Colombia Urges Blood Diamond-Style Controls for Gold Buyers

  • Central banks may have bought illegally-mined precious metal
  • Less than a fifth of Colombia’s gold is produced legally

A person illegally mines for gold at a site in the Department of Choco near the city of Quibdo, Colombia, on Nov. 11, 2016.

Photographer: Nicolo Filippo Rosso/Bloomberg

Colombia is calling for tougher controls over international gold purchases to curb the amount of illegally-mined metal entering mainstream markets, following similar moves by the diamond industry.

“There’s a responsibility on the part of buyers to make certain what the origin of the gold is that they are acquiring,” Colombian Mining and Energy Minister German Arce said. “My fear is that there’s a lot of illegally-extracted gold that ends up in central bank vaults.”

Less than a fifth of Colombia’s gold is produced legally, with much of the 60 metric-ton annual production controlled by illegal armed groups. These range from large capital-intensive operations to individual miners panning in streams and often handing over a percentage to local mafias.

As well as funding Colombia’s five-decade conflict, illegal mining poisons rivers with mercury and causes deforestation. Production in countries such as Colombia, Ecuador and Peru, where a significant amount of the gold is mined illegally, is growing as a share of total world output, according to Arce.

The Kimberley Process was formed in 2000 to ensure diamond purchases don’t finance violence by rebel movements. It represents 81 countries, including the U.S., European Union nations, Russia, China and South Africa.

‘Blood Gold’ in U.S. Cars and Phones Funds Marxist Rebel Armies

Colombia has complained in forums organized by the U.N., the Organisation for Economic Co-operation and Development and others in an effort to bring attention to the topic.

Gold exports can be used as a way to launder drug profits, according to the Attorney General’s office. In 2015, Colombian prosecutors arrested chief executive officer John Hernandez and other senior management of a Medellin-based gold-trading company called CI Goldex SA, alleging that it was at the center of a $970 million money-laundering scheme, one of the largest such schemes in the nation’s history. The case is ongoing, with Hernandez and the other executives declaring their innocence.

Gold refiners hold certificates of responsible business practice from organizations such as the London Bullion Market Association and the Responsible Jewellery Council. Despite this, they buy more gold from Colombia than the country legally produces, making it impossible that all of it is legal.

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