PROJECTION. In the midst of the gold price boom, the LBMA aims to work with artisanal miners from several countries around the world.

The evolution of gold due diligence in the LBMA

The evolution of gold due diligence in the LBMA

PROJECTION. In the midst of the gold price boom, the LBMA aims to work with artisanal miners from several countries around the world.

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A seven-month investigation by a team of journalists from OjoPúblico's Cross-Border Network, as part of the Amazon Dirty Gold series, revealed that there is a large discrepancy between the gold produced in five Latin American countries and the tons they export. In response to a list of questions from OjoPublico, the London Bullion Market Association details the measures they are taking to ensure that the gold exported by companies linked to their organization is of legitimate origin.

14 Abril, 2024

As the international price of gold continues to break historical records, the illegal gold mining phenomenon continues to grow in the Amazon's most sensitive places: its river basins.

During this new gold rush, which has had its ups and downs over the last 10 years, the main association of buyers in the gold market assures that it continues to review and improve its due diligence standards so that refineries linked to its organization do not fall into the purchase of ore of illicit origin. 

In response to a list of questions from OjoPúblico, as part of the cross-border Amazon Dirty Gold investigative series, the London Bullion Market Association, the guild that sets the standards for the world's gold and silver supply chain, explained how its programs and its decision to work with artisanal miners in various countries around the world have changed.

The LBMA, which also coordinates a list of refineries that deliver high-quality or "Good Delivery" material, was in the crosshairs of several OjoPúblico news reports in 2015 that questioned the due diligence of companies that were certified by the LBMA on its Good Delivery list. Many of them, according to the findings of that series of reports, were exporting tons of illicitly sourced gold in South America on a regular basis.

Since then, the LBMA says much has changed in its compliance oversight processes, as illegal mining and gold laundering becomes an increasingly worrisome problem for authorities in European Union countries and the United States. 

In 2012, the LBMA began requiring refiners to begin conducting independent audits to confirm that their product is ethically sourced. 

These new standards are published in a Responsible Gold Guide and have been revised nine times since then. According to a spokesperson for the organization told OjoPúblico, this document has allowed its members that "approximately 90% of the gold mined each year has gone through an auditing process" that complies with the suggested policies of the Organization for Economic Cooperation and Development (OECD).

There are two changes that the association made in 2022 that represent one of the most important developments around new methods of laundering illegal and small-scale mining money flow. 

The most ambitious change in its policies is to increase the amount of artisanal and small-scale gold purchased directly by refiners on its good delivery list. This initiative started two years ago and so far includes seven major countries, including Peru and Colombia. 

"The LBMA wants to see illegal ASM [artisanal and small-scale mining] eliminated, but also recognizes and supports the legitimate role ASM plays in communities and economies around the world," said a spokesperson for the organization, in response to questions from OjoPúblico.

"The main objective of the ASM initiative is to address the governance challenges posed by a largely unregulated ASM market, and also to bring more material within the oversight of refiners" on the good delivery list. While artisanal and small-scale sourced gold accounts for nearly 20% of global gold production, says the LBMA, it represents 2% of the gold handled by refiners linked to its association.

In its focus countries for this initiative, the LBMA says that "we are optimistic that there should be a good amount of metal originating from ASM coming from responsible projects." Part of the initiative is to work directly with governments and members of civil society to support reforms to improve the formalization of artisanal miners.

Recycled gold trend

The second major policy change by the LBMA was recycled gold, a market that has received more attention in recent years, but is rife with opportunities to launder illegal gold. 

Several luxury jewelers such as Pandora and Prada have announced initiatives in recent years that they will purchase 100% recycled gold and silver. These initiatives are aimed in part at reducing carbon dioxide emissions. 

However, mining experts recognize that recycled gold does not ensure that the ore is from an ethical source. In many cases, illegal gold is exported as recycled gold to hide its true point of origin.

"The LBMA is very aware of the risks associated with recycled gold," the spokesperson told OjoPublico. The LBMA disaggregates recycled material from its source data from refiners to monitor anomalies in the system. 

According to LBMA standards, there are three mineral sources that are strictly prohibited within refineries on its good delivery list. These include gold mined from areas recognized as World Heritage Sites; mined or recycled gold that is in violation of international sanctions stipulated by the United Nations, United States, United Kingdom, European Union or other countries; or mined or recycled gold that includes companies in its supply chain that are known for money laundering, fraud or terrorism, or that have been implicated in serious human rights abuses, or direct or indirect support to illegitimate organized armed groups.



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