Once strictly a cash business, the diamond industry is being dragged into modern financial life. That means accepting checks, credit cards and transfers, and informing the authorities about large or unusual sales. All that requires a mental switch from an industry that has traditionally run on the rails of trust and personal connections.

Under regulations that went into effect this week, Israeli diamond dealers are not allowed to accept more than NIS 75,000 ($21,000) in cash for a precious stone from retail customers. Dealers conducting wholesale transactions with other dealers must report transactions over NIS 50,000 ($14,000).

In addition, any deals that seem “suspicious” must be reported to the authorities. A suspicious transaction, according to the Knesset Constitution Law and Justice Committee, which issued the orders, could be “a transaction that makes no economic sense” — such as a seller offering a real “bargain” on valuable stones — as well as deals with “a client who is a resident of Saudi Arabia, Jordan, Egypt, Morocco and other countries, trade with a terrorist or terrorist organization, and dealings with a client who seems unreasonably concerned with his personal privacy.” The committee did not define just how “concerned’ a client was allowed to be before being suspected of nefarious intentions.

The new regulations are an update of laws against money laundering, which limits cash transactions between businesses in general to no more than NIS 20,000, That rule was not enforced in the diamond business. Until now, transactions in precious stones did not have to be reported at all.

The tightening of rules in the diamond business reflects a trend toward stricter regulation of cash use throughout Israel’s economy. In June, a special committee headed by Harel Locker, head of the Prime Minister’s Office, recommended the implementation of major restrictions on the use of cash. Among the recommendations are banning all cash transactions over NIS 15,000 between individuals, and NIS 7,500 between businesses or an individual and a business. The amount would drop to NIS 5,000 after an initial period. Other measures would set a limit of NIS 7,500 on a check that can be cashed, and “strongly encouraging” Israelis to adopt the use of debit cards for all transactions.

Diamond retailers and dealers, who are considered independent businesspeople, are supposed to report their volume of sales to tax authorities on a monthly or bimonthly basis, but until now there was no requirement to report individual transactions. Penalties for failing to report range from fines to criminal prosecution, because the transaction could be considered not just a financial transgression, but a violation of security laws as well — depending on who the “customer” is.

Is this the end of hundreds of years of tradition, or plugging up a major hole in the battle against money laundering? That depends on whom you ask. According to Mickey Levi, a spokesperson for the Economics Ministry, the new rule “tightens up regulations on money that taxes have not been paid on, and chokes off another route via which individuals will be able to hide illicit funds.”

Diamond merchants are understandably less enthusiastic. A picture on the diamond exchange’s website captioned “closing the deal” shows a handshake — and one of the hands is holding a spray of $100 bills.

Because unreported income is by definition difficult to trace, estimates of how much undocumented money is swimming around the Israeli economy vary widely. A recent OECD study claimed that some 7% of economic activity goes unreported, while other studies say that the figure is closer to 20% or more.

A recent report by the Paris-based Financial Action Task Force (FATF) said that diamond dealers in Belgium, Israel, India, China and the US are involved in plots to launder cash for unsavory figures, from tax cheats to terrorists. “The closed and opaque nature of the diamond markets and the high value of diamonds combined with a lack of expertise in this area on the part of the authorities have left this industry susceptible to abuse by criminals,” the group said.

Thus, a tradition that goes back hundreds of years — or at least society’s perception of that tradition — of a small, closed community of diamond dealers who buy and sell with each other, trading precious stones for precious cash on a trust basis without the need for a contract, may be falling by the wayside.

For Moti Besser, who as chairman of the Israel Diamond Exchange (Bourse) represents hundreds of dealers, the end of that tradition promises to be rough. The new rule “is a truly revolutionary change, and it is going to take a lot of time for many of us to get used to it,” he said, adding, “we may need a year and a half or so to implement it.”