A 2019 United Nations report detailed how one militia raked in huge revenue by selling gold to traders in Uganda and Burundi. They purchased weapons and ammunition from the Congolese army and brutally raped civilians,mostly women and children.
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“Conflict mineral is a short word to capture a very big issue – there are all sorts of problems and all these problems mount with the rising price of gold,” said globally renowned anti-corruption expert Mark Pieth,who is based in Switzerland. “The circumstances under which gold is being found is terrible – not only is it very,very dangerous but the people themselves are dangerous.”
Pieth visited the Southern Andes in Peru as part of his research for his 2019 book,Gold Laundering:The dirty secrets of the gold trade and how to clean up. What he saw was devastating.
“Women are treated abhorrently:they’re not allowed to go into the mines for reasons of superstition and most of the women there are abused as prostitutes. Many of them are underage. They are lured there,passports are taken away … You have up to 4000 forced prostitutes in a group of 60,000 men at a place called La Rinconada.”
Geopolitical turmoilincluding the wars in Ukraine and Gaza as well as central banks embarking on a global rate rising campaign to drive down inflation has boosted the price of gold,which has jumped about 12 per cent over the past year. Our awareness of ethical investment may have increased,but gold-fuelled violence has remained high.
Earlier this year,the US-based Government Accountability Officepublished a report showing that only 51 per cent of companies had made country-of-origin inquiries to determine whether the conflict minerals in their products may have come from Congo or other high-risk countries – a figure that has remained relatively unchanged since 2015.
The University of Melbourne’s Dr Sara Meger researches the gendered drivers of armed conflict. She concedes there isn’t an easy solution to dismantling corrupt officials’ and militias’ decades-long reliance on conflict minerals,but argues the international community must take a greater stand.
“Institutions are trying to enact policies that create more sustainable or ethical processes or procedures,but on the ground there’s always work arounds,” Meger said.
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“We’ve disaggregated the supply chain so explosively that no end manufacturer actually can have 100 per cent certainty on the origins of the materials they’re using. And at the same time,there’s a bit of an incentive for them to turn a blind eye as long as someone down the chain is ensuring these are ethically sourced.”
It’s easy to turn that blind eye. Globalisation means these minerals are ending up everywhere around the world.
Over $4 billion in conflict gold from central and east Africa flows to international markets annually. Gold from Congo,the Central African Republic,Sudan and South Sudan is smuggled into neighbouring countries,primarily Uganda,Rwanda,Cameroon,Kenya,Chad and Burundi and then exported to Dubai before ending up in jewellery or gold bars around the world.
International banks may refuse to take the gold refined by certain Dubai refineries,but many of those minerals end up in Switzerland,where it is re-melted and sold as Swiss gold. What was unethical conflict gold suddenly becomes a marketable and bankable commodity,Pieth lamented.
In 2018,Switzerland was the third-biggest destination for gold from the United Arab Emirates,importing about 58 tonnes or $US2.4 billion,according to UN trade statistics. After being refined,almost half of Swiss gold is sold to jewellers,about a third is sold to banks and the rest is sold to various industries,The Sentry reported in 2021.
“Due to voluntary standards that refineries apply to ensure that the gold refined is conflict free,the Swiss government admitted in a report that they cannot exclude the possibility of conflict gold being used by its country’s refineries,” the watchdog said in its report.
The Sentry identified five actions companies,governments and financial institutions should pursue to disincentivise conflict gold. It called for greater consequences for individuals and companies trading in conflict gold;strengthening policies and enforcement in Dubai;harmonising gold taxes across African countries;reducing red tape for artisanal miners;and sourcing from conflict-free artisanal mines.
According to Transparency International Australia chief executive Clancy Moore,it’s not just the violence gold fuels that is a huge concern,but also the way the commodity is used by criminals in Australia to launder their money.
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In the 2020-21 financial year,the bullion sector (which includes other precious metals) made 370 suspicious matter reports,valued at $80 million,to the national financial intelligence agency AUSTRAC. The Australian Federal Policelast year charged a gold dealer and his wife after an investigation revealed the pair had allegedly moved more than $22 million through their bank accounts during an 18-month period.
“With the increasing price and value,it’s a way for criminals to launder their money and hide the proceeds of their crime,” Moore said. “There are industry standards that provide some level of transparency,but it’s hard to trace the origins of minerals.”
Last month,the taxpayer-owned Perth Mint and its operator Gold Corporation avoided a finedespite AUSTRAC uncovering a litany of failures in its compliance with anti-money laundering and terrorism finance laws.
The ABC’sFour Cornerspublished CCTV footage in March showing ex-Hells Angels bikie Dayne Brajkovich purchasing tens of thousands of dollars worth of gold without mint staff batting an eyelid.
Gold Corp entered into an “enforceable undertaking” with AUSTRAC where it must fix its anti-money laundering compliance by April next year. TheAustralian Financial Reviewpreviously revealed in 2020 that Perth Mint boughtup to $200 million of conflict gold annually from a convicted killer in Papua New Guinea.
“With the increasing price and value,it’s a way for criminals to launder their money and hide the proceeds of their crime.”
Transparency International Australia chief executive Clancy Moore
These issues are close to home and warrant the attention of Australians,Pieth said. He highlights the problem of children in the Philippines using only diving masks and a hose for oxygen to dive into caves to source mud that contains gold.
“This is a conflict gold of a different type – it’s the exploitation of children,” Pieth said.
The Mineral Council of Australia declined to comment,but the World Gold Council,which is a membership organisation championing a sustainable gold market,pointed to its website that provides detailed information about the responsible production of the mineral.
The council launched its conflict-free gold standard in 2012 following concerns about “the potential links between gold and unlawful armed conflict,such as civil wars and militia activity”.
“Although the proportion of newly mined gold that is tainted by the involvement in conflict is very low,responsible mining should put processes in place to make sure that neither they,nor the gold they produce,are contributing to the conflict,” its website states.
“Ceasing operations entirely,however,could accentuate the crisis for communities in conflict areas by denying them legitimate livelihoods and economic opportunities.”
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