Evaluating Cash Dependency on Money Laundering Vulnerabilities in Dealers of Precious Metals and Stones in India

Money laundering poses a significant threat to the integrity of financial systems, particularly in cash-intensive industries such as trading in precious metals and stones (PMS). This study explores how the use of cash by small-scale jewellers in India increases their vulnerability to money laundering activities. Applying a mixed qualitative research approach, the study employs both exploratory and phenomenological methods to analyze industry behaviour, determine regulatory loopholes, and evaluate compliance-related challenges. Data were collected using semi-structured interviews with jewellers within Kerala, Rajasthan, Karnataka, and Tamil Nadu. They were then analyzed using thematic coding, sentiment analysis, and topic modelling (LDA) with the help of Python. The findings show that trust-based transactions, invoice manipulation through making charges, and regulatory arbitrage enable money laundering activities by informal networks. Despite existing de jure rules, a de facto enforcement gap allows illicit practices to continue. The research emphasizes how sincere jewellers hesitate to report malpractices because of industry criticism and competitive losses. To overcome such weaknesses, the researchers suggest enacting a floor price for a minimum making charge, enhancing compliance with AML through electronic documentation (CBDCs), and increasing regulatory coverage with tailored risk management models for small-scale jewellers. These results add to the general knowledge of financial crime in cash-intensive enterprises and provide policy interventions to formalize the industry.