Retail Jewelers: When Buying Gold From the Public, or From Abroad, Makes You a Dealer

Most retail jewelers assume the retailer exception keeps them out of FinCEN's anti-money laundering rule for dealers. For many it does. But two ordinary parts of a jewelry business can push a store past it: the counter where you buy gold from the public, and the trip where you buy inventory abroad.

What the retailer exception does

Under 31 CFR 1027.100(f), a retailer is a person engaged within the United States in the business of sales primarily to the public of covered goods (jewels, precious metals, precious stones, and finished goods that derive 50 percent or more of their value from them). A retailer is not a dealer under Part 1027 unless, during the prior calendar or tax year, it "purchased more than $50,000 in covered goods from persons other than dealers or other retailers (such as members of the general public or foreign sources of supply)" (31 CFR 1027.100(b)(2)(i)).

That gives a retail jeweler a two-part test. You are a dealer this year only if, last year, you both:

received more than $50,000 in gross proceeds from sales of covered goods, and
purchased more than $50,000 in covered goods from someone other than a dealer or another retailer.

FinCEN's 2005 FAQs on the rule apply the test to a retail jeweler who buys jewelry from the public in exactly these terms (FinCEN FAQ 3(g)). Inventory bought from U.S. dealers and other retailers does not count toward the second number.

"Primarily to the public" matters too. In the 2005 interim final rule, FinCEN said a business selling primarily to the public "would not be disqualified from the retailer exception solely because of occasional sales to a dealer or retailer" (70 FR 33702, June 9, 2005). Selling scrap to a refiner now and then is fine; if those sales become a large share of revenue, revisit it: a business that is not a retailer falls under the general dealer test, and its program covers all buying and selling.

The scrap trap

Paying a walk-in customer for a broken chain or an estate piece is a purchase of covered goods from a member of the general public. The regulation names exactly that source.

Consider a jeweler that runs a "we buy gold" counter and pays walk-in sellers an average of $1,200 a transaction, a little over one buy a week. That alone comes to about $65,000 for the year, past the threshold before any estate buying.

Two points owners miss:

State secondhand-dealer laws are a separate obligation. Recording sellers for the police under a state or local secondhand law does not satisfy the federal rule. The Jewelers Vigilance Committee, a jewelry-industry legal compliance organization, agrees: a retailer whose purchases from the public exceed $50,000 must also comply with the dealer rule "even if you report these purchases as required by state law" (JVC, Learn About Anti-Money Laundering, viewed October 28, 2026).
Trade-ins do not count, but only true trade-ins. When a customer trades in covered goods, you credit the value to the customer's account, and you pay out no funds, the transaction is not a purchase or sale for the thresholds (31 CFR 1027.100(b)(3)). A footnote to FinCEN's FAQ 3(f) applies this to the retailer test too. Once you pay the customer money for the item, the exclusion is gone and the buy counts.

The import trap

A foreign supplier is not a "dealer" under Part 1027, which covers persons engaged within the United States, and the regulation names "foreign sources of supply" alongside the public. FinCEN's FAQ puts it directly: a retailer that buys more than $50,000 of precious stones from a foreign supplier, and sells more than $50,000, must have a program addressing "the purchases from your foreign supplier" (FAQ 3(e)). JVC says the same of a retailer whose only foreign buying is one overseas trade show a year.

Commenters on the proposed rule asked FinCEN to extend the exception to retailers who buy mostly from foreign sources. FinCEN declined, saying that approach "would ignore the risk of money laundering and terrorist financing through a dealer's international source of supply." It also rejected two narrower fixes:

FATF membership. A supplier's country being a member of the Financial Action Task Force does not help, because membership does not mean that country requires its dealers to run an AML program.
Written assurances. A foreign supplier's written assurance about its own AML controls does not create an exception. FinCEN said such assurances "could be a factor in assessing the degree of risk inherent in a particular relationship."

A 2015 FATF and Asia/Pacific Group report shows the risk: the owners of a U.S. importer were charged after it declared about $6.4 million of Central American scrap gold while wiring about $24 million back to the exporters (FATF/APG, ML/TF Risks and Vulnerabilities Associated with Gold, July 2015, case study 13).

To treat a supplier as a dealer or retailer, take reasonable steps to confirm it. FinCEN said "in most cases" the supplier's verbal or written representation will be enough, but "in other cases, additional due diligence will be required" (FAQ 3(c)).

Counting to $50,000

Transaction	Counts toward the purchase threshold?
Buying scrap or estate jewelry from a walk-in seller for cash or check	Yes (purchase from the general public)
Buying inventory from a foreign manufacturer or dealer	Yes (foreign source of supply)
Buying inventory from a U.S. dealer or another retailer	No
Trade-in credited to the customer's purchase, no funds paid out	No (31 CFR 1027.100(b)(3))
Sending your own scrap to a refiner for a fee and getting the metal back (toll refining)	No; FinCEN said toll refining is not a purchase or sale

For finished goods, count only the metal and stones (31 CFR 1027.100(b)(5)), and only for pieces that derive 50 percent or more of their value from them. A piece bought abroad for $20,000 whose gold and stones are worth $14,000 adds $14,000 to the purchase total, not $20,000. Scrap is mostly metal, so the price you pay for scrap is close to the number that counts.

The test looks back to the prior calendar or tax year, and you test again every year. A store that crossed the line in 2025 is a dealer in 2026. Under 31 CFR 1027.210(c), a new dealer has six months from the date it becomes subject to the rule to put its program in place.

If you cross the line, the program is narrow

A retailer's program "need only address such purchases" (31 CFR 1027.210(a)(2)). FinCEN explained that the program "would be limited to guarding against the risks presented by its sources of supply other than dealers and other retailers," and "would not be required to address sales, or other types of purchases." Your bridal counter is outside the program.

The program still needs all four elements of 31 CFR 1027.210(b): written policies, procedures, and internal controls based on a risk assessment; a designated compliance officer; ongoing training; and independent testing. Senior management approves it, and FinCEN can ask to see it.

What a purchase-side program looks like in a jewelry store

Part 1027 sets elements, not a checklist. The specifics below are design choices for meeting the risk-based requirement.

Risk assessment

Write down where your non-dealer purchases come from: walk-in volume and typical ticket, estate buying, and each foreign supplier and its country. The regulation lists products, suppliers, and geography among the factors, including payments routed through designated high-risk jurisdictions (31 CFR 1027.210(b)(1)(i)).

Seller identification and records

Part 1027 contains no customer identification rule for dealers, and the bank CIP rule does not apply to them. Still, a program cannot spot unusual sellers without knowing who they are, so a store will usually record a government ID, contact details, an item description, and the amount paid. State or local law may already require this. Decide what you collect at each dollar level and write it down.

Red flags and the right to walk away

The program must include reasonable inquiry and a way to refuse or terminate suspicious transactions (31 CFR 1027.210(b)(1)(ii)). For a buy counter or an import relationship, useful red flags include:

a seller who will not give complete or accurate contact information, or asks you not to keep records (both listed in the regulation);
a seller who insists on cash, wants payment split up, or asks you to pay a third party;
gold offered well below market, or new items, multiples, or freshly melted material that do not fit a household seller;
volume or frequency unusual for that seller or for walk-in sellers generally;
for imports, invoices that do not match the goods, payment routed through unrelated parties or unexpected countries, or a supplier whose size does not fit the shipment.

FATF notes that cash-for-gold businesses let criminals convert stolen gold into cash "without having to prove ownership." Suspicious activity reports are voluntary for dealers (Part 1027 has no SAR requirement), and the safe harbor protects good-faith voluntary filings. Your program should say how you decide.

Supplier due diligence for imports

For each foreign supplier, confirm its legal name, location, ownership, and licensing. Ask about its AML controls and record the answer as a risk factor. Two non-governmental standards are useful references. The OECD's Supplement on Gold names jewelry retailers among "downstream companies" and recommends they identify, "to the best of their efforts," the refiners in their supply chain (OECD Due Diligence Guidance, Third Edition, 2016). The Responsible Jewellery Council's Code of Practices requires its members to keep know-your-counterparty procedures for suppliers and customers, including identity checks against government ID and screening against government lists (RJC Code of Practices, December 2024, COP 12). Neither binds a U.S. jeweler that is not an RJC member, but both show what trading partners may ask.

OFAC screening

OFAC sanctions are separate from the BSA and apply to every U.S. person, dealer or not (OFAC FAQ 11). OFAC says civil penalties are generally based on strict liability. Screen walk-in sellers and foreign suppliers, and their owners where you can identify them, and keep OFAC records for 10 years (31 CFR 501.601; more on OFAC).

Training and testing

Train everyone who buys at the counter or places import orders. The independent tester can be an employee, but not the compliance officer or anyone involved in running the program, and the testing's scope and frequency should fit your risk assessment (31 CFR 1027.210(b)(4)).

Form 8300 is a different rule

Form 8300 applies to every business, dealer or not, and it is triggered by cash you receive. A business that "receives currency in excess of $10,000" in one transaction or related transactions must report it (31 CFR 1010.330(a)(1)(i); 26 U.S.C. 6050I). Paying a seller $12,000 in cash for scrap does not trigger one, because you paid the cash. It may still be a red flag under your program.

A cash sale over $10,000 does. So can a smaller mix. In a designated reporting transaction, such as the retail sale of a collectible like "metal, gems, stamps, or coins" (IRS Form 8300 Reference Guide, updated July 27, 2026), a cashier's check, bank draft, traveler's check, or money order with a face amount of $10,000 or less counts as cash (31 CFR 1010.330(c)). The regulation's own example: gold coins paid for with $6,200 in currency and a $7,000 cashier's check are reportable. A personal check is not cash for this purpose.

Run the numbers every year

Total last year's purchases from the public and foreign suppliers, value finished goods by metal and stone content, exclude true trade-ins, and compare to $50,000. Keep the worksheet. Under the line, it is your documented reason. Over it, it is the first page of your program.

For the general test, see Are You a Dealer Under the BSA?. The Dealer Guide and FAQ cover program elements, and Who We Serve covers retail jewelers.