CDD for Precious Metals and Stones Dealers Under Tranche 2

Precious metals and stones dealers must run customer due diligence (CDD) before providing a designated service, using the risk-based approach set out in their AML/CTF programme. Since Tranche 2 obligations came into force on 1 July 2026, that means verifying every customer's identity, checking the source of funds behind high-value cash and bullion transactions, and screening for sanctions and PEP status — not just recording a name and licence number.

When must a precious metals dealer run customer due diligence?

CDD applies before you provide a designated service under the AML/CTF Act 2006 — buying, selling, or arranging the sale of bullion, gemstones or precious metals above the reporting threshold. It also applies whenever a transaction looks unusual for that customer, regardless of value, or when an existing customer's risk profile changes. Waiting until settlement to check identity is too late — AUSTRAC expects CDD completed before the designated service is provided.

What information must be collected and verified?

For an individual customer, collect and verify: 1. Full name, date of birth and residential address, checked against a reliable independent source such as a driver's licence or passport 2. Source of funds for cash or high-value transactions, especially where payment doesn't match the customer's apparent profile 3. Sanctions and PEP screening results, run before the transaction proceeds 4. The purpose of the transaction, particularly for repeat bullion purchases or unusually large single sales For a company or trust buying or selling on the business's behalf, this extends to verifying the entity and tracing through to its beneficial owners.

When does enhanced due diligence apply?

Enhanced due diligence (EDD) is triggered by higher-risk indicators specific to this sector: cash payments structured around the reporting threshold, a customer requesting delivery to a third party, cross-border courier arrangements, or a politically exposed person on either side of the deal. EDD means collecting additional identity evidence, escalating sign-off to a senior compliance role, and documenting why the extra scrutiny was applied.

How does ongoing due diligence work after onboarding?

CDD isn't a one-off check at the counter. Repeat customers need their risk rating reviewed on a set cycle, and any transaction that doesn't fit their known pattern — a sudden jump in value, a new delivery address, a change in who's paying — should trigger a fresh look. AMLify for precious metals and stones dealers runs this monitoring automatically against each customer's profile, so a pattern change surfaces without anyone having to remember to check.

Key Takeaways

• CDD must be complete before the designated service is provided — not after the sale
• Verify identity against an independent source — a self-declared form isn't enough
• Source-of-funds checks matter most for cash and high-value bullion transactions
• Enhanced due diligence applies to structuring, third-party delivery, cross-border couriers and PEPs
• Ongoing monitoring catches pattern changes onboarding-only checks miss — see /pricing for a 14-day free trial

Frequently Asked Questions

Q: What counts as a designated service for precious metals and stones dealers?

Buying, selling or arranging the sale of bullion, gold, silver, gemstones or other precious stones above the AUSTRAC reporting threshold is a designated service under the AML/CTF Act 2006, triggering CDD obligations regardless of whether payment is cash or electronic.

Q: Do I need to verify identity for a small, low-value sale?

Below-threshold transactions still need basic identification if the transaction looks unusual for that customer. Simplified due diligence can apply to genuinely low-risk sales, but the risk assessment in your AML/CTF programme — not the sale price alone — should decide that.

Q: How is source of funds different from source of wealth?

Source of funds is where the money for this specific transaction came from — a bank transfer, a cash sale of another asset. Source of wealth is the customer's overall financial background. Standard CDD usually only needs source of funds; source of wealth is reserved for higher-risk or EDD cases.

Q: Can I rely on a customer's driver's licence alone to verify identity?

A single government-issued photo ID satisfies identity verification for most standard-risk customers, provided it's checked against a reliable, independent source rather than just sighted. Higher-risk customers may need a second, corroborating document.

This is general information only and not a substitute for legal advice.

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