Why Bullion Dealers Are High-Risk Under UAE AML Law

Understanding why regulators view bullion dealers as high-risk is essential for compliance, risk mitigation, and regulatory survival.

 

1. High-Value, Portable Assets

Gold and precious metals have high value relative to size and weight. A small quantity can represent millions of dirhams, making it easy to transport, conceal, or move across borders.

From an AML perspective, this creates a serious risk:

• Criminal proceeds can be quickly converted into bullion

• Value can be transferred without leaving strong audit trails

• Assets can be liquidated in multiple jurisdictions

This portability alone elevates bullion trading above many other commercial sectors.

 

2. Cash-Intensive Transactions

Despite tightening regulations, cash transactions remain common in the bullion sector, especially in wholesale, refinery-linked, or international trading environments.

Cash increases AML risk because:

• Source of funds is harder to verify

• Structuring (smurfing) is easier

• Transactions may bypass traditional banking scrutiny

For this reason, UAE AML law places strict obligations on bullion dealers to identify, verify, and monitor cash-based customers.

 

3. Complex Supply Chains

Bullion supply chains often span:

• Multiple countries

• Artisanal or small-scale mining regions

• High-risk or conflict-affected areas

Without strong controls, this exposes dealers to:

• Conflict gold risks

• Sanctions exposure

• Trade-based money laundering

UAE regulators expect bullion businesses to apply enhanced supply-chain due diligence, not just customer checks.

 

4. Use in Trade-Based Money Laundering (TBML)

Gold is frequently used in over- and under-invoicing schemes, circular trading, and false documentation arrangements.

Common AML concerns include:

• Inflated gold purity or weight declarations

• Repeated buy-sell cycles with no commercial logic

• Unusual pricing or settlement structures

These risks place bullion trading firmly within the highest AML risk categories.

 

5. Cross-Border Exposure

The UAE is a global hub for precious metals trading, linking Africa, Asia, Europe, and the Middle East. This international reach increases exposure to:

• Sanctions jurisdictions

• Politically Exposed Persons (PEPs)

• Weak AML regimes

Cross-border transactions trigger Enhanced Due Diligence (EDD) requirements under UAE law.

 

6. Explicit Regulatory Classification

UAE AML legislation and supervisory guidance clearly identify dealers in precious metals and stones (DPMS) as Designated Non-Financial Businesses and Professions (DNFBPs).

This classification brings mandatory obligations such as:

• Risk-based AML frameworks

• goAML suspicious transaction reporting

• Independent AML audits

• Appointment of a Compliance Officer

Failure to meet these obligations can lead to heavy fines, license suspension, or criminal liability.

 

What This Means for Bullion Businesses

Being labeled “high-risk” does not mean bullion trading is discouraged—it means expectations are higher.

UAE regulators expect bullion dealers to demonstrate:

• Robust customer due diligence

• Strong source-of-funds checks

• Ongoing transaction monitoring

• Clear escalation and reporting procedures

A “light-touch” AML approach is no longer acceptable in this sector.

 

Final Thought

Bullion dealers sit at the intersection of high value, high velocity, and high anonymity—three red flags in any AML framework. The UAE’s classification reflects global best practice and international pressure to safeguard the precious metals trade.

For bullion businesses, proactive compliance is not optional—it is a commercial necessity.