IFSCA has issued a circular to clarify the responsibilities of Vault Managers operating within the IFSC, particularly in the context of the Bullion Exchange. This circular underscores two key areas: Customer Due Diligence (CDD) and Supply Chain Integrity. Both aspects are crucial to ensuring transparency, accountability, and compliance in the handling and movement of bullion.
Strengthening Customer Due Diligence (CDD)
The first part of the circular reaffirms the role of Vault Managers as regulated entities under the IFSCA’s KYC/AML-CFT Guidelines, 2022. These guidelines are designed to prevent money laundering, terrorist financing, and other financial crimes. As such, Vault Managers are now explicitly required to conduct proper due diligence on all customers associated with Bullion Depository Receipts (BDRs). This includes:
Overseas suppliers or buyers
Entities within GIFT-IFSC
Domestic participants like Qualified Jewellers or India-UAE CEPA TRQ holders
Members of the Bullion Exchange
Vault Managers may collaborate with the bullion depository to access verified documentation, but this does not exempt them from independently validating and assessing customer profiles. In other words, shared data can aid the process, but the ultimate responsibility for compliance lies with the Vault Manager.
Additionally, where logistics partners are involved—especially those operating overseas—the Vault Manager must ensure these partners also follow robust CDD protocols. These standards must align with the FATF recommendations or the stricter regulatory framework of the jurisdiction involved.
Ensuring Supply Chain Integrity
The second major focus of the circular is the need to preserve supply chain integrity throughout the bullion’s journey—from the point of origin to its final vaulting at the IFSC.
According to the new guidelines:
Bullion must never leave the custody of the Vault Manager or its authorized logistics partners during transit.
Contracts with logistics service providers must reflect this requirement, ensuring that once the bullion leaves the refinery, it remains in a tightly controlled custodial chain.
The Vault Manager must maintain end-to-end custody, ensuring transparency and reducing the risk of tampering, misrouting, or substitution.
This requirement emphasizes the importance of having secure and traceable logistics operations in place, and it aims to boost investor confidence in the integrity of the bullion trading ecosystem.
Regulatory Oversight
Responsibility for ensuring that Vault Managers comply with these clarified standards falls to the Bullion Depository. The circular, issued under the authority of the IFSCA Act, 2019, and the Bullion Market Regulations, 2025, is already in effect and can be accessed on the IFSCA website.
Conclusion
This circular represents a strong step toward enhancing regulatory rigor within India’s emerging bullion ecosystem at the IFSC. By mandating strict due diligence and secure, traceable logistics practices, the IFSCA is reinforcing its commitment to building a robust, transparent, and compliant bullion market.
