Global Financial Watchdog Raises Concerns Over Precious Metals and Stones Trade in India
The Financial Action Task Force (FATF), a global body dedicated to combating financial crimes, has raised concerns about India’s gems and jewellery sector. In its latest report, FATF highlighted how the trade of precious metals and stones (PMS) in the country could be exploited for illegal activities like money laundering and terrorist financing. Given India’s position as a major player in the global market for gold and diamonds, these concerns are particularly significant.
Vulnerability of the Sector
FATF noted that precious metals and stones can be used to move large sums of money without leaving any trace of ownership. This is especially worrying because of the scale of the gems and jewellery sector in India, which accounts for around 7% of the country’s GDP. The FATF report emphasized that India needs to address the risks related to smuggling, illicit trade, and money laundering more effectively.
India’s gems and jewellery sector has about 1,75,000 dealers, but only 9,500 are registered with the Gem and Jewellery Export Promotion Council (GJEPC). A GJEPC membership certificate, along with tax registration, is required for the import or export of gems in India. Despite this, the FATF report indicated there are gaps in understanding the true risks of smuggling and illegal trade in this sector.
Recommendations for Stronger Monitoring
FATF has recommended that India improve its data collection and risk analysis, especially when assessing the money laundering risks related to smuggled precious metals and stones. The report suggested using both domestic and international sources to gather more in-depth qualitative and quantitative data. This would help Indian authorities better understand how smuggling and the trade in precious metals and stones are linked to illegal financial activities.
Furthermore, FATF stressed the need for India to continue monitoring fraud and techniques used to avoid detection in the sector. Authorities are encouraged to collect more data on how criminals might use the gems and jewellery trade for money laundering. This will help law enforcement target their efforts more effectively to combat financial crime in the sector.
India’s Role in the Global Market
As one of the world’s largest consumers and producers of gold and gemstones, India plays a significant role in the global market. The country is the second-largest consumer of gold and the largest exporter of gold jewellery. Additionally, India leads in diamond processing and gemstone polishing, making it a central hub in the global jewellery industry. These factors make it essential for Indian authorities to remain vigilant against financial crime in this sector.
FATF also pointed out that human trafficking risks are intertwined with the illicit trade of precious metals and stones. The report advised India to take more action to address this issue by gathering better data and focusing resources on combating human trafficking related to the jewellery trade.
Stronger Safeguards Needed
With India’s large involvement in the global gems and jewellery industry, FATF has urged the country to take additional steps to safeguard the sector from misuse. This includes enhanced monitoring, better risk assessment, and more robust data collection to prevent illegal activities like money laundering and terrorist financing from taking place within this industry. The recommendations from FATF aim to help India continue its efforts in ensuring the integrity of its booming gems and jewellery trade while addressing potential risks.
