Buyers of gold or other precious metals worth over Rs500,000 will have to provide their fingerprint to bullion traders, according to a proposed directive of the Inland Revenue Department.

The directive has been proposed with an aim to limit money laundering and terrorism financing as a part of ‘Know Your Customer or KYC’ policy.

The Inland Revenue Department, which has assumed the responsibility of working as a regulator of the gold market, prepared the draft of the directive which is currently under the inter-ministerial discussions.

The Money Laundering Prevention Act categorises bullion traders as reporting entities that need to keep a record of customers who buy precious metals worth over Rs1 million as well as report suspicious transactions to the designated authority.

As per the draft of the directive obtained by the Post, bullion traders will have to maintain a detailed personal record of buyers of gold and other precious metals. If the actual buyer is someone other than the person who is buying, the vendor should maintain a record of that buyer as well.

The proposed directive also requires bullion traders to maintain updated records about customers who occupy high profile positions, also known as politically exposed persons (PEPs).

The PEPs are considered risky because they may indulge in corrupt activities by misusing their positions.

The bullion traders will have to submit a report about any transaction above Rs1 million by a customer in a day to the Financial Information Unit, a financial intelligence unit within 15 days after transaction,

In the case of suspicious transactions, the bullion trader should submit a report about it to the FIU within three days.

However, the demands for putting such a system in place to monitor suspicious transactions in the proposed directive has made bullion traders uncomfortable.

“The provision of proposed directive will make us doubt every customer. How can we do business by creating terror among customers?” asked Ramesh Maharjan President of Nepal Gold Silver Gem and Jewellery Associations, a grouping of bullion traders.

“Based on the proposed directive, the responsibility for the bullion traders is huge. But the traders don’t have human resources and structure with proper knowledge and orientation,” said Maharjan.

However, Information Officer at Inland Revenue Department Yagya Dhungel said the provision has been in line with the anti-money laundering law. “As the draft is still under discussion, there might be modifications in it,” he told the Post.

Traders also have huge concerns over the proposed penalties—which range from Rs100,000 to Rs10 million—in the directive for failing to implement the directive.

For example, a trader who fails to prepare a working procedure within a set deadline by the directive will face punishment—ranging from being issued a warning notice to paying Rs5 million in fines for consistently failing to do so. If traders get involved in transactions under an imaginary name, such traders will face penalty up to Rs10 million.

“Many traders have started to talk about giving up the business due to high fines proposed in the proposed directive,” said Maharajan.