China Tightens Reporting Rules for Gold and Jewelry Retailers to Combat Money Laundering (Yicai) July 3 -- China will strengthen its anti-money laundering regulations next month, targeting traders of precious metals such as gold and silver, as well as gemstones including diamonds and jade.

Starting Aug. 1, merchants with daily transactions of CNY100,000 (USD13,960) or more will be required to strictly fulfill their anti-money laundering obligations, the People’s Bank of China announced in a regulatory document released yesterday.

Analysts said the new rules implement the updated Anti-Money Laundering Law, which came into effect in January and expanded the scope of regulation to include retailers of gems and precious metals. According to them, the PBOC document addresses a long-standing regulatory gap while enhancing oversight of the sector.

While the rules further define the scope of regulation, they also raise the reporting threshold to CNY100,000 (or the equivalent in foreign currency), up from the previous CNY50,000 (USD6,980). For such large transactions, institutions must report to the China Anti-Money Laundering Monitoring and Analysis Center within five working days. In addition, merchants are required to retain transaction records and customer identity information for at least 10 years.

Dong Ximiao, chief researcher at Merchants Union Consumer Finance, told Yicai that the precious metals and gemstones trade carries inherent risks due to its high value density, liquidity, complex pricing mechanisms, prevalence of cash transactions, cross-border mobility, and potential for anonymity. These factors make the sector particularly vulnerable to money laundering and terrorist financing.

Wang Pengbo, a senior analyst at Botong Analysys, added that illicit groups can exploit the industry to conceal illicit funds. Bringing this sector under anti-money laundering regulation will help close regulatory loopholes, reduce financial risks, and strengthen market integrity, he noted.

Preventing Flows of Tainted Money

This move reflects China's broader efforts to bolster its framework to stop flows of dirty money.

The Financial Action Task Force, an intergovernmental body that combats global money laundering and terrorist financing, highlighted in its 2019 report that China had insufficient regulation of designated non-financial businesses and professions (DNFBPs), a category that includes dealers of precious metals and gemstones.

Dong explained that under the revised law, "dealers engaged in spot trading of precious metals and gemstones above a specified amount" are now classified as DNFBPs and are legally obligated to comply with anti-money laundering requirements.

Wang emphasized that the new regulations clarify institutional obligations, standardize reporting procedures, and make China's anti-money laundering enforcement more relevant and operational.

However, Wang also cautioned that regulators should consider the compliance burden on small and medium-sized businesses and ensure efficient allocation of supervisory resources.

Courtesy : Yicai Global