The Financial Action Task Force (FATF) has highlighted vulnerabilities in India’s precious metals and stones sector, stating that the ease of transferring large sums without leaving an ownership trail raises concerns about money laundering and terrorist financing. This finding is part of the FATF's mutual evaluation report for India, released on Thursday.
The report notes that while there are approximately 175,000 dealers of precious metals and stones (DPMS) in India, only 9,500 are members of the Gems and Jewellery Export Promotion Council (GJEPC), which requires certification and tax registration for imports and exports in the gems trade.
FATF identified "shortcomings" in understanding the risks related to money laundering, particularly concerning smuggling and dealing in these commodities, as well as human trafficking.
The report states, "The ease with which PMS (precious metals and stones) can be used to move large amounts of funds without leaving an ownership trail means there are vulnerabilities associated with their use as a tool for ML/TF (terrorist financing)."
It recommended that India enhance its risk assessments by including "deeper" qualitative and quantitative data on money laundering risks linked to precious metals and stones, especially those smuggled into the country.
The FATF also emphasised the need for effective domestic coordination on anti-money laundering and counter-terrorist financing (AML/CFT) at both policy and operational levels. It called for a more detailed action plan that outlines clear priorities and benchmarks for implementation to strengthen responses.
The report noted that the precious metals and stones sector plays a significant role in Indian culture and tradition, serving as a store of value for many. India is currently the world's second-largest consumer of gold, the largest importer, and the largest exporter of gold jewellery, with the industry contributing about 7% to the country's GDP.
FATF warned that criminal networks operating across borders could exacerbate risks in this sector, urging Indian authorities to continue monitoring fraud and smuggling techniques and to gather more data to effectively combat money laundering threats.
Follow us
