Identity Verification

Anyone who buys or sells gold, silver or other precious metals for cash will sooner or later encounter identity verification. Under the UK Money Laundering Regulations, dealers are obliged to establish the identity of their customers once a transaction exceeds certain thresholds or where suspicious circumstances arise. The aim: to prevent money laundering and terrorist financing through the precious metals trade.

Legal basis

The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 classify high value dealers (including precious metals dealers) as obliged businesses. They must carry out customer due diligence, which includes identifying the counterparty. For the precious metals trade the following applies to cash payments:

For non-cash payments (bank transfer) separate rules apply; there, identity is usually already evidenced through the payment channel.

Note: The thresholds and their interpretation can shift through changes in the law. This is not legal or tax advice.

What is checked?

The dealer records and documents the following details:

1. Full name (first name and surname)
2. Date of birth
3. Residential address
4. Type and number of the identity document (passport or photocard driving licence)

The data is usually copied or scanned and retained for five years. A valid official photo identity document is mandatory. In the UK, a passport or a photocard driving licence is typically accepted for identity verification, often supported by a proof of address.

Procedure at a precious metals dealer

Typically, identity verification proceeds as follows:

• Customer wishes to buy or sell gold coins or bars for cash above the threshold (for example via the purchase price calculator).
• The dealer requests a valid photo identity document.
• Data is recorded and the document is copied.
• The transaction is documented internally and archived in an audit-proof manner.
• Only then is the transaction settled.

If a customer refuses identification, the dealer must decline the transaction and, where appropriate, submit a Suspicious Activity Report (SAR) to the National Crime Agency (NCA).

Over-the-counter deals and anonymity

The so-called over-the-counter cash deal - an anonymous cash purchase without identification - is only possible in the precious metals trade below the statutory thresholds. Above these limits there is no lawful way to acquire or dispose of precious metals anonymously for cash. This applies regardless of whether the purchase takes place at a precious metals dealer, a bank or a pawnbroker.

Where several transactions are evidently split to circumvent the cash limit (so-called "structuring"), the dealer is likewise obliged to establish identity and report the matter.

Relationship to tax liability

Identity verification has no direct effect on the tax treatment of a gain from selling precious metals. UK Capital Gains Tax applies to disposals of precious metals independently of identity checks; there is no German-style one-year speculation period. Nevertheless, the statutory documentation creates transparency towards the tax authorities. This is not tax or investment advice - if in doubt, consult a tax adviser.

In brief

Identity verification is a legally mandatory instrument for combating money laundering in the precious metals trade, and it affects every buyer or seller who carries out cash transactions above the Money Laundering Regulations thresholds. Anyone buying or selling gold who exceeds the limits should always carry a valid identity document.