with a terrorist organisation
• engaged in proliferation of weapons of mass destruction, or a country used for diverting funds for proliferation financing
• in a conflict zone
• known for people trafficking. 

Imported scrap material 

You may use local materials along with gold and silver scrap jewellery from overseas. Using overseas materials makes it difficult to trace the true source. This can increase your risk.

Gemstone pipeline

This is the journey a gemstone takes from extraction to final product. It’s a transnational and complex process that can increase your exposure to money laundering. 

For instance, diamonds may be sold several times among dealers, wholesale traders, cutters, polishers and manufacturers before reaching Australian customers. This can hide the: 

• owner
• buyer
• origin
• value.

Foreign jurisdiction suspicious indicators 

Red-flag indicators for customers with international connections could include when your customer or their representative: 

• is from a high-risk jurisdiction for money laundering, corruption, criminal activity, terrorism, sanctions and embargoes
• is from, or has citizenship or residence status in, a tax haven or secrecy jurisdiction
• lives or works significantly far from the precious stones or metals dealer.