AML Red Flags for Precious Metals and Stones Dealers
Know which client and transaction patterns to scrutinise. The key AML red flags Australian precious metals and stones dealers must recognise.
Australian dealers in precious metals and stones (DPMS) face elevated money laundering risk because their goods are portable, high-value, and liquid. Under the AML/CTF Act 2006, DPMS must apply a risk-based approach to every transaction — and that starts with recognising which client and transaction patterns are most likely to indicate financial crime.
Why are precious metals and stones high-risk for money laundering?
Precious metals are a documented vehicle for value transfer: a kilogram of gold can hold hundreds of thousands of dollars and cross borders with limited traceability. FATF guidance and AUSTRAC's own sector risk assessments both rate DPMS as high-risk for proceeds-of-crime placement — which is why the sector was captured under Tranche 2 of the AML/CTF Act 2006, with obligations commencing 1 July 2026.
What are the key AML red flags for precious metals dealers?
- Cash structuring — multiple payments just below the AUD 10,000 threshold from the same client in a short window, suggesting deliberate avoidance of threshold transaction reporting
- Third-party payments — a buyer who wants goods settled by a third party with no documented relationship to the transaction
- Resistance to CDD — a client who delays or refuses identity verification or beneficial ownership disclosure
- Requests for anonymity — avoiding invoices, receipts, or asking to use a nominee purchaser
- Unexplained source of funds — a buyer unable to credibly explain how they hold significant cash or cryptocurrency for a high-value purchase
- Rapid buy-sell cycles — repeatedly buying and immediately reselling precious metals with no apparent commercial purpose
What should a DPMS do when a red flag appears?
A red flag does not automatically require declining a transaction — but it requires a documented response: 1. Conduct enhanced due diligence — gather additional information about the client's business and source of funds 2. Escalate to the AMLCO for a recorded assessment of the risk level 3. Decide to proceed, pause, or exit the relationship based on the assessment 4. Lodge an SMR with AUSTRAC within 24 hours if suspicion of money laundering or terrorism financing arises AUSTRAC focuses in a review on whether red flags were identified, escalated, and documented — not only on whether an SMR was ultimately filed. AMLify for precious metals dealers provides an integrated red-flag log and SMR workflow tied to your CDD records.
Key Takeaways
- DPMS face elevated ML/TF risk — portable, high-value goods make the sector a documented target for money laundering and proceeds placement
- Structuring, third-party payments, and anonymity requests are the most common red flags to monitor across this sector
- Red flags require documented assessment — AUSTRAC looks for evidence of identification, escalation, and resolution, not just SMR filing
- An SMR must be filed within 24 hours when suspicion of ML/TF arises — a structuring pattern alone can trigger this obligation
- AMLify for precious metals dealers includes a built-in red-flag log, AMLCO escalation workflow, and AUSTRAC reporting suite
Frequently Asked Questions
Q: What is the cash reporting threshold for precious metals dealers?
DPMS must lodge a Threshold Transaction Report (TTR) with AUSTRAC for any cash transaction of AUD 10,000 or more. Structuring — deliberately splitting a transaction to avoid this threshold — is itself an AML red flag and warrants an SMR even when no individual transaction crosses $10,000.
Q: Does a red-flag assessment that finds no SMR still need to be documented?
Yes. Dealers must retain records of every red-flag assessment — including the indicators identified, the enquiries made, and the AMLCO's decision — for seven years under the AML/CTF Act 2006. A well-documented 'no SMR' decision demonstrates to AUSTRAC that the dealer exercised appropriate judgement and did not simply overlook the concern.
Q: Are cryptocurrency payments a red flag for precious metals transactions?
Cryptocurrency payments for high-value goods are a recognised risk indicator. They are not prohibited, but when combined with other red flags — anonymity requests, refusal to disclose identity, or no clear commercial purpose — they increase the overall risk level and should trigger enhanced due diligence and AMLCO review.
This is general information only and not a substitute for legal advice.