Record-keeping of cash deals in gems & jewellery trade now a must under PMLA

Mumbai: Cash transactions in gold, silver, diamonds and other precious stones have come under the Prevention of Money Laundering Act (PMLA) ambit.

The finance ministry has notified dealers in precious metals and precious stones as “persons carrying on designated businesses or professions”, if they engage in any cash transactions with a customer “equal to or above Rupees ten lakhs, carried out in a single operation or in several operations that appear to be linked.”

For income tax purposes, cash transactions up to a threshold of Rs 2 lakh without KYC –PAN or Aadhaar — are allowed in the gems and jewellery sector. Any sale in cash above Rs 2 lakh requires KYC.

To skirt the rule, a customer having unaccounted money undertakes multiple transactions up to Rs 2 lakh, which are not recorded. Now that tradesmen have been notified as designated businesses under PMLA , they would have to maintain a record of such transactions — the buyer’s identity through his Pan or Aadhaar number. Trade sources said failure to do so would invite the wrath of the Enforcement Directorate (ED), which enforces provisions under the PMLA, 2002.

“It’s not like I’m saying ‘don’t do the transaction’. It’s like saying ‘do it but maintain a record of each such cash transaction so in case I need it, you have it,'” said Rajesh Khosla, consultant to MMTC-Pamp, India’s only LBMA accredited gold refinery.

“This is a step that will enforce stronger discipline in the trade,” said Surendra Mehta, national secretary, India Bullion and Jewellers Association (IBJA). “Since record keeping of cash transactions by the trade becomes mandatory , deals engineered to skirt the law wouldn’t be easy to do, thanks to the Sword of Damocles over the merchant’s head.”

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However, a trade source said offenders could still skirt the rule by buying from multiple merchants instead of just one. He added that for making the rule “water-tight” a digital database for every cash transaction would have to be made and be accessible by the authorities.

Amit Modak, CEO, PN Gadgil & Sons, said the rule would make constituents of the trade more “compliant” and was a “step in the right direction.”



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