"By buying gold in Dubai, Swiss refineries distance themselves from the problems of the mines."

Keystone / Sam Mednick

Safe-haven par excellence, gold is a coveted commodity in these times of crisis. This month, the price of gold has surpassed $1,800 per ounce for the first time in nine years. Since the beginning of the year, investors have invested more than $40 billion in precious metal-backed funds. In this regard, the in-depth investigation published by Swissaid on Thursday, 16 July into the origin of gold imported into Switzerland is very timely. The picture that has emerged is not a rosy one, despite statements by refiners that their supply chains are responsible, complying with environmental requirements and respect human rights.

The NGO's work is well-documented and lifts the veil of secrecy that shrouds the supply chain: from the artisanal mines of Sudan and Suriname, through Dubai and Switzerland, up until the end customers — banks and technology companies. Switzerland is home to four major refineries and processes the equivalent of two-thirds of the world's production every year. The report focuses on the links between the Emirati giant Kaloti, scandal-stricken but an inescapable giant, and Valcambi, which operates the world's largest refinery, capable of processing 1200 tonnes of gold, based in Ticino. Interview with Marc Ummel, Head of Raw Materials and Natural Resources at Swissaid and lead author of this survey.

Heidi.news - What is the reason for Switzerland's leading position in the gold sector?

Marc Ummel — Firstly, by being an important financial centre. UBS owned the Argor-Heraeus refinery, while Credit Suisse owned Valcambi. Secondly, [Switzerland’s] proximity to the markets. In the 1970s, Italy was an important centre for the jewellery industry, which led to the establishment of three refineries in Ticino (Valcambi, Argor-Heraeus, and PAMP). The fourth, Metalor, was established in the canton of Neuchâtel, near watchmaking factories. In addition to this, there is lenient legislation, which systematically includes exceptions when it comes to gold, be it through the law on money laundering or the ordinance on the control of precious metals. Finally, the Federal Administration has kept the statistics on gold imports secret for more than 30 years, between 1982 and 2013. This decision was taken partly in order to conceal the fact that Switzerland imported gold from South Africa during apartheid.

Why should we be interested in this sector?

Because of its dominant market share, Switzerland has special responsibility for the conditions under which gold is produced and marketed. The World Bank estimates that between 20 and 25 million artisanal miners extract the precious metal worldwide, providing livelihoods for around 100 million people. Child labour, environmental damage, smuggling and the financing of armed conflicts, such as in the Democratic Republic of the Congo and Sudan, are as serious as they are numerous. Refineries should source directly from these people and pay them a fair price rather than offloading their responsibilities through complex supply chains.

Why do Swiss refineries trade with Dubai?

For convenience. A lot of gold passes through the Emirates and this allows them not to ask too many questions in exercising of their due diligence. Dubai serves as a kind of platform for laundering gold. If you compare, as Reuters has done, the volume of gold imports into Dubai with exports from Africa, the gap is huge. It means that very large quantities of gold reach the Emirates illegally, wherein a substantial part of it gets re-exported to Switzerland. African countries thus lose millions of dollars in revenue from this illegal trade. For Swiss-based refineries, it is thus a way of distancing themselves from the problems associated with gold mining.

Do you have any evidence that Valcambi, via the controversial Dubai group Kaloti, acquires volumes from Darfur and Surinam, where risks are well documented?

Valcambi officially states that Sudan is on its blacklist, that it does not source from that country. But the real question is elsewhere: does Kaloti refine segregated gold? And how does Valcambi* ensure this? Because it is certain that the Kaloti group buys gold, and a lot of it, from Sudan. A report by the UN Security Council expert group and a report by the Sudanese Ministry of Finance have made it abundantly clear that the Sudanese central bank buys gold from militias in Darfur and then sells it almost exclusively to Kaloti, at a very advantageous price.

So Valcambi should know about it?

The refinery in Balerna has had a business relationship with Kaloti since 2002. It seems unthinkable that after 18 years of collaboration, they don't know where the gold is coming from. Ignorance would be just as problematic. Moreover, Kaloti refuses to publish its audit report, as required by the OECD guide to which it claims to comply. Valcambi's CEO claims to be 90% clean. But the remaining 10% represents tens of tons of gold. And his company has acquired 44 tonnes from a trading company very close to Kaloti.

What should we think about the self-regulation mechanisms proposed by the industry and the way they are implemented?

In June, the Swiss Federal Audit Office clearly detailed the limits of self-regulation. The London Bullion Market Association, the main gold trading platform, is responsible for ensuring compliance with current standards. However, it creates a conflict of interest, since it also sets the price of gold and must promote its marketing. In theory, it can exclude a member, which is almost tantamount to a death sentence but has done so only very rarely. For example, it says it is unaware of the relationship between Valcambi and Kaloti. But how can it guarantee good practice if it does not have access to its members' list of suppliers? Apple seemed furthermore to have been trapped. It had already excluded Kaloti from its suppliers because of its bad practices. And now the company discovers that Valcambi is, in fact, buying from the one it wanted to avoid.

What is the position of the Swiss authorities with regard to the increasing number of cases?

The federal administration produced a report in 2018. One of the recommendations was to improve transparency on the origin of gold. Two years later, there is no progress to report. The SECO and the FDFA do not want to touch this sector at all, saying that the refineries would leave Switzerland. In reality, they are in foreign hands. They stay in Switzerland because of its reputation. “Made in India” does not have the same value as being Swiss-made.

You propose binding mechanisms. But how would they be better enforced than voluntary standards?

We are not proposing anything different from what already exists and what everyone says they are implementing. The only difference is the consequence of bad practices. Today refineries can import dirty gold without any sanctions. With the Responsible Business Initiative, on which the Swiss will vote at the end of the year, refineries will have to ensure that imported gold has not been produced in violation of human rights. If this is not the case, and provided that there has been a serious breach of due diligence and a victim files a complaint against them, they will be subject to civil liability and will have to answer for their actions. That would be a very positive step: refineries, which have to process large volumes to make their operations profitable, would get their gold directly from artisanal miners in the countries of extraction. They could pay them a fair price and use their influence to improve working conditions.

*Asked by Heidi.news before the publication of the Swissaid report to confirm or deny the existence of its business relationship with the Kaloti group, Valcambi said it could not comment on a document it was not able to read. As the issue did not appear to be dependent on the content of the publication, we sent them a second e-mail to which the refinery did not respond.

Heidi.news — «En achetant l'or à Dubaï, les raffineries suisses se distancient des problèmes des mines» (21 July 2020)