From the desk of Sudarshana — 25+ years in the jewellery industry
Old gold purchase (OGP) is a core transaction in most Sri Lankan jewellery retail operations. A customer brings in old gold — jewellery, coins, bars — and the shop purchases it, either paying cash or setting the value off against a new purchase. The transaction involves a physical asset being handed over at the counter in exchange for value.
This creates a uniquely difficult fraud control problem. Unlike a sale — where a customer receives an item and is motivated to ensure the transaction is recorded correctly — an OGP customer is handing over gold and receiving cash or credit. Once they leave the shop, they have no further stake in whether the transaction was recorded accurately in the system. A dishonest staff member can purchase gold at full value, pocket part of the cash payment, under-record the weight or value in the system, or not record the transaction at all.
The core vulnerability: OGP fraud is hard to detect because it often involves a real transaction with a real customer. The gold came in. Some payment went out. The evidence that something is wrong is in the discrepancy between what actually happened and what the system records — and in a high-volume shop, checking every OGP transaction manually is not practical.
It is important to be honest: eliminating OGP fraud completely is very difficult. A determined, sophisticated fraudster can find ways around most controls. The goal is to make fraud significantly harder, to ensure that most fraud attempts are detected quickly, and to remove the easy opportunities that account for the majority of OGP theft.
The full weight is received and the full payment made to the customer. But the system entry shows a lower weight or lower value, and the difference in payment is pocketed by the staff member.
The transaction is completed in cash. No entry is made in the system. The gold is retained by the staff member or sold privately. The cash comes from the till and is covered by a later false reconciliation.
OGP gold is collected at the branch before being sent to head office for melting or processing. During the period between purchase and dispatch, the genuine gold is substituted for lower-quality material. Head office receives less value than was purchased.
A customer and staff member collude: the system records a higher weight than was actually purchased, the payment reflects the inflated weight, and the excess payment is shared. Head office sees a normal OGP transaction.
The system I designed treats every OGP transaction as a multi-stage process with verification, visibility and handover controls at each stage. No single point of the process is unmonitored. Each stage requires a system action before the next stage can proceed.
The branch records the OGP purchase in the system: customer details, weight, purity, calculated value and payment method. This creates a locked transaction record that cannot be altered after submission. The gold balance at the branch increases immediately and is visible to head office from this moment.
The moment the OGP entry is saved, an SMS is sent automatically to the customer's registered mobile number confirming the weight and value recorded for their gold. The customer receives: "Your old gold of [X] grams has been purchased for Rs. [Y] by [Branch Name] on [Date]."
This single control eliminates under-recording fraud almost entirely. A customer who receives an SMS showing a lower weight than they handed over will call immediately. The discrepancy is surfaced in real time rather than discovered weeks later during an audit.
For customers who require stronger security — or for transactions above a threshold value set by management — the system can require OTP (one-time password) verification before the purchase is finalised. The customer receives an OTP on their registered mobile number and must provide it to the branch staff to complete the transaction.
This makes it impossible to record a fraudulent OGP transaction without the customer's active participation. Collusion is still possible, but a solo fraud by a staff member against an unknowing customer is eliminated.
From the moment a branch records an OGP purchase, the gold appears on the head office dashboard as OGP stock held at that branch. Head office knows immediately: which branch holds it, what weight, what purity and when it was purchased. No branch can hold OGP gold without head office knowing it exists.
This eliminates the window in which a branch could hold gold without accountability. Previously, gold could be purchased, held informally and either substituted or privately disposed of before head office was aware it existed.
When the branch is ready to send OGP gold to head office, the branch manager creates a formal dispatch note in the system specifying the items being dispatched, their weights and the expected date of arrival. The system records this action against the branch manager's account with a timestamp.
The gold cannot be dispatched informally. The dispatch note is the system record of the handover. Creating it is an acknowledgement by the branch that they are transferring specific gold of specific weight to head office.
Once the dispatch note is created, the gold moves from "OGP at branch" status to "OGP in transit" on the head office dashboard. Head office can see exactly what gold is on its way, from which branch, dispatched by whom and when it was sent. If gold does not arrive within a reasonable time, head office has a system record of when it was dispatched and can follow up immediately.
When the gold arrives at head office, a designated staff member weighs it, confirms it against the dispatch note and records the receipt in the system. This confirmation is a formal acceptance: the weight received is logged and compared against the weight dispatched. Any discrepancy is flagged immediately as a system alert. The responsibility for the gold transfers from the branch to head office at this moment.
After receipt confirmation, the gold enters a "Pending Action" queue on the management dashboard. It stays in this queue until management assigns it to a specific process — melting, refining, re-manufacturing or resale. No gold received as OGP can disappear from the system without a formal action record explaining what happened to it.
Once management assigns the gold to a process — for example, sending for melting — that process is tracked through the system. The weight going in to the melt, the yield coming out and any loss is recorded and compared against expected norms. The chain of custody for every gram of OGP gold is complete from the moment of purchase to the final process output.
Why this works: Each stage of the process requires a system action before the next stage can begin. No single person controls more than one stage without a handover record. The customer is informed at the point of purchase. Head office has visibility from the moment of purchase. Every transfer of responsibility is formally recorded. The complete trail from purchase to final processing cannot be broken without leaving a visible gap in the system.
Most OGP fraud relies on the absence of one or more of these controls. When all of them are present simultaneously, the opportunities for undetected fraud are very significantly reduced.
Under-recording fraud eliminated at purchase stage — the customer SMS confirms the actual recorded weight immediately.
Unrecorded purchases made almost impossible — head office sees all OGP gold from the moment of purchase entry.
Gold substitution during transit controlled — dispatch note records weight leaving branch, receipt confirmation records weight arriving at head office. Discrepancies are immediate.
Informal holding of OGP at branch eliminated — all OGP gold is visible on the head office dashboard from purchase to dispatch.
Post-receipt losses controlled — the pending action queue ensures no received OGP gold can be removed from the system without a formal process record.