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How the OECD can Support India in Meeting IncreasingInternational Expectations for Responsible Gold

Louis Marechal, OECD Responsible Business Conduct Unit


The Indian gold market is currently undergoing major regulatory changes in efforts to enhance, amongst other objectives, global trust in the sector and reduce illegal gold imports flowing into India. This development comes at a time when governments across the world are increasingly becoming aware of the various risks that threaten their gold industries. These risks range from potential connections to violation of human rights (for example in and around gold mining sites) to sophisticated money laundering schemes that enable revenue from illegal activities to enter the legitimate banking system.


The global trading pattern of gold has evolved over the past years, with India confirming its position as a major importer of gold doré in particular -for the OECD this type of trade requires enhanced scrutiny. Experience has that gold doré can quite easily be exported illegally from many producing countries. Applying strengthened controls in importing countries, to be carried out by local authorities and the private sector, is clearly needed to prevent gold illegally produced and/or exported to enter legitimate global supply chains.


As highlighted earlier this year in the Bullion Bulletin, international buyers of gold have increased their expectations for sourcing gold. Adding to traditional physical specifications, they now expect a multiplicity of responsible sourcing criteria to be fulfilled, to ensure that the production and trade of gold is not associated with violations of human rights, conflict financing, corruption, etc. This is in particular reflected in the recent adoption of a regulation in the European Union, laying down supply chain due diligence obligations for Union importers of gold. This regulation is based on the Organisation for Economic Cooperation and Development (OECD) Due Diligence Guidance on Responsible Supply Chains of Minerals from Conflict -Affected and High-Risk Areas (OECD Guidance), which has become the de facto international standard to foster global responsible supply chains of minerals.


In China the awareness of government and private sector actors has recently evolved significantly with several initiatives underway to adapt international requirements and standards to the Chinese context. In 2015 Chinese Guidelines on Responsible Mineral Supply Chains for tin, tungsten, tantalum and gold were adopted and are based on the OECD Due Diligence Guidnance. Since then, the OECD Secretariat has provided significant support to Chinese industry and regulatory bodies to develop systems and tools to check that Chinese companies are carrying out adequate due diligence. The OECD plans to extend this support in the years to come to ensure importers and exporters of gold or gold-bearing components take all necessary steps to map their supply chains and identify risks associated with gold production and trade.


The OECD Secretariat is equally engaged in Latin America, where it supports local stakeholders in Colombia in particular to develop targeted policies promoting supply chain due diligence in the gold sector. The Colombian government has introduced a national registry of gold producers and traders, to which it is seeking to, add a more rigorous screening system. Such checks should ensure that individuals or organisations with links to organised crime or armed groups are not granted access to the legal international gold market.


In Africa, beyond its almost decade-long cooperation with the International Conference on the Great Lakes Region (grouping 12 States in Central Africa) the OECD is currently enhancing its cooperation with West African countries, in particular Ivory Coast, Burkina Faso, Niger and Mali, to support the adoption of public policies requiring more transparency from private sector operators (producers, traders and exporters). Gold production, in particular of artisanal and small-scale origin, is significant across all those countries and a source of funding for illicit armed groups, terrorists and organised crime.


In parallel, to complement the various initiatives developed by the global private sector to operationalise the OECD Guidance in the gold industry (in particular with the support of the LBMA, the DMCC and the RJC), the OECD Secretariat has teamed up with Interpol to explore the development of a project aimed at enhancing the capacity of law enforcement agencies globally to identify, investigate and prosecute crimes associated with the production and trade of mineral resources. Precious metals feature prominently amongst them, and Indian officers have on several occasions marked their interest for the initiative.


Over the coming months and years, the OECD is therefore particularly open to developing strong ties with Indian authorities and local private sector operators to support the drafting of national policies aligned with international standards and global private sector expectations. This ambition is shared by all participants of the multi-stakeholder group steering the global implementation programme of the OECD Guidance, entailing, beyond OECD Member State governments, several multinationals from the gold, jewellery and electronics industry, as well as representatives of local and international civil society organisations. Expectations for a more responsible sourcing of gold by India are high, and the OECD stands ready to support the local gold industry in meeting them.


Disclaimer: Views are personal and not the views of the publisher.