Gold market breaches ‘covered up’ – by Andy Verity (BBC Newsnight – February 25, 2014)

http://www.bbc.com/news/

Dubai’s biggest gold refiner committed serious breaches of the rules designed to stop gold mined in conflict zones from entering the global supply chain, a whistleblower has revealed.

Amjad Rihan led an Ernst & Young team that audited Kaloti and found it was failing to carry out the proper checks. But after he told the Dubai regulator, it changed its audit procedures. He said that allowed details of the most serious findings to be covered up, with Ernst & Young turning a blind eye.

The regulator, Ernst & Young and Kaloti all say they acted properly. Mr Rihan told BBC Newsnight: “The risk of conflict gold entering Dubai and entering the global supply chain is extremely high.”

The audit team, which visited Kaloti last year, alerted the Dubai Multi Commodities Centre (DMCC) and also urged superiors at Ernst & Young to notify other regulators and the gold-buying public.

In May the DMCC’s guidance required the audit team’s initial findings to be made public but by November that requirement had disappeared.

Global gold hub

Angry with the regulator and his firm, Mr Rihan decided to resign and blow the whistle, taking his story to the campaigning group Global Witness, which passed key documents to Newsnight. His disclosures have also been reported by the Guardian and Al-Jazeera.

“I wouldn’t be able to live with a decision like that. I wouldn’t be able to come back home at the end of the day and look at my children in the eyes and tell them I’m proud of myself. I will never feel at peace with myself,” he said.

The audit found Kaloti had breached a number of international rules for the responsible sourcing of gold, including:

Paying tens millions of dollars in cash without proper documentation – a total of $5.2bn (£3.1bn) – or 40% of its business

Importing more than four tonnes of gold-painted silver that arrived in Dubai declared as gold – a practice Kaloti described as “normal”

Dealing with a supplier that had been linked to conflict zones in eastern Congo
Conflict-free gold is described as gold that has not caused, supported or benefited unlawful armed conflict during its production.

Dubai is an important global gold hub, with more than one-fifth of the world’s trade in physical gold taking place there.

As well as being used for jewellery or gold bars, about 300 tonnes of gold a year is used for components in electronic devices, such as computer leads and smartphones.

‘Choke point’

Dubai has been named in reports by Global Witness and the United Nations as a big destination for conflict gold. So the DMCC has adopted the international standards designed to show its gold traders and refiners are sourcing gold responsibly.

For the rest of this article, click here: http://www.bbc.com/news/business-26341072

 

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