Identity Verification
Also: KYC, Know Your Customer, ID check, Customer identification
Identity verification is the legally required identification process when buying or selling precious metals above certain cash transaction thresholds under anti-money laundering law (AML).
Anyone who buys or sells gold, silver or other precious metals in cash will sooner or later encounter identity verification. Dealers are required under German anti-money laundering law (Geldwäschegesetz, GwG) to establish the identity of their customers as soon as a transaction exceeds certain threshold values or if there are grounds for suspicion. The goal: to prevent money laundering and terrorist financing through the precious metals trade.
Legal basis
The Anti-Money Laundering Act (GwG) in its 2017 version (subsequently tightened several times) classifies precious metals dealers as so-called "obliged entities" (§ 2 GwG). They must fulfil due diligence obligations, which include identifying the contracting party. The following thresholds apply to cash payments in the precious metals trade:
| Threshold | Situation | Obligation |
|---|---|---|
| From €2,000 (cash payment) | Purchase or sale of precious metals | Full identification required |
| Below the threshold | Suspicion of money laundering | Identification and possible FIU report |
| Evidently connected partial transactions | Combined amount ≥ €2,000 | Identification still required (anti-structuring rule) |
For non-cash payments (bank transfer), separate rules apply; in those cases identity is usually already established through the payment channel.
Note: Thresholds and their interpretation may change due to legislative amendments. This is not legal or tax advice.
What is verified?
The dealer records and documents the following details:
- Full name (first and last name)
- Place and date of birth
- Nationality
- Home address
- Type and number of identity document (national ID card or passport)
The data is generally copied or scanned and retained for five years (§ 8 GwG). A valid official photo ID is mandatory. A health insurance card is not accepted; a driving licence alone is also insufficient under the GwG — only a national ID card or passport is recognised.
Procedure at a precious metals dealer
A typical identity verification process proceeds as follows:
- The customer wishes to buy or sell gold coins or bars above the threshold value in cash (for example using the Buying Price Calculator).
- The dealer requests a valid national ID card or passport.
- Details are recorded and the document is copied.
- The transaction is documented internally and archived in an audit-proof manner.
- Only then is the transaction processed.
If a customer refuses to provide identification, the dealer must decline the transaction and, if appropriate, file a suspicious activity report with the Financial Intelligence Unit (FIU).
Over-the-counter transactions and anonymity
The so-called over-the-counter cash transaction — an anonymous cash purchase without identification — is only possible in the precious metals trade below the statutory thresholds. Above these limits there is no legal way to purchase or sell precious metals anonymously in cash. This applies regardless of whether the purchase takes place at a precious metals dealer, a bank or a pawnbroker.
Even in the case of multiple transactions that are evidently being split in order to circumvent the cash limit (so-called "structuring"), the dealer is obliged to establish the customer's identity and report the matter.
Connection to tax obligations
Identity verification has no direct bearing on the tax treatment of a profit from selling precious metals. The speculative holding period of one year (§ 23 EStG) applies regardless. Nevertheless, the statutory documentation creates transparency vis-à-vis the tax authorities. This is not tax or investment advice — consult a tax adviser if in doubt.
Key takeaway
Identity verification is a legally mandatory instrument for combating money laundering in the precious metals trade and affects every buyer or seller conducting cash transactions above the AML thresholds. Anyone who buys or sells gold and exceeds the limit should always carry a valid identity document.