The International Financial Services Centres Authority (IFSCA) has issued a circular addressing the obligations of Vault Managers within the International Financial Services Centre (IFSC) concerning Customer Due Diligence (CDD) and the maintenance of supply chain integrity for bullion. Referencing the IFSCA (Anti Money Laundering, Counter Terrorist-Financing and Know Your Customer) Guidelines, 2022, and the IFSCA Circular on Operating Guidelines on Bullion Exchange, Bullion Clearing Corporation, Bullion Depository and Vault Manager dated August 25, 2021, the circular provides specific clarifications for regulated entities. It explicitly states that Vault Managers, as regulated entities, are required to conduct appropriate due diligence on customers who are the ultimate beneficial owners of Bullion Depository Receipts (BDRs). This obligation extends to all customers, including overseas suppliers and buyers, entities within GIFT-IFSC, domestic participants like Qualified Jewellers and India-UAE CEPA TRQ holders, and members of the Bullion Exchange.
To facilitate this process, the circular suggests that Vault Managers may coordinate with bullion depositories to access complete customer records and verified due diligence documents. While Vault Managers can rely on the CDD conducted by the Bullion Depository, this reliance does not absolve them from their regulatory responsibility to perform an independent due diligence and assessment of all customers engaging in transactions on the Bullion Exchange. Furthermore, the IFSCA mandates that Vault Managers enter into agreements with partner logistics service providers located overseas. These agreements must explicitly stipulate that the logistics providers are obligated to undertake CDD on the bullion suppliers in accordance with the Financial Action Task Force (FATF) guidelines or the regulatory framework of the supplier’s jurisdiction, whichever is more stringent.
Regarding the maintenance of supply chain integrity during the supply of bullion, the circular outlines specific requirements that Vault Managers must adhere to under the Bullion Guidelines. They must ensure the integrity of the bullion supply chain from its origin, ensuring that the bullion does not leave the custody of the Vault Manager or their authorized partner logistics provider at any stage. This requirement must be incorporated into their formal contractual arrangements. These arrangements must also guarantee that once the bullion is procured by the supplier from an overseas refinery, it remains continuously within the custody of either the authorized logistics entity or any other authorized entity involved in the collection, storage, transportation, and delivery until it is received and vaulted by the Vault Manager. The circular specifies that the Bullion Depository will be responsible for ensuring the Vault Manager’s compliance with these stipulations. This circular, issued under the powers granted by the International Financial Services Centres Authority Act, 2019, and the International Financial Services Centres Authority (Bullion Market) Regulations, 2025, takes immediate effect and is available on the IFSCA website.
International Financial Services Centres Authority
Circular F. No. IFSCA-DMC0MSD/1/2024-Dept. of Metals and Commodities/01 Dated: April 22, 2025
To,
Vault Managers in the International Financial Services Centre (IFSC)
Bullion MIIs in the IFSC
All market participants on the Bullion Exchange in the IFSC
Dear Sir/Madam
Subject: Clarification on conducting Customer Due Diligence (CDD) and Maintenance of Supply Chain Integrity by the Vault Managers
1. This has reference to the following:
a. Conducting CDD by the regulated entities under the IFSCA (Anti Money Laundering, Counter Terrorist-Financing and Know Your Customer) Guidelines, 2022 (hereinafter referred to as ‘IFSCA (KYC/AML-CFT) Guidelines’) dated October 31, 2022; and
b. Maintenance of Supply Chain Integrity as referenced in the IFSCA Circular on Operating Guidelines on Bullion Exchange, Bullion Clearing Corporation, Bullion Depository and Vault Manager dated August 25, 2021 (hereinafter referred to as ‘Bullion Guidelines’).
2. In this regard, the clarification on the aforementioned aspects is as follows:
A. Conducting CDD by the Vault Manager under the IFSCA (KYC/AML-CFT) Guidelines-
a. Vault Manager is a ‘regulated entity’ under the IFSCA KYC/AML-CFT Guidelines, thus, in accordance with the said guidelines, they shall conduct appropriate due diligence of customers who are the ultimate beneficial owners of the Bullion Depository Receipts (BDRs).
Explanation: For removal of doubts, it is hereby clarified that, the above requirement shall be applicable for all customers such as suppliers or buyers located overseas, within the GIFT-IFSC, or in the domestic territory (such as Qualified Jewellers/valid India- UAE CEPA TRQ holder), or members of the Bullion Exchange.
b. The Vault Manager may coordinate with the bullion depository to ensure that the complete records of all the customers including duly verified due diligence documents are made available as and when requested.
c. Notwithstanding anything contained above, the Vault Manager may place reliance on the CDD conducted by the Bullion Depository, subject to the provisions of IFSCA KYC/AML-CFT Guidelines. However, such reliance shall not absolve the Vault Manager from its regulatory obligation to undertake an independent due diligence and assessment of all customers being onboarded for the purpose of engaging in transactions on the Bullion Exchange.
d. The Vault Manager shall enter into agreements with partner logistics service providers located overseas, the terms of such agreements shall expressly stipulate that the said logistics service providers shall be obligated to undertake CDD in respect of the suppliers of the Bullion being transported, in accordance with the applicable guidelines issued by the Financial Action Task Force (FATF) or the regulatory framework of the jurisdiction from where the supplier is transacting, whichever is stringent.
b. Maintenance of Supply Chain Integrity during the Supply of Bullion by Vault Manager:
The compliance of the following requirements shall be deemed/treated as Maintenance of Supply Chain Integrity under the Bullion Guidelines: –
a. The Vault Manager shall ensure the integrity of the supply chain in respect of Bullion sourced from the jurisdiction of origin. At no stage the Bullion shall exit the custody of the Vault Manager or its authorized partner logistics service provider; and the Vault Manager shall incorporate such requirement in their formal contractual arrangements.
b. Such contractual arrangements shall ensure that the Bullion once procured by the supplier from the overseas refinery, remains continuously within the custody of either the authorized partner logistics entity or any other authorized entity engaged in the collection, storage, transportation, and delivery of the said Bullion. This custodial chain shall remain intact throughout the entire delivery lifecycle until the Bullion is duly received and vaulted by the Vault Manager.
3. The responsibility of compliance of clause (2) of this circular, by the Vault Manager, shall be ensured by the Bullion Depository.
4. This Circular has been issued in exercise of the powers conferred under section 12 and 13 of the International Financial Services Centres Authority Act, 2019 r/w Regulation 76 of the International Financial Services Centres Authority (Bullion Market) Regulations, 2025 and this Circular shall come into immediate effect.
5. A copy of this circular is available on the website of the International Financial Services Centres Authority at ifsca.gov. inat “Legal->Circulars”.
Yours faithfully
(Ramakrishnan Padmanabhan)
General Manager
Department of Metals and Commodities
email: ramakrishnan.pad@ifsca.gov.in
Tel: +91 79 61809849
