Kuwait Prohibits Customer Gold Exchange Transactions

The Ministry of Commerce and Industry in Kuwait has implemented significant amendments to the regulations governing the gold, precious stones, and precious metals sector. A key provision of these new rules is the prohibition of direct ownership transfers between customers and licensed traders for the exchange of old gold, a move designed to enhance transparency and combat money laundering.

The New Exchange Mechanism

Under the revised guidelines, the traditional practice where customers could directly swap old gold items for new ones in a single transaction has been banned. Previously, shops facilitated these exchanges through direct ownership transfer. Now, the process must be split into two distinct, fully documented transactions.

When a customer wishes to exchange old gold, the shop must first purchase the old gold from the client. The value of this purchased gold is then credited directly to the customer's bank account rather than being held as store credit or offset against a new purchase immediately. Subsequently, the customer uses funds from their bank account to purchase new gold items from the same or another shop. This separation ensures that every step of the financial flow is recorded and traceable.

The ministry mandates that all details for these transactions be meticulously documented, including the date of the transaction, the weight of the gold, its purity (carat), and its specific monetary value.

Stricter Oversight on Supply Chains

The amendments also address the movement of gold within the industry itself. The previous allowance for the supply and transfer of gold between shops, workshops, and wholesale outlets has been removed. Such transfers are now prohibited unless they strictly involve logistics or inventory management without any change in legal ownership or sales activity. This change aims to close potential loopholes where gold could circulate without proper registration.

Anti-Money Laundering and Transparency Measures

These changes align with the ministry's broader commitment to strengthening anti-money laundering (AML) protocols and ensuring market transparency. The updated framework reinforces several existing strictures:

• Ban on Cash: Cash transactions remain prohibited in the sector. All payments must be made through approved electronic payment methods.
• Identity Verification: For any transaction exceeding KD 3,000, traders are required to collect and verify detailed identity information from customers.
• Due Diligence: Enhanced due diligence procedures must be applied to high-risk customers and politically exposed persons (PEPs).

The Ministry stated that these measures are intended to provide greater oversight of Kuwait's gold and precious metals market, ensuring regulatory compliance and preventing the use of the sector for illicit financial activities. By forcing digital trails and separating buy-sell cycles, authorities aim to create a more secure and transparent trading environment for both consumers and businesses.