KYC/AML: Bullion dealers & jewellers now high-risk accounts
Current · Source: Reserve Bank of India · RBI/2010-11/410 · issued 18 Feb 2011 · ~1 min read
Quick answerRBI directs urban co-operative banks to categorise bullion dealers and jewellers as high-risk accounts, requiring enhanced due diligence and intensified monitoring for suspicious transactions under PMLA.
The rule, in the simplest words
Banks must put bullion dealers (people who buy/sell gold bars) and jewellers into the 'high-risk' group, meaning they need extra checking.
For these accounts, banks have to do 'enhanced due diligence' (ask more questions about where the money comes from and why the business is doing what it does).
Banks must watch these accounts more closely for any suspicious moves and report them to FIU-IND (the government's money-laundering watchdog).
If a bank doesn't follow these rules, it can get fined under the Banking Regulation Act and PMLA (laws against money-laundering).
How it plays out — a real example
A KYC & compliance officer in Surat, Priya, opens a new account for a local jeweller. She immediately marks it as 'high-risk' and asks the jeweller for extra documents showing where he buys his gold and how he funds his business. Every month, she reviews his transactions more carefully than usual, and if she sees a big cash deposit that doesn't match his sales, she files a Suspicious Transaction Report to FIU-IND.
What changed
RBI added bullion dealers (including sub-dealers) and jewellers to the illustrative list of higher-risk customers requiring enhanced due diligence. Banks must now treat these accounts as high-risk and subject them to intensified monitoring for suspicious transaction reporting to FIU-IND.
What it means for you
Urban co-operative banks must update their KYC/AML risk classification to include bullion and jewellery businesses as high-risk. This means stricter customer due diligence, more frequent transaction reviews, and a lower threshold for filing Suspicious Transaction Reports. Non-compliance can attract penalties under the Banking Regulation Act and PMLA rules.
What you must do
Reclassify all existing and new accounts of bullion dealers, sub-dealers, and jewellers as high-risk.
Apply enhanced due diligence measures for these accounts, including source of funds and business rationale.
Intensify transaction monitoring for these accounts and ensure timely filing of STRs to FIU-IND.
Update internal KYC/AML policies and staff training to reflect this new risk category.
Who it affects
Primary (Urban) Co-operative Banks, Bullion dealers and sub-dealers, Jewellers, Compliance and AML teams at urban co-operative banks
❓ Common questions
Why are bullion dealers and jewellers now considered high-risk?
Cash-intensive businesses like bullion and jewellery are more vulnerable to money laundering and terrorist financing, so RBI mandates enhanced due diligence and monitoring for these accounts.
What specific actions must banks take for these high-risk accounts?
Banks must apply enhanced due diligence, intensify transaction monitoring, and identify suspicious transactions for filing STRs to FIU-IND, as per earlier KYC/AML circulars.
What happens if a bank fails to comply with this directive?
Non-compliance may attract penalties under Section 35A of the Banking Regulation Act, 1949 and the Prevention of Money-laundering Rules, 2005.
📜 Read the original circular — full text as issued by RBI
RBI/2010-11/410
UBD. BPD. (PCB) No. 37/12.05.001/2010-11
February 18, 2011
The Chief Executive Officer
All Primary (Urban) Co-operative Banks
Dear Sir,
Know Your Customer (KYC) norms / Anti-Money Laundering (AML) standards/
Combating of Financing of Terrorism (CFT) / Obligation of banks under PMLA, 2002
Please refer to our circular UBD. PCB. Cir. 30/09.161.00/2004-05 dated December 15, 2004 on Know Your Customer (KYC) norms and Anti-Money Laundering (AML) standards.
2. In terms of Paragraph 2 (vi) of the guidelines on “Know Your Customer” norms and Anti-Money Laundering measures appended to the above circular, banks are required to apply enhanced due diligence measures on higher risk customers. Some illustrative examples of customers requiring higher due diligence have also been given in the paragraph under reference. It is further advised that in view of the risks involved in cash intensive businesses, accounts of bullion dealers (including sub-dealers) & jewellers should also be categorised by banks as ‘high risk’ requiring enhanced due diligence.
3. In terms of Paragraph 4 of the Circular cited above, banks are also required to subject these ' high risk accounts ' and the transactions to intensified monitoring. It is advised that high risk associated with such accounts should be taken into account by banks to identify suspicious transactions for filing Suspicious Transaction Reports (STRs) to FIU-IND.
4. These guidelines are issued under Section 35A of the Banking Regulation Act, 1949 (AACS) read with Rule 7 of Prevention of Money-laundering (Maintenance of Records of the Nature and Value of Transactions, the Procedure and Manner of Maintaining and Time for Furnishing Information and Verification and Maintenance of Records of the Identity of the Clients of the Banking Companies, Financial Institutions and Intermediaries) Rules, 2005. Any contravention thereof or non-compliance shall attract penalties under the relevant Act / Rules.
Yours faithfully,
(Uma Shankar)
Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2010-11/410 · issued 18 Feb 2011. The plain-English explanation above is BankPulse’s own independent summary.
Example: if you are a Compliance officer at a bank this circular applies to (Primary (Urban) Co-operative Banks, Bullion dealers and sub-dealers, Jewellers, Compliance and AML teams at urban co-operative banks), your first concrete step on “KYC/AML: Bullion dealers & jewellers now high-risk accounts” is: “Reclassify all existing and new accounts of bullion dealers, sub-dealers, and jewellers as high-risk.” (RBI issued this 18 Feb 2011).
Action required: Reclassify all existing and new accounts of bullion dealers, sub-dealers, and jewellers as high-risk.
Action required: Apply enhanced due diligence measures for these accounts, including source of funds and business rationale.
Action required: Intensify transaction monitoring for these accounts and ensure timely filing of STRs to FIU-IND.
Action required: Update internal KYC/AML policies and staff training to reflect this new risk category.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
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BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=6269&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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