Martello Risk https://martellorisk.com/ We are a leading provider of independent, third-party supply chain audits Wed, 22 Mar 2023 10:19:52 +0000 en-US hourly 1 https://wordpress.org/?v=6.3.3 179264194 BENEATH THE SHINE: A TALE OF TWO GOLD REFINERSGLOBAL WITNES https://martellorisk.com/gold_drug_money-2-2/ Sat, 25 Jul 2020 09:19:13 +0000 https://martellorisk.com/?p=2164 How the world’s biggest gold refiner is sourcing from a company that has bought gold linked to militias in Sudan The world’s largest gold refiner, Switzerland-based Valcambi, has sourced over 20 tonnes of gold from UAE-based refiner and gold trader Kaloti, which likely purchased Sudanese...

The post BENEATH THE SHINE: A TALE OF TWO GOLD REFINERS<h6>GLOBAL WITNES</h6> appeared first on Martello Risk.

]]>
How the world’s biggest gold refiner is sourcing from a company that has bought gold linked to militias in Sudan

The world’s largest gold refiner, Switzerland-based Valcambi, has sourced over 20 tonnes of gold from UAE-based refiner and gold trader Kaloti, which likely purchased Sudanese conflict gold in 2012 and was at high risk of doing so in subsequent years, our new investigation reveals.

Valcambi bars sold in Dubai. Michael Gibb

Valcambi bars sold in Dubai. Global Witness

In 2012 Kaloti likely sourced at least 20 tonnes of gold linked to armed groups in Darfur, Sudan, scene of a long-running conflict and alleged genocide, and it continued to buy gold potentially linked to conflict from the Central Bank of Sudan between 2013 and 2019. Despite this, Valcambi appears to have ignored obvious signs that Kaloti’s gold might be linked to conflict.

KEY FINDINGS

We reveal that Kaloti sourced over 57 tonnes of Sudanese gold in 2012 alone. The UN has estimated that at least 30 of the 65 tonnes of gold that Sudan exported to the UAE that year were connected to militias in Darfur, where a gold rush had just begun.

Since then, Kaloti has continued to acquire gold from the Central Bank of Sudan. At various points between 2012 and 2019, the Central Bank bought gold connected to armed groups involved in fighting for control of the Darfur mines. This included purchasing gold from a company linked to the Rapid Support Forces (RSF). The RSF is currently Sudan’s most powerful paramilitary group and was reportedly involved in massacring over 100 pro-democracy demonstrators in Khartoum in 2019. That year the Central Bank appears to have bought gold from mines occupied by another armed group, the Sudan Liberation Army/Abdul Wahid, which has engaged in killings, kidnapping, torture, extortion and forced labour.

In spite of Kaloti sourcing from the Central Bank of Sudan, a high-risk supplier linked to conflict, Valcambi acquired around 20 tonnes of gold directly from Kaloti in 2018 and 2019. During that same period, Valcambi also sourced over 60 tonnes of gold from Trust One Financial Services Ltd, a UK-registered company whose directors include Kaloti Group founder Munir Kaloti’s son.

While Valcambi presents itself as an industry pioneer in responsible sourcing and claims to go above and beyond the internationally recognised OECD due diligence standards, it is contravening those very standards by failing to scrutinise Kaloti’s irresponsible sourcing practices and continuing to source gold from the problematic refiner.

New Kaloti refinery

Kaloti’s new refinery in the heart of the Dubai Multi Commodities Centre free trade zone. Global Witness

Our findings severely undermine the credibility of the London Bullion Market Association (LBMA), the gold sector’s premier accreditation body, which has continued to include Valcambi on its Good Delivery List. Any company on this list is supposedly required to carry out robust supply chain due diligence, which Valcambi has seemingly failed to do of Kaloti. The gaps in the LBMA’s responsible sourcing standards and the body’s apparent lack of oversight of Valcambi has facilitated the company’s due diligence failures vis-à-vis Kaloti. Valcambi’s auditor KPMG also appears to have turned a blind eye to Valcambi’s sourcing from a high-risk supplier.

These failures in Valcambi’s audit process recalls the scandal exposed by the 2014 Global Witness report City of Gold, in which auditor Ernst & Young (EY) and the Dubai Multi Commodities Centre (DMCC) – against whose ‘Dubai Good Delivery Standard Kaloti’ was audited – colluded with Kaloti to hide its involvement in gold smuggling. Our new report reveals that EY’s successor Grant Thornton also helped Kaloti to downplay due diligence failures.

The governments in jurisdictions where these refiners are based are also part of the problem, as they solely seem to rely on the sector’s inadequate attempts at self-policing instead of taking responsibility for stopping the gold trade from fuelling and funding conflict and human rights abuses. The UAE, a notorious hub for high-risk gold, does little to enforce due diligence requirements and Switzerland lacks any meaningful legislation of responsible sourcing. These regulatory weaknesses mean that conflict gold could still be finding its way into reputable markets.

Both Kaloti and Valcambi have denied Global Witness’ findings and claimed they conduct enhanced due diligence when sourcing from conflict-affected and high-risk areas.

RECOMMENDATIONS

To address the systemic problems in the gold industry and break its ties with conflict and human rights abuses, Global Witness is calling on:

  • the UAE and Swiss authorities to adopt and enforce stringent legislation on supply chain due diligence.
  • accreditation bodies such as the DMCC and LBMA to ensure that refiners properly adhere to their due diligence standards, that audits are carried out in a meaningful way and that adequate sanctions are imposed on refiners that breach their standards.
  • Valcambi and other refiners to ensure, in line with the OECD Guidance, that they have effective due diligence systems and that they do not source conflict gold nor source from companies that could be accepting conflict gold.

The post BENEATH THE SHINE: A TALE OF TWO GOLD REFINERS<h6>GLOBAL WITNES</h6> appeared first on Martello Risk.

]]>
2164
Ex-EY whistleblower wins $10.8m in damages’BBC News https://martellorisk.com/ex-ey-whistleblower-wins-10-8m-in-damagesbbc-news/ Mon, 20 Apr 2020 13:03:35 +0000 http://martellorisk.com/?p=1245 Accountancy firm EY has been ordered to pay $10.8m in damages to a whistleblower who claimed it covered up evidence of money laundering. Auditor Amjad Rihan sued EY after being forced out of his job in 2014. A year earlier, Mr Rihan led an audit...

The post Ex-EY whistleblower wins $10.8m in damages’<h6>BBC News</h6> appeared first on Martello Risk.

]]>
Accountancy firm EY has been ordered to pay $10.8m in damages to a whistleblower who claimed it covered up evidence of money laundering.

Auditor Amjad Rihan sued EY after being forced out of his job in 2014.

A year earlier, Mr Rihan led an audit that discovered Dubai’s biggest gold refiner Kaloti had paid out a total of $5.2bn (£4bn) in cash in 2012.

Mr Rihan argued it was evidence of money laundering – but EY didn’t report the activity to the authorities.

EY then helped to cover up a crime – the export to Kaloti in Dubai of gold bars that had been disguised as silver to avoid export limits on gold.

A BBC Panorama investigation last year revealed the smuggled gold Mr Rihan uncovered at Kaloti was owned by a criminal gang that laundered money for British drug dealers.

The gang had collected cash from drug dealers in the UK and other European countries. They then laundered the dirty money by buying and selling black market gold.

Documents seen by Panorama and French news agency Premieres Lignes showed that Renade International – a company owned by a member of the money laundering gang – sold $146m (£114m) of gold to Kaloti in 2012 alone.

Twenty-seven members of the money laundering gang were jailed in France in 2017. Kaloti denies any wrongdoing.

Silver and gold

Panorama saw a number of drafts of a Kaloti compliance report to a Dubai regulator. In the initial report, Kaloti seemed to admit buying gold coated with silver. It said: “We acknowledge an incident… with the bars coated with silver.”

But EY rewrote the report so that it said: “We acknowledge transactions… in which there were certain documentary irregularities.”

The accountancy firm turned the crime into a “documentary irregularity”.

On Friday Mr Justice Kerr ruled that EY’s behaviour amounted to professional misconduct, and that EY bosses were “responsible for suggesting to Kaloti that it should draft its compliance report in a manner that masked the reality of the Morocco gold issue”

The court found EY breached the Code of Ethics for Professional Accountants, and that it had a duty of care to take reasonable steps to protect Mr Rihan “against economic loss, in the form of loss of future employment opportunity, by providing an ethically safe work environment, free from professional misconduct”

‘Total vindication’

The court awarded Mr Rihan $10,843,941 in US dollars and £117,950 in damages.

Mr Rihan said: “Almost seven years of agony for me and my family has come to an end with a total vindication by the court. My life was turned upside down as I was cruelly and harshly punished for insisting on doing my job ethically, professionally and lawfully in relation to the gold audits in Dubai.”

“I really hope EY will use this judgement as an opportunity to improve – to avoid such events happening again in the future,” he added.

Mr Rihan’s solicitor Paul Dowling from law firm Leigh Day said: “I am delighted that our client has finally received justice in his case. This important judgment sends a clear message to would-be whistleblowers that they do not have to tolerate unethical conduct within their organisation, no matter how high up the chain it goes.”

EY has told the BBC it is “surprised and disappointed by the judge’s decision” and will appeal the ruling.

In a statement, EY said: “It was the work of an EY Dubai assurance team that uncovered serious irregularities and reported them to the proper authorities. Their work ultimately resulted in sanctions against the refiner and contributed to significant changes in the sourcing of precious metals and the regulation of refiners in Dubai”.

 

The post Ex-EY whistleblower wins $10.8m in damages’<h6>BBC News</h6> appeared first on Martello Risk.

]]>
1245
EY: Gold, drug money and a major auditor’s ‘cover-up’Andy Verity and Tim Robinson, BBC Panorama https://martellorisk.com/gold_drug_money/ Tue, 29 Oct 2019 12:31:09 +0000 http://martellorisk.com/?p=1224 A major accountancy firm covered up evidence of smuggling by an organised crime gang that was laundering British drug money, an investigation has revealed. A major accountancy firm covered up evidence of smuggling by an organised crime gang that was laundering British drug money, an...

The post EY: Gold, drug money and a major auditor’s ‘cover-up’<h6>Andy Verity and Tim Robinson, BBC Panorama</h6> appeared first on Martello Risk.

]]>
A major accountancy firm covered up evidence of smuggling by an organised crime gang that was laundering British drug money, an investigation has revealed.

A major accountancy firm covered up evidence of smuggling by an organised crime gang that was laundering British drug money, an investigation has revealed.

EY failed to report suspicious activity at one of the world’s largest gold refineries and then altered a compliance report to hide the crime.

BBC Panorama found the gang laundered money by selling 3.6 tonnes of gold to the Kaloti refinery in Dubai.

Both EY and Kaloti deny any wrongdoing.

Twenty-seven members of the money laundering gang were jailed in France in 2017.

The gang had collected cash from drug dealers in the UK and other European countries. They then laundered the dirty money by buying and selling black market gold.

Documents seen by Panorama and French news agency Premieres Lignes show that Renade International – a company owned by a member of the money laundering gang – sold $146m (£114m) of gold to Kaloti in 2012 alone.

The following year the accountancy firm EY, formerly known as Ernst and Young, had been asked to conduct a review of Kaloti’s compliance with rules designed to keep gold from illegitimate sources out of the global supply chain.

Smuggled gold

The auditors discovered that Kaloti had paid out a total of $5.2bn (£4bn) in cash in 2012, but EY didn’t report suspicious activity to the money laundering authorities.

EY also helped to cover up a crime – the export to Dubai of gold bars that had been disguised as silver to avoid export limits on gold.

The audit team had been shown what appeared to be bars of silver from Morocco, but scratching the surface revealed they were really gold bars coated silver.

The BBC and Premieres Lignes have now discovered the smuggled gold was owned by the money laundering gang’s company, Renade International.

Amjad Rihan was the lead auditor for EY in Dubai in 2013 and he says he wanted to report the suspicious activity at the time. But he says his bosses watered down reports and told him not to tell the authorities.

“If you identify a suspicious transaction you should report it to the authorities and what we identified was way beyond suspicion. Instead of reporting the crimes that I told them about, my bosses just covered them up,” he said.

EY did not just fail to report the crime – it helped to cover it up too.

Panorama has seen a number of drafts of a compliance report to a Dubai regulator. In the initial report, Kaloti seems to admit buying gold coated with silver. It says: “We acknowledge an incident… with the bars coated with silver.”

Suspicious activity

But EY rewrote the report so that it said: “We acknowledge transactions… in which there were certain documentary irregularities.”

The accountancy firm turned the crime into a “documentary irregularity”.

EY declined to comment about the rewriting of the report but said it was confident that all legal and reporting obligations had been complied with. The company said it had delivered its findings to the relevant regulator in Dubai.

 

The company said: “It was the work of EY Dubai that brought to light Kaloti’s non-compliance with the applicable regulations and ultimately resulted in the remediation of the issues.

“More recently, and many years after these events, Mr Rihan has raised certain unfounded allegations in a legal claim which is being vigorously defended.”

Under the Proceeds of Crime Act, accountants have a legal duty to report any suspicious activity to the police.

In its legal dispute with Mr Rihan, EY admits that the disguised gold “provided reasonable grounds for knowing or suspecting… money laundering.”

‘Appropriate checks’

But the accountancy firm claims it did not have to report this to the police because its auditors were not doing accountancy work at Kaloti.

Kaloti said that it had conducted all appropriate anti-money laundering checks.

“Kaloti would not knowingly enter into a trading relationship with any party in the knowledge that such party had been engaged in financial impropriety or criminal activity of any kind.

“It is categorically denied that Kaloti purchased gold coated in silver from Renade, or anyone else for that matter.”

The company said that cash payments were common in Dubai, but it no longer buys gold for cash.

 

The post EY: Gold, drug money and a major auditor’s ‘cover-up’<h6>Andy Verity and Tim Robinson, BBC Panorama</h6> appeared first on Martello Risk.

]]>
1224
Illegal gold trade in Congo still benefiting armed groups, foreign companiesCecilia Jamasmie https://martellorisk.com/panama-papers-the-drcs-gold-standard-2-2-2/ Tue, 05 Jul 2016 16:15:43 +0000 http://martellorisk.com/?p=1121 International regulations have failed to prevent foreign firms and armed groups from profiting from illegal gold mining in mineral-rich eastern Democratic Republic of Congo, a new report by Global Witness shows. Illegally acquired and exported gold from the mineral-rich eastern Congo keeps filling the pockets of some foreign...

The post Illegal gold trade in Congo still benefiting armed groups, foreign companies<h6>Cecilia Jamasmie</h6> appeared first on Martello Risk.

]]>
International regulations have failed to prevent foreign firms and armed groups from profiting from illegal gold mining in mineral-rich eastern Democratic Republic of Congo, a new report by Global Witness shows.

Illegally acquired and exported gold from the mineral-rich eastern Congo keeps filling the pockets of some foreign companies as well as armed groups.

According to the UK-based organization, which campaigns against natural resource-related conflict and corruption, up to $17 million worth of gold produced by Chinese firm Kun Hou Mining went missing during a 12-month period between 2014 and 2015. The document adds that the metal was very likely to have been “smuggled out of Congo into international supply chains.”

Illegal gold trade has also benefitted Congo-based armed groups, which made as much as $25,000 a month in illegal taxes charged to artisanal diggers and received at least two assault rifles and $4,000 from the company over a two-year period, Global Witness says.

Global regulations in place since the beginning of the decade, such as the Organization for Economic Cooperation and Development guidelines on responsible mineral-supply chains and the U.S. Dodd-Frank Act, have been more successful when it comes to limiting illegal trade of the so-called conflict minerals.

Insurgents and elements of government forces in the DRC control some 65% of the country’s gold mines, which are the foundation for an international smuggling network worth an estimated $400 million a year.

Illicit mining of tin, tantalum, tungsten and coltan, which are key in the production of smart phones and other high tech devices, has been reduced to a minimum, according to another research, conducted by the ENOUGH Project, an anti-genocide campaign group.

They said that while conflict mineral used to provide armed groups with about $185 million a year, by 2014 only one-thirds of those mines were still controlled by warlords. But contraband of gold remains a large source of income for those groups, they warned.

Insurgents and elements of government forces in the DRC control some 65% of the country’s gold mines, which are the foundation for an international smuggling network worth an estimated $400 million a year, the ENOUGH Project said in a February update.

Much of the smuggled gold is sold to buying houses in Dubai, the report notes. In other cases, provincial authorities in South Kivu falsified documents to obscure the link between gold and non-validated mining sites, it says.

According to DRC government statistics, artisanal and small-scale mines (ASMs) produced 548.43 kg of gold last year, but the country’s Chamber of Mines said in February that as much as 400 kilograms of illegal gold leave the South Kivu province alone every month.

The post Illegal gold trade in Congo still benefiting armed groups, foreign companies<h6>Cecilia Jamasmie</h6> appeared first on Martello Risk.

]]>
1121
AFRICA | REBELS, ARMY SEEN PROFITING FROM CONGO GOLD DESPITE CONTROLS https://martellorisk.com/panama-papers-the-drcs-gold-standard-2-2/ Mon, 27 Jun 2016 13:53:23 +0000 http://martellorisk.com/?p=1067 International regulations aimed at curbing the trade in so-called conflict minerals have failed to stop rebel groups and elements of the army in eastern Democratic Republic of Congo profiting from gold mining in the region, according to a United Nations group of experts. The lack...

The post AFRICA | REBELS, ARMY SEEN PROFITING FROM CONGO GOLD DESPITE CONTROLS appeared first on Martello Risk.

]]>
International regulations aimed at curbing the trade in so-called conflict minerals have failed to stop rebel groups and elements of the army in eastern Democratic Republic of Congo profiting from gold mining in the region, according to a United Nations group of experts.

The lack of a functioning traceability system for gold is a “particular area of concern,” the panel, which monitor sanctions on the Congo, said in a report to the UN Security Council published June 16. “Gold from non-validated mining sites, and therefore possibly benefiting armed groups, is laundered into the legitimate supply chain and, subsequently, into the international market,” it said.

Gold production has increased exponentially in Congo from almost nothing in 2011 to 25.5 metric tons (820,000 troy ounces) last year, as commercial mines run by London-listed Randgold Resources Ltd. and Toronto-based Banro Corp. have started up. Officially, only 583 kilograms of gold was produced by artisanal and small-scale miners last year, much of which was sold in Dubai, the panel said, citing government statistics. The real figure is suspected to be much higher, it said.

Congo’s Chamber of Mines in February said that as much as 400 kilograms of illegal gold leaves the South Kivu province alone every month. Congolese exporters under-declared exports by as much as USD174 million in 2015, depriving the state of tax revenue, the panel said in the report.

Since 2010, when the U.S. Dodd-Frank Wall Street Reform and Consumer Protection Act included a requirement for listed companies to disclose their use of conflict minerals – tantalum, tin, tungsten and gold – sourced from Congo and adjacent countries, significant efforts have been made to clean up mineral-supply chains in the region.

Due diligence and traceability programs for tin, tantalum and tungsten have reduced opportunities for armed groups, of which at least 60 continue to operate in eastern Congo, to profit from trade in the minerals. No comparable program has been introduced for gold, which is more transportable and more valuable, leading to an increase in illegal gold mining.

The UN experts found that Congolese exporters are ignoring due diligence requirements to source gold from validated mining sites, aggregating metal sourced from multiple sites, some which are not validated, and under-declaring exports to national and provincial authorities. In doing so, exporters in the Congo are “enabling the laundering of illegitimate gold that is not conflict-free into the international supply chain,” according to the report.

In one example, five dredge owners operating on the Lubero River in North Kivu province told the UN experts that members of the rebel Democratic Forces for the Liberation of Rwanda were enforcing a tax of 5 grams (0.16 ounces) of gold a month, worth about $205 at current prices.

In South Kivu province, the UN experts said that members of the Congolese armed forces were controlling parts of the gold trade in the Misisi area. Soldiers operate an illegal barrier between mining and processing areas, collecting 500 Congolese francs ($0.52) from each digger entering the mine and 1,000 francs from those bringing product back out, the group said.

To address the problem, the military in March told the UN it would rotate all officials working in the area in the near future. Tom Wilson, Bloomberg

The post AFRICA | REBELS, ARMY SEEN PROFITING FROM CONGO GOLD DESPITE CONTROLS appeared first on Martello Risk.

]]>
1067
DRC resource curse still in play https://martellorisk.com/panama-papers-the-drcs-gold-standard-2/ Mon, 27 Jun 2016 13:29:20 +0000 http://martellorisk.com/?p=1064 A United Nations report published last week suggests the trade of conflict minerals in the Democratic Republic of Congo is alive and well despite international regulations designed to curb the practice. Factions of the army along with rebel groups in the east of the country...

The post DRC resource curse still in play appeared first on Martello Risk.

]]>
A United Nations report published last week suggests the trade of conflict minerals in the Democratic Republic of Congo is alive and well despite international regulations designed to curb the practice.

Factions of the army along with rebel groups in the east of the country are said to be profiting from gold mining in the region, according to a Bloomberg report citing an expert UN panel.

The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act forced listed companies to disclose the use of conflict minerals – namely  tantalum, tin, tungsten and gold – in order to choke off illegal industry, but Bloomberg cited Chamber of Mines numbers that suggested the rate of gold exports from South Kivu had reached 3.6t per annum.

The UN said Congolese exporters were ignoring due diligence requirements in sourcing gold from validated operations; aggregating metal sourced from multiple sites, some which are not validated; and under-declaring exports to national and provincial authorities, according to the Bloomberg report.

This enabled the “laundering of illegitimate gold that is not conflict-free into the international supply chain”.

The report, if accurate, is a blow to the industry, the people of the DRC and the regulators, which had been hoping Dodd-Frank would be a watershed moment in the fight against exploitation for minerals.

The fear for downstream companies already forced into costly compliance procedures as the result of Dodd-Frank and associated legislation is regulating bodies will up the ante, increasing compliance and reporting obligations even further.

The post DRC resource curse still in play appeared first on Martello Risk.

]]>
1064