Government Tightens Regulation on Traders Dealing in Precious Metals and Stones

The government has tightened regulations on businesses dealing in precious metals and stones in an effort to curb money laundering and the financing of terrorism. The Inland Revenue Department (IRD) under the Ministry of Finance has issued a new directive outlining compliance requirements and penalties for traders of such high-value goods.

Under the directive, businesses must report any transaction exceeding Rs 1 million in a single day to the Financial Information Unit within 15 days. Traders are also required to maintain detailed customer identification records and submit information on threshold and suspicious transactions on time.

The directive further instructs traders to exercise enhanced due diligence when dealing with politically exposed persons (PEPs), their family members, or close associates.

According to the IRD, businesses lacking a proper system to identify threshold transactions may face fines of up to Rs 10 million, along with possible cancellation of their registration. Failure to maintain customer identification records carries penalties of up to Rs 5 million, while conducting transactions under fictitious names may attract fines ranging from Rs 100,000 to Rs 10 million.

The list of regulated precious items includes gold, silver, platinum, ruby, rhodium, diamonds, pearls, jade, and similar goods. Jewellery containing at least 2 percent precious metal content is also classified as precious items that fall under regulation.

The directive sets rules for business transactions and payments, requiring that all payments be made through bank accounts held in the name of the business entity. Traders are prohibited from using personal accounts or accounts belonging to employees, family members, or any other individual for business transactions.

For sales of precious metals or items worth Rs 1 million or more, payments must be received from the bank account of the buyer or their family member. The directive also prioritizes the use of electronic payment systems for all purchases and sales.

If existing limits on electronic payments restrict compliance, the IRD has requested the Nepal Rastra Bank to consider raising those limits for businesses dealing in precious metals and stones.

The directive also includes provisions for monitoring, inspection and supervision to ensure compliance. The IRD will conduct risk-based inspections of reporting entities, and businesses are required to cooperate fully in the process. The authority to interpret the directive lies with the IRD’s Director General, and the department may amend the provisions as necessary.