Gold sourcing must be ethical and transparent to prevent conflicts, human rights violations, and financial crimes. Companies in the gold supply chain must implement due diligence measures to ensure responsible sourcing. Various regulations provide frameworks to help businesses maintain ethical practices and prevent illicit activities.
Key Regulations for Responsible Sourcing
The OECD Due Diligence Guidance provides a structured five-step framework to help companies identify, assess, and mitigate risks. It emphasizes transparency, ethical sourcing, and continuous monitoring to prevent human rights abuses and illicit financial activities.
Similarly, the Emirates Bullion Market Committee Rules set a risk-based approach for bullion traders in the UAE. These rules require enhanced due diligence for high-risk transactions and suppliers, ensuring accountability and ethical business conduct.
Additionally, the UAE Ministry of Economy Regulations align with international best practices, including OECD standards. These regulations mandate risk assessment, reporting, and documentation for all gold traders while encouraging financial institutions, refiners, and traders to implement strict compliance measures.
Key Areas of Supply Chain Due Diligence
Effective due diligence requires careful assessment of various risk factors. One of the most important considerations is geographic risks, as companies must identify the origin of gold and assess whether it comes from high-risk or conflict-affected regions. Monitoring for corruption, informal payments, and potential smuggling is also essential.
Another crucial factor is supplier risks. Conducting Know Your Customer (KYC) checks on suppliers helps businesses assess transparency in operations and ownership structures. It is important to ensure suppliers follow ethical mining and sourcing practices, minimizing exposure to illicit activities.
Additionally, companies must evaluate product risks by determining the type of gold, such as:
- Artisanal and Small-Scale Mining (ASM)
- Large-Scale Mining (LSM)
- Recyclable gold
Ensuring proper documentation and verifying purity help prevent fraud and unauthorized sourcing.
The last major consideration is delivery and transaction risks. Businesses should scrutinize delivery channels, transport security, and third-party logistics providers. Identifying suspicious payment methods, cash transactions, or mismatched delivery locations can help mitigate financial crime risks.
Identifying Red Flags
Red flags in gold sourcing can indicate unethical or high-risk practices. Some of the most common include sourcing gold from conflict-affected or sanctioned regions, dealing with suppliers with unclear sourcing records, and engaging in transactions with irregular payments or inconsistent documentation. Recognizing these warning signs allows businesses to take proactive steps in ensuring ethical sourcing.
Training & Role-Specific Responsibilities
Implementing effective due diligence requires tailored training at different levels within a company. General training ensures that employees understand responsible sourcing principles and compliance regulations. More specialized role-specific training is essential for procurement, compliance, and risk management teams, equipping them with the knowledge to monitor and enforce ethical sourcing standards.
Conclusion
Responsible gold sourcing is crucial for maintaining legal compliance and ethical business practices. By adhering to international and UAE-specific regulations, businesses can build a transparent, secure, and compliant gold supply chain. Implementing strong due diligence frameworks, recognizing red flags, and ensuring proper training will help create a responsible and sustainable gold industry.
