KYC Procedures in Precious Metals
KYC (Know Your Customer) in precious metals is the process of verifying, before any commercial step, exactly who each party to a transaction is: legal identity, beneficial ownership, licences and authorisations, and the legitimacy of their role in the deal. In gold trading KYC runs in both directions — sellers verify buyers, buyers verify sellers, and banks verify everyone — because each party's compliance standing affects whether the transaction can be financed, shipped and settled at all.
What KYC Establishes
- Legal identity — the counterparty exists: certificates of incorporation, registries, registered addresses, directors.
- Beneficial ownership — the natural persons who ultimately own or control the entity, typically at a 25%+ threshold, evidenced and screened.
- Authority — the individuals negotiating actually represent the entity: board resolutions, powers of attorney, passports of signatories.
- Licences — the permissions the counterparty's role requires: mining or export licences for sellers, dealing registrations for traders, regulatory standing for banks.
- Profile coherence — the deal makes sense for this counterparty: volumes plausible for their source, funds consistent with their business, history consistent with their claims.
The Typical KYC Document Exchange
In a physical gold transaction, parties commonly exchange a KYC pack early — before instruments, before shipment, often before detailed commercial negotiation:
| Seller-side | Buyer-side |
|---|---|
| Certificate of incorporation and corporate registry extract | Certificate of incorporation and registry extract |
| Beneficial ownership declaration | Beneficial ownership declaration |
| Export licence / dealing authorisation | Evidence of regulatory standing where applicable |
| Passport copies of signatories | Passport copies of signatories |
| Evidence of metal origin and supply capability | Banking references / evidence of capability to transact |
Each side independently verifies what it receives — against public registries, licence databases and screening tools — rather than accepting documents at face value.
Screening
Every identified party and beneficial owner is screened against sanctions lists, politically-exposed-person (PEP) databases and adverse media. Sanctions screening is binary — a listed party ends the transaction (see Sanctions Compliance); PEP and adverse-media hits trigger enhanced due diligence rather than automatic refusal.
Example
A facilitator introduced to a new doré supplier requests the KYC pack before discussing price. The corporate documents check out against the national registry; the export licence is verified with the issuing ministry; beneficial owners screen clean. One signatory's passport, however, does not match the name on the board resolution. The discrepancy is resolved — a legitimate name change, documented — before the relationship proceeds to a sample shipment. Without that resolution, no contract, no instrument, no shipment: in professional gold trading, unresolved KYC questions stop deals.
KYC Is Continuous, Not One-Off
Counterparty risk changes. Licences expire, ownership changes hands, sanctions lists update weekly. Ongoing relationships — especially off-take programmes — require periodic KYC refresh and continuous screening, and any material change (new shareholders, new bank, new origin) re-opens the review. Reputable counterparties expect this; resistance to routine KYC refresh is itself a warning sign.
Why Sellers Should Welcome KYC
Sellers sometimes treat buyer-side KYC requests as intrusive. The opposite framing is correct: a buyer that runs serious KYC is a buyer with real banking relationships and a real compliance function — exactly the counterparty a genuine seller wants. The buyers to avoid are the ones who ask for nothing.
Key Takeaways
- KYC verifies legal identity, beneficial ownership, signatory authority, licences and profile coherence — before any commercial step.
- Both sides exchange and independently verify KYC packs; banks then run their own checks on everyone.
- All parties and beneficial owners are screened against sanctions, PEP and adverse-media databases.
- KYC is continuous: licences, ownership and sanctions lists change, and material changes re-open review.
- A counterparty that asks for no KYC is a bigger red flag than one that asks for plenty.
Frequently Asked Questions
What documents are in a standard gold trading KYC pack?
Certificate of incorporation, corporate registry extract, beneficial ownership declaration, signatory passports and authorisations, relevant licences (export, dealing), and evidence of capability — metal origin for sellers, banking standing for buyers.
What is a beneficial owner?
The natural person(s) who ultimately own or control an entity — commonly identified at a threshold of 25% ownership or control. KYC requires looking through corporate layers to real people.
How long does KYC take in a gold transaction?
Days to weeks for a first relationship, depending on jurisdictions and how quickly documents verify. Established relationships transact much faster — one reason long-term supply programmes are commercially attractive.
Who performs KYC — the parties or the banks?
Both. Each party diligences the other for its own protection and regulatory duty, and the banks issuing instruments independently review all parties. A transaction must clear every layer.
What is a PEP?
A politically exposed person — someone holding or close to prominent public office. PEP involvement doesn't bar a deal but mandates enhanced due diligence on source of funds and wealth.