60 Indicators Suspected of Money Laundering in the Gold and Gemstone Sector

Marwa Al-Juaidan, Acting Undersecretary of the Ministry of Commerce and Industry and Director of the Anti-Money Laundering and Counter-Terrorist Financing Department, issued a reporting guide for suspected cases of money laundering or terrorist financing for the gold, precious metals, and gemstones trading sector. According to the guide, the Ministry has identified approximately 60 indicators of suspicion, emphasizing the importance of protecting Kuwait from money laundering, terrorist financing, and the financing of weapons proliferation. Professions involved in the trade of gold, precious metals, and gemstones play a crucial role in safeguarding Kuwait against such crimes. The guide notes that precious metals and gemstones are attractive to money launderers and terrorist financiers because they combine high value, ease of transport, relative liquidity, and a degree of anonymity.

The guide enumerates nine common money laundering typologies in the gold, precious metals, and gemstones trading sector. Traders should be aware of these patterns, which are as follows:

1. Converting illicit funds into gold, jewelry, or gemstones.

2. Structuring or breaking down transactions to avoid reporting thresholds or internal controls.

3. Using third parties, nominees, or shell companies to conceal the true buyer or beneficial owner.

4. Repeatedly buying and selling the same goods to disguise the source of funds.

5. Transferring metals or gemstones across borders to transfer value.

6. Trade-based money laundering through the issuance of fake invoices or providing misleading information regarding value.

7. Using metals or gemstones as an alternative to the banking system.

8. Using the sector to facilitate sanctions evasion.

9. Engaging in complex or unusual commercial arrangements without a clear economic justification.

The guide states that the 60 suspicious activity indicators for the gold, precious metals, and gemstones trading sector are distributed as follows:

A. Customer Due Diligence (CDD), customer file, and behavioral indicators

1. The customer exhibits a high degree of secrecy or evasiveness regarding the source of funds.

2. Providing incorrect or incomplete information about one or more parties to the transaction, including unverifiable addresses or inaccessible contact information.

3. The customer’s source of funds is unusual, inconsistent with their profile, or cannot be reasonably verified.

4. The customer appears to be acting on the instructions of another person without providing a sufficient explanation of the nature of the relationship.

5. Repeated refusal, hesitation, or delay in providing required due diligence information or documents.

6. Use of forged, fraudulent, altered, or otherwise unreliable identification documents.

7. Negative media reports or other reliable information linking the customer or beneficial owner to criminal activity, money laundering, corruption, fraud, sanctions evasion, terrorist financing, or other serious crimes.

8. The customer is a politically exposed person (PEP), or a family member or close associate of such a person, and there is negative information concerning them.

9. The customer is unable to clearly explain the purpose of the transaction or provides contradictory explanations over time.

10. The customer displays unusual concern regarding anti-money laundering (AML) and counter-terrorist financing (CTF) procedures, reporting requirements, or beneficial owner identification.

11. The customer repeatedly changes information previously provided during the course of the transaction.

12. The customer terminates discussions or abandons the transaction after being asked to provide information on the source of funds, actual beneficiary, or other due diligence information.

13. The volume of the customer’s purchases is disproportionate to their usual trading patterns.

14. The customer is relatively young, with an unclear purpose for the purchase, or lacking a logical, economic, or commercial justification for the sale.

15. The customer insists on completing the transaction at an unusual speed before required procedures are finalized.

16. The customer purchases gold or jewelry without regard to price, quality, or specifications, focusing solely on replacing their funds.

17. Unusual nervous behavior by the customer, sometimes accompanied by threats, in an attempt to prevent staff from performing their due diligence duties (including identity verification or requesting supporting documents).

B. Beneficial owner indicators

1. The customer appears to be purchasing precious metals or gemstones on behalf of another person.

2. Use of intermediaries or legal entities to conceal the identity of the beneficial owner.

3. Difficulty in identifying the ultimate beneficial owner despite taking reasonable measures.

4. The beneficial owner resides in another country unrelated to the transaction and is unable to adequately explain the purpose of the transaction.

C. Legal entity indicators

1. The buyer appears to be using company assets for personal purposes.

2. Involvement of investment companies or legal entities in the transaction without a clear commercial justification.

3. Use of newly established companies with limited or no operating history to acquire high-value goods.

4. Companies with no clear connection to the jewelry or precious metals business conducting large transactions.

5. The corporate structure includes multiple layers of ownership distributed across several countries without a clear commercial purpose.

D. Source of funds and financing indicators

1. Sudden or unjustified changes in financing arrangements.

2. Use of unusual sources of financing that are difficult to explain.

3. Payments funded by third parties unrelated to the transaction.

4. Request to transfer transaction proceeds to third parties unrelated to the transaction itself.

5. Inability of the customer to adequately explain the source of funds used in the transaction.

6. Funds arriving from multiple unrelated sources without a clear financial justification.

7. Receipt of funds from other countries unrelated to the customer or the transaction.

8. Large amounts deposited shortly before the execution of the transaction without a clear source.

E. Transaction indicators

1. Existence of side payments or undocumented arrangements outside the formal transaction.

2. Execution of multiple buy or sell operations within a short period.

3. Attempt to purchase gold, gemstones, or precious metals in cash, despite bans on cash transactions for the sale or purchase of such goods.

4. Repeated buying or selling of gold with unjustified fluctuations in its value.

5. Urgent sale of goods coupled with a request for partial cash payment.

6. Transactions lacking economic justification or involving significant, unjustified losses.

7. Sudden changes in the buyer’s identity shortly before the completion of the transaction.

8. Requests to expedite transactions at prices significantly above or below market value.

9. Purchase of goods followed by immediate resale without a clear commercial justification.

10. Transactions with values significantly higher or lower than similar market transactions.

11. Acquisition of goods followed by rapid payment without a clear source of funds.

12. Repeated transactions involving the same group of individuals or companies.

13. Significant increase in the purchase of metals and gemstones by a regular customer without a clear reason.

14. A customer purchasing gold bars through multiple (fragmented) transactions within a short period.

15. A customer requesting conversion of gold into bars or vice versa without a clear commercial reason.

F. Intermediary indicators

1. Involvement of multiple intermediaries without an apparent commercial need.

2. One intermediary appears to be managing the transaction while the customer’s role is limited.

3. Instructions received from parties other than the customer or the declared beneficial owner.

G. Geographic risk indicators

1. The buyer or seller is from a high-risk country.

2. Use of accounts, persons, or entities abroad in high-risk countries.

3. Source of funds from multiple countries or routed through them without a clear commercial justification.

H. Network and relationship indicators

1. Multiple customers appear to act in coordination when buying or selling goods.

2. Multiple transactions involve common addresses, phone numbers, beneficial owners, or representatives.

3. The same brokers repeatedly appear in unrelated transactions.

4. Parties appearing unrelated conduct transactions that appear coordinated or economically interlinked.

5. The customer is linked to previous suspicious transactions, suspicious transaction reports, investigations, or individuals known to be associated with criminal activities.