Over-the-Counter Transaction

Also: Cash transaction, Over-the-counter purchase, Anonymous precious metal purchase

An over-the-counter transaction is the anonymous purchase or sale of precious metals, securities or other assets for cash "across the counter", without disclosing the buyer's identity.

The over-the-counter transaction denotes the anonymous purchase or sale of precious metals (gold, silver, platinum, palladium) for cash, without the dealer recording the customer's identity. The term derives from the fact that the transaction is settled literally "across the counter" - that is, at the shop counter. For many investors, the over-the-counter transaction was for decades the preferred method of discreetly acquiring physical precious metal. Since the tightening of European anti-money laundering rules, however, the scope for complete anonymity has been strongly curtailed.

Legal basis: cash thresholds and identification duty

Anti-money laundering law obliges dealers in precious metals, above certain transaction thresholds, to establish the identity of their customers (identity verification). In Malta these obligations rest on the Prevention of Money Laundering Act (PMLA) and the accompanying regulations, which transpose the EU anti-money laundering directives into national law:

Framework	Identification threshold (precious metals, cash)	Legal basis
EU anti-money laundering directives	€10,000 (single or linked transactions)	AMLD / PMLA (Malta)
High-risk third-country transactions	from €1 (enhanced due diligence)	AMLD / PMLA
Suspicion of money laundering	regardless of amount	PMLA / FIAU reporting duty

Important: Under the EU framework applicable in Malta, traders in goods dealing in cash must identify customers once a transaction (or several evidently linked transactions) reaches €10,000. Above this amount, a genuinely anonymous over-the-counter transaction is therefore no longer permissible. In Germany, by contrast, a much lower national threshold of €2,000 applies - a difference worth bearing in mind for cross-border purchases.

When customers are identified, the following data are typically recorded:

Full name
Date and place of birth
Residential address
Type and number of the identity document (identity card or passport)

Tax dimension

The over-the-counter transaction has a second, tax-law side. In Malta, no capital gains tax is levied on the disposal of movable private property such as bullion or coins - a private individual who sells physical precious metal generally realises no taxable gain on the disposal itself. This differs markedly from Germany, where gains from the sale of physical precious metal are taxable as a private sale transaction if less than one year lies between purchase and sale (speculation period).

Even where no capital gains tax applies, retaining documentation remains sensible: proof of acquisition can be relevant where a tax authority questions whether an activity is genuinely private rather than a commercial trade. Anyone who wants to use the current gold price as a buying basis should therefore always keep purchase receipts.

Note: This article does not constitute tax or legal advice. For tax questions on precious metal purchases, consult a qualified tax adviser.

Practical settlement today

In practice, a precious metal purchase from a reputable dealer today proceeds as follows:

Below €10,000: Cash payment without proof of identity possible (over-the-counter transaction in the classic sense).
From €10,000: Identity document required, documentation by the dealer under the PMLA.
On suspicion of money laundering: Reporting duty to the Financial Intelligence Analysis Unit (FIAU) - regardless of amount.

Dealers who breach AML duties risk substantial administrative penalties. Buyers who deliberately split transactions to stay below the identification threshold ("smurfing" / structuring) circumvent the dealer's due-diligence obligation and may, depending on the circumstances, expose themselves to money laundering liability where the funds used stem from a predicate offence.