In times of uncertainty, people have often turned to gold as a source of wealth and financial stability. Consumers know that gold retains value, and often choose it because of that stability in the gold as a commodity. As a jeweler, you may be tempted to shift to this business model given the economic volatility currently seen in the U.S. market. However, if you do, there are existing laws and regulations on the books you’ll want to know before you enter into this secondary market.
Most dealers are already familiar with basic anti-money laundering (AML) provisions that derive from the PATRIOT Act and the Bank Secrecy Act. Dealers in precious metals, precious stones, and jewels who do $50,000/year in purchase and sale must comply with these regulations, and compliance was enforced as of January 1, 2006. Penalties for non-compliance are severe. Many retailers, however, do not know that if they purchase from non-dealers (such as members of the public), then they too must have a compliant AML program. Under the regulations, if a dealer/retailer purchases goods from the public, they must have a program that addresses these purchases and creates oversight. Purchases from the public require fully identifying the person selling the goods to you, using “KYC” or “Know Your Counterparty” identification procedures. If a business plans to engage in these types of transactions, setting up a compliant AML program is essential.
Many jurisdictions require a secondhand dealer license for those reselling goods as well as a special pawnbroker license for those engaging in pawn transactions. If your business buys gold, silver, jewelry, or other precious metal, you likely must have a scale and inform the seller of the troy weight of the precious metal. In New York, these scales must be approved by the NY Department of Agriculture and Markets. Generally, licenses are issued by the Department of Consumer Affairs (or the equivalent in your state.) Most jurisdictions also require that purchases from customers be logged in a book (or online) and that the jewelry or precious metal purchase be held for a certain amount of time. You should get familiar with your local laws before beginning to purchase from the public.
Finally, according to the Federal Trade Commission (FTC), it’s deceptive to represent an item as new or unused when it’s not. Your customer should know if a piece is new or used when making a purchase – and this disclosure must be made prior to the sale. “Used” includes goods that are used, rebuilt, remanufactured, or reconditioned. Make sure you are disclosing relevant information about used goods to your customer, and ensuring they know what they are deciding to purchase.