The world’s largest gold refiner, the
Swiss company Valcambi, has sourced significant quantities of gold from
notorious UAE-based refiner Kaloti, a new report from Global Witness reveals
Beneath the Shine: A Tale of Two Gold Refiners also shows how Kaloti probably purchased Sudanese gold linked to armed groups in Darfur in 2012 and was at high risk of doing so in subsequent years. Kaloti’s gold could even be ending up in the products of major household brands such as Amazon, Starbucks, Sony, Disney, and HP.
Between 2012 and 2019, Kaloti has repeatedly acquired large amounts of gold from the Central Bank of Sudan, which has bought gold from the Jebel Amer mines in Darfur, controlled by violent militias responsible for grave human rights abuses during the long-running civil conflict in the region.
“Our revelations that Kaloti has likely sourced Sudanese gold linked to conflict and human rights abuses add to the company’s already problematic reputation,” said Seema Joshi, Director of Campaigns at Global Witness.
Despite Kaloti’s unscrupulous business practices being well known, the company’s gold could be ending up in products all over the world, in part through Kaloti’s relationships with reputable refiners and traders like Valcambi. Our research reveals that in 2018 alone, over 270 international companies likely sourced gold from Kaloti or purchased products containing gold refined by Kaloti. Among them are well-known brands such as Amazon, Starbucks, Sony, Disney, and HP.
“Our explosive findings on the huge global reach of Kaloti’s gold and the company’s relationship with Valcambi starkly illustrate the systemic weaknesses of the gold trade, allowing gold from suppliers with questionable sourcing practices to enter supposedly reputable international supply chains,” said Joshi.
During the period that Kaloti was sourcing from the Central Bank of Sudan, one of the Bank’s suppliers was a company linked to the Rapid Support Forces, a powerful paramilitary group reportedly involved in the massacre of over 100 pro-democracy demonstrators in Khartoum in June 2019. That same year the Central Bank has probably 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.
The internationally respected Swiss
refiner Valcambi appears to have ignored obvious warning signs that Kaloti could
be sourcing conflict gold and continued to buy gold from the company.
Sources have indicated to Global Witness that in 2018 and 2019 Valcambi sourced around 20 tonnes of gold directly from Kaloti, and over 60 tonnes from a company linked to Kaloti. Valcambi’s business relationship with Kaloti dates back to 2002 and appears to be ongoing.
“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,” commented Joshi.
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 failed to do with 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 lapses in Valcambi’s audit process recall 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) - whose ‘Dubai Good Delivery Standard’ Kaloti was audited against - colluded with the group to hide its involvement in gold smuggling. Global Witness’s new report reveals that Grant Thornton (GT), which took over Kaloti’s auditing from EY, seemingly also helped Kaloti to downplay due diligence failures.
“These failings by auditors are particularly worrying because of the central role audits are supposed to play as part of industry schemes on responsible sourcing,” said Joshi. “In the case of both Valcambi and Kaloti, it is clear that the gold industry’s inadequate attempts at self-policing haven’t worked.”
Governments cannot rely on the gold sector’s self-regulation but instead must take responsibility for cleaning up the gold sector by adopting and enforcing strong laws on supply chain due diligence. The UAE, where Kaloti is based, is a notorious hub for high-risk gold and yet does little to enforce due diligence requirements. Switzerland, home to Valcambi and arguably a centre of the global gold industry, currently lacks any meaningful legislation on responsible sourcing.
“Our report exposes how both Valcambi and Kaloti’s problematic sourcing practices have been enabled or ignored by gold industry bodies, some of the world’s biggest accountancy firms, and Swiss and Dubai authorities,” said Joshi. “It’s high time that the major stakeholders in the gold sector move beyond rhetoric and PR to real action to ensure that gold does not continue to fuel and fund conflict and human rights abuses,” she concluded.
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
Kaloti wrote to Global Witness that it has never sourced conflict gold or gold from Darfur and that it has conducted enhanced due diligence when sourcing from conflict and high-risk areas.
Valcambi wrote to Global Witness that it has developed its own sourcing standards which are aligned with and go beyond international standards and that it conducts enhanced due diligence on high-risk sources.
Notes to editor:
- Global Witness’s investigation is based on research and analysis carried out between June 2017 and July 2020 with field research in Dubai, Sudan and Switzerland. A parallel investigation was also conducted by the Swiss NGO SWISSAID.
- Global Witness reviewed the documents of 270 companies reporting to the US Securities and Exchange Commission that likely sourced gold refined by Kaloti in 2018 alone. Among them were well-known brands such as Amazon, Starbucks, Sony, Disney, and HP. Of these 270 companies, only 28 report having identified Kaloti as a risk in their supply chain.
- According to gold industry insiders, Valcambi sourced over 16 tonnes of gold from Kaloti in 2018 and over four tonnes in 2019. In 2018 and 2019 Valcambi is also said to have received respectively almost 20 tonnes and over 44 tonnes of gold from Trust One Financial Services Ltd, a UK-registered company with board-level links to Kaloti (its four directors include Osama Kaloti, son of the Kaloti Group founder Munir Kaloti). There are circumstantial grounds to suspect that Valcambi may buy gold from Trust One Financial Services in order to conceal its ultimate sourcing from Kaloti.
- The OECD’s Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (OECD Guidance) are the internationally recognised standards on responsible sourcing, which sets out a five-step due diligence framework to detect, mitigate and report on supply chain risks. Its Annex II is the centrepiece of the OECD Guidance and calls on companies to “immediately suspend or discontinue engagement with upstream suppliers where [they] identify a reasonable risk that they are sourcing from, or linked to, any party providing direct or indirect support to non-state armed groups” or engaging in serious human rights abuses. Valcambi and Kaloti both state that they adhere to the OECD Guidance and go beyond it.
- The LBMA’s Responsible Gold Guidance (RGG) is based on the OECD Guidance. Implementation of the RGG standard is mandatory for refiners that wish to be included in the LBMA’s Good Delivery List. The DMCC’s Dubai Good Delivery standard is similarly supposed to implement the OECD Guidance, although in practice both accreditation bodies appear to fall short of enforcing the Guidance’s requirements.
- Switzerland currently lacks any meaningful legal or administrative enforcement of responsible sourcing. A Responsible Business Initiative (RBI) proposal from an NGO coalition, which would legally require companies to implement human rights due diligence programmes, is due to be voted on by the Swiss electorate in 2020.
Credit for listing image: Duncan Chard/Bloomberg via Getty Images
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