Swiss refiners — chief among them Valcambi — are under scrutiny due to the high risk of conflict gold originating in Africa entering their supply chain via the United Arab Emirates. Two parallel NGO reports on the subject were published on Thursday.This content was published on July 16, 2020 - 18:00
One of the reports, Golden Detour [Détour Dorée] by Bern-based Swissaid, examines the gold trade in the UAE, with a focus on the scandal-stricken Dubai company Kaloti Precious Metals and its ties to Valcambi, a precious metal refinery based in canton Ticino. The report denounces the “hypocrisy of a system in which actors resort to intermediaries to mask the origin of gold, rather than to source directly from the origin.”
Marc Ummel, head of raw materials at Swissaid, investigated the supply chain of Swiss refineries importing gold from the UAE. He carried out field research in Dubai in early 2020 and interviewed dozens of industry insiders. The UAE exported 149 tonnes of gold, worth CHF6.8 billion ($7.2 billion), to the Alpine nation in 2019.
Dubai – portal for Africa’s artisanal miners
The true origins of at least some of that gold, according to the report, are African artisanal mines and the Dubai gold market. In 2018, half of the gold transiting through Dubai came from the African continent — much of it exported illegally and originating in conflict-stricken areas, such as the Democratic Republic of Congo and the Darfur region of Sudan.
That gold is processed by Emirati companies with which Swiss refiners have no direct ties, making it impossible to trace the metal’s origin and ensure that it is extracted under conditions that are respectful of human rights and the environment, warns the report.
“We call on Swiss refiners, which have a major impact and weight in the market, to source directly from mines and artisanal miners without going through Dubai, where you can’t even determine its point of origin,” Mr. Ummel told swissinfo.ch.
“On one end you have [Swiss gold refinery] Metalor, which says we don’t take gold from Dubai because it is impossible to trace [and] the risk of ending up with illegal gold is too high. On the other you have Valcambi, which is taking huge amounts. It’s a problem,” he added.
Valcambi is said to be the largest Swiss importer of gold from the UAE, followed by Ticino-based Argor-Heraeus in a distant second place. Between 2018 and 2019, Valcambi sourced 20.5 tonnes of gold directly from Kaloti, and over 60 tonnes from a company linked to Kaloti, Trust One Financial Services, according to both Swissaid and Global Witness, which cite industry insiders.
“It is shocking that so much gold continues to come from Kaloti after all the problems it has been implicated in,” said Mr. Ummel. “We find it very problematic that a refinery [Valcambi] certified by the London Bullions Market Association has that kind of relationship.”
The other report released on Thursday is a Global Witness investigation, Beneath the Shine: A Tale of Two Gold Refiners. It shares the Swissaid conclusion that it is likely Kaloti sourced Sudanese gold linked to conflict and human rights abuses in Darfur between 2012 and 2019. Kaloti reportedly bought gold from the Central Bank in Sudan, which got its supplies from militia-run mines in Darfur.
“Valcambi presents itself as an industry pioneer in responsible sourcing and claims to go above and beyond the internationally recognised OECD due diligence standards, yet it is contravening those very standards by failing to scrutinise Kaloti’s irresponsible sourcing practices and continuing to source gold from the problematic refiner,” said Seema Joshi of Global Witness.
Valcambi has not replied to a swissinfo.ch request for comment. The Swissaid reports quotes Valcambi CEO Michael Mesaric as saying: “"I'm 90% sure I'm clean” and in "in 85-90% of cases, we know the origin of the gold ", without specifying whether he was talking about the UAE or global supplies. It is the remaining 10-15% that worries Swissaid.
Argor-Heraeus, which also sources from the UAE, told swissinfo.ch it knows the “country is a sensitive market for the precious metals industry” but that it only works with companies there that “strictly adhere to laws and take personal responsibility.”
The Swiss-based refiner urged NGOs such as Swissaid to help develop reliable sources gold in the UAE and beyond, rather than make vague accusations.
Fragmented and flawed oversight
Back in Switzerland, banks, jewellers and watchmakers at the end of the supply chain follow different due diligence procedures. Swissaid analysed 15 companies and found their ability to ensure they source clean gold to be limited. The NGO also questions the LBMA certification process, which shunned Kaloti but has a limited capacity to check who supplies Swiss refiners like Valcambi.
Last month, the Swiss Federal Audit Office found “shortcomings” in the current monitoring system for precious metals. Switzerland refines and processes two-thirds of the world's gold and is the main hub of the international gold trade. Many NGOs focused on the environment and human rights would like the country to adopt an initiative for responsible business that seeks to oblige Swiss-based firms to assess the impact of their activities and those of their subsidiaries on human rights and the environment at home and abroad.