Rights Groups Claim ‘Dirty’ Gold Can Still Find Way into London Market

Human rights groups are urging the London Bullion Market Association (LBMA) to ramp up efforts to exclude “dirty gold” from the exchange’s supply chain. The LBMA oversees the worldwide over-the-counter (OTC) bullion market and has a global membership of nearly 150 refiners, traders, producers, fabricators and miners.

Referring to itself as the global precious metals authority, the London Bullion Market Association sets global standards for how companies in the mining space mine, refine and trade precious metals, including gold and silver. While the association has certainly taken steps to prevent gold associated with criminality or human rights abuses from entering its supply chain, rights groups say conflict gold still ends up in the London gold market.

A recent letter from eight mining analysis organizations to the London Bullion Market Association noted that LBMA-vetted refineries still obtain gold from “questionable sources” and allow conflict gold to infiltrate the global supply chain. According to the letter, these refineries also aren’t mitigating the environmental harm and human rights violations associated with gold mining and refining.

In response, the LBMA sent an email stating it was looking forward to discussing several proposals at an upcoming London event. The association has issued several initiatives to prevent conflict gold from passing through its refiners and legally entering bank vaults, including the establishment of the Good Delivery List (GDL), a list that outlines refiners the LBMA considers to be reputable gold sources. Members of the list are reportedly backed by due diligence systems put in place by the LBMA and are allowed to trade freely on the gold market.

However, the rights organizations said that while LBMA systems have seen “slight improvements” over the past three years, many of the refiners on its list have been found to source gold from suppliers linked to human rights abuses, money laundering, and land and water pollution. As a result, they say the exchange has allowed gold associated with human rights issues or environmental degradation to enter the worldwide gold market. The letter cited instances exposed by researchers or the media in Africa, the Middle East and Latin America but did not specify any of the refineries said to be involved with questionable gold suppliers.

The groups also said that gold refiners don’t make enough effort to engage with the communities around gold mines. The letter also noted that refiners often take advantage of the lack of strict reporting requirements to be less transparent about where they source their gold.

There is need for the entire industry to identify more robust mechanisms through which the gold from known miners such as Freeport-McMoRan Inc. (NYSE: FCX) can be clearly distinguished from the gold linked to conflicts, rights abuses and other forms of criminality.

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