Action not abstention on hand-carried gold and other industry-related challenges
A couple of weeks ago, I was joined by seventy-eight industry leaders, reporters and government officials from around the world who took up DMCC’s invitation to proactively discuss the challenges surrounding the issue of hand-carried gold and how we as industry stakeholders can provide a better framework to improve standards of fair trade, regulation, passenger and aircrew safety and the well-being of miners.
Notable attendees included Simon P. Handy, Political Affairs Officer at the United Nations, Michel Constain, Vice President Africa & Middle East, Brink’s and Huda Belhoul, Director of Customs Development and Head of the National Risk Assessment Committee, the Executive Office of the Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT).
Notably absent was any representation from LBMA, who were busy being unavailable to comment on articles published in Reuters, Investment Week and Nasdaq (syndicated), which highlighted a call from five civil society organisations (CSOs) for the European Union not to recognise its Responsible Gold Guidance (RGG) due to “serious shortcomings”.
Signed by Global Witness, Rights and Accountability in Development (RAID), SwissAid, Fastenopfer and Society for Threatened Peoples, the letter outlined that due to “serious weaknesses in the programme”, investors “cannot have confidence that LBMA’s Good Delivery gold is free of human rights abuses and not linked to conflict and illicit trade.” According to Investment Week, LBMA’s decision for refiners to suspend trade ‘as a “last resort”, as opposed to its previous standard that trade should be suspended if there is “a possibility the gold sourced is illicit”’, gave a clear signal that “rules can be bent” in favour of overlooking potential misconduct.
While LBMA did eventually get round to issuing a response, it failed to comment on the finding that an LBMA refiner sourced gold from a company that was linked to conflict gold. According to a response statement issued by Global Witness, "LBMA should admit that its Responsible Sourcing Programme is either not aligned to the OECD Guidance or that the refiner has not been correctly assessed - and detail appropriate steps to address these issues including considering sanctions against the refiner in question."
If Ruth Crowell is serious about welcoming feedback from all stakeholders to help achieve fuller and better transparency, this would be an excellent place to start. I would further add that if what Ms. Crowell says is true about how “the LBMA programme leads the way for the gold market”, I am certainly not alone in thinking it is time for all of us to stop and consider alternative leadership and direction in the form of a wider, collaborative framework. When looking at the organization more closely, LBMA’s moral flexibility ought not to be a surprise considering its Regulatory Affairs Committee Chair is a senior manager from 'too big to jail' , HSBC Plc, an institution that has consistently demonstrated that rules can be broken without the consequence of criminal prosecutions ever taking place.
From a leadership perspective, I cannot help thinking that the current approach, which is perpetuated by NGO’s calling foul and LBMA deciding whether to take action based on their discretion is neither helpful nor beneficial to the wider industry, but ultimately detrimental to the artisanal miners who lose access to the markets due to internationally imposed trade restrictions or wider government sanctions. This approach of embargo over holistic responsible sourcing goes against the fundamentals of the OECD, which conclusively supports legitimate businesses from high-risk areas to improve their standards, as opposed to cutting them out.
As far as LBMA’s reluctance to actually collaborate, I struggle to share the outlook of an organisation that would willingly miss an opportunity to discuss important matters relating to their business, but still find the time to push out the same tired narrative, packed with affirmative cliches about “providing trust” or “enhancing transparency” in the hope that maybe the industry’s challenges will somehow just go away. It is strange to think there was a time when certain London Good Delivery-approved refineries would automatically be granted Dubai Good Delivery status as a reflection of the institution’s portrayed credibility and ethical standards - today, Dubai cannot be seen to be taking such risks.
As one of the central themes discussed during last week’s roundtable on hand-carried gold, attendees acknowledged the importance of understanding the full list of industry stakeholders involved in the process and how each should be given a seat at the table in finding a solution that works for the many and not the few.
While I had originally called for a full ban on hand-carried gold by air, the general consensus showed such action could potentially price out artisanal miners who would be otherwise forced to use security providers to transport their goods. As such, it was suggested that gold could be treated in a similar way to the current restrictions on physical cash, i.e., passengers would be able to carry gold, however within a certain allowance and with the correct paperwork. In doing so, governments would gain a valuable measure of the trade volumes moving across borders and perhaps most importantly, from which countries of origin.
Other suggestions included a solution between IATA and the world’s airlines to offer a cost-effective service that would accept gold with appropriate insurance and documentation at check-in and place it in the hold for the duration of the flight, allowing passengers to collect at their destination before clearing customs. As such, it would address three of the issue’s primary challenges.
Firstly, by ensuring that all gold, no matter the volume would be accompanied with full and correct documentation in order to move it over international borders, thereby providing a more accurate method of monitoring and an additional layer of protection for valuable tax revenues. Secondly, by reducing the risk of introducing mercury into a pressurized cabin, potentially causing health hazards to crew and passengers and thirdly, to deter criminals from attempting to smuggle larger quantities on their person. In the case of larger volumes, it was also suggested that as a first step, the use of a locally registered importer should be mandatory.
Certainly, from my position as Executive Chairman and CEO of DMCC, I am indifferent to the solution coming in the form of an outright ban or through tighter regulation - providing it solves the problems that we as an industry face. In working with a group of industry specialists who can acknowledge there is a problem and that finding a solution is only a matter of time and energy, we are that much closer to working within a vastly improved industry for all. In the UAE, the establishment of a Special Task Force, which reports directly to the Ministry of Economy, has been a great example of how even domestic collaboration has provided an additional level of clarity by auditing a cross-section of industry stakeholders.
As a next step, DMCC will coordinate a follow-up roundtable, which will include a structured agenda, covering topics such as which stakeholders and organisations should be part of the decision-making process, which policies and ideas make the most sense and which organisation, or organisations should be responsible for its governance.
Again, I continue to extend an open invitation to all members of the gold industry, including those who missed the initial discussion to join and take part in this process. For anyone interested, please reach out to events@dmcc.ae and a member of the team will help to coordinate your access.
Max DePree famously said, “The first responsibility of a leader is to define reality. The last is to say thank you. In between, the leader is a servant.” As an organisation that first called out the issue of hand-carried gold five years ago and was eventually forced to take matters into its own hands in the absence of any other industry action and that also called out LBMA for its hypocrisy repeatedly before being joined by other industry stakeholders who found the courage to say what they knew to be true, it would be fair to say that DMCC has defined reality in spite of the risk of sounding controversial or unpopular. In terms of the future, we look forward to the day when we can sincerely thank all members of the gold industry for working together to improve standards for all stakeholders and not just for profit. Until such a time, DMCC will continue to serve the industry, including leading it when required.