Responsible Sourcing Programme Third Party Assurance Guidance
Appendix: Non-Conformance Risk Levels
Non-conformances may relate to the Refiner’s precious metals supply chain management systems, supplying counterparty due diligence, transactions documentation or any other aspect covered by the Guidance, including but not limited to the definitions below:
Conformant:
- Appropriate implementation of Step 1 to 5 of the Guidance. This includes:
- Having effective precious metals supply chain policies, procedures, processes, management systems and practices which perform in a manner that addresses the Programme objectives
- Coverage of all minimum responsible sourcing risks identified in Step 1.1 of the Guidance - Preparation of the Refiner’s Compliance Report, including:
- The minimum information set forth in the Disclosure Guidance document
- Fair representation of the activities over the full reporting year
- Adherence to the principles of good reporting (i.e., complete, balanced, accurate, relevant and timely) - Preparation of the Refiner’s Country of Origin Annex, including:
- Completeness and accuracy of jurisdictions and volumes for sources of mined (large scale, and artisanal and small scale) and recycled material
- Appropriate classification and presentation of mined and recycled material - Publishing a policy on the precious metals supply chain and relevant criteria to demonstrate how the Refiner complies with the Guidance
- Providing access to all evidence required by the Assurance Provider.
Low-risk non-conformance: An issue that presents a low-risk to the Refiner and the integrity of the Programme
- An occasional or isolated lapse in performance or discipline of the Refiner’s policies, procedures, systems, processes and practices which is sufficiently mitigated through other procedures
- Occasional failure to request and obtain required due diligence documentation as set forth in the Refiner’s policies and procedures in the sample of counterparty files reviewed
- Occasional failure to request and obtain appropriate transactional documentation for sample of counterparties assessed as low risk
- Known non-compliance with a relevant legislative or regulatory requirement which the Refiner has adequately tried to rectify.
A Refiner can still be in conformance with the Responsible Gold Guidance if only low-risk deviations from conformance are identified. Low-risk non-conformances are not required to be publicly disclosed in the Refiner’s Compliance Report but should be included in the Management Report.
Medium-Risk non-conformance: does not result in an imminent significant risk to employees, the community, the environment, or the business
- Multiple aspects of the Refiner’s policies, procedures, systems, processes, and practices are not conformant with one requirement of the Guidance. This includes:
o Failure to identify and implement new responsible sourcing risks included in updates to Guidance
o Failure to identify a relevant legislative or regulatory requirement which however has not resulted in a significant impact - Multiple problems with the performance of the Refiner’s policies, procedures, systems, processes, and practices related to the same root cause. This includes:
o Recurrent failure to request and obtain required due diligence documentation as set forth in the Refiner’s policies and procedures in the sample of counter-party files reviewed
o Recurrent failure to request and obtain appropriate transactional documentation for the sample reviewed
o A problem related to the Refiner’s internal material control mechanism
o Recurrent failure to adequately address low-risk non-conformances resulting in an escalation of the risk rating - Process or control issues which does not have a significant impact in the current reporting period but could potentially cause a future high-risk or zero tolerance non-conformance.
Medium-risk deviations must be reported in the Refiner’s Compliance Report and attention drawn to these in the assurance provider’s report.
High-risk deviations from conformance: pose an imminent significant risk to employees, the community, the environment or the business
- Multiple aspects of the Refiner’s policies, procedures, systems, processes and practices are not conformant with one requirement of the Guidance. This includes:
- Failure to identify and implement new responsible sourcing risks included in updates to the Guidance
- Failure to identify a relevant material legislative or regulatory requirement
- Multiple problems with or total absence of the performance of the Refiner’s policies, procedures, systems, processes and practices related to the same root cause. This includes:
- Recurrent failure to request and obtain required due diligence documentation as set forth in the Refiner’s policies and procedures in the sample of counterparty files reviewed
- Recurrent failure to request and obtain appropriate transactional documentation for the sample reviewed
- A problem related to the Refiner’s internal material control mechanism
- Recurrent failure to adequately address medium-risk non-conformances resulting in an escalation of the risk rating
- Lack of control over the Refiner’s policies, procedures, systems, processes and practices. This includes:
- Failure to regularly review the risk assessment or report the results to the Board
- Failure to implement an effective risk mitigation strategy or monitor risk mitigation strategies outlined for counterparties under risk mitigation strategies and known issues
- Insufficient key documentation that affects any transaction from high-risk supply chains (e.g., no transaction records, fraudulent transaction records not in official counterparty name, etc.)
High-risk deviations must be disclosed in the Refiner’s Compliance Report and may lead to a modified assurance conclusion.
Zero-tolerance deviations from conformance: non-compliances that put the credibility and integrity of the LBMA system at risk
- Precious metals-bearing material is identified as associated with armed conflict, serious human rights abuses, financing of terrorism or money laundering
- Precious metals-bearing material is known to originate from areas designated as World Heritage Sites
- Precious metals-bearing material is known to be sourced in breach of international sanctions (including but not limited to those of the UN, EU, UK and US)
- The precious metals supplying counterparty, other known upstream companies or their ultimate beneficial owners are known money launderers, fraudsters or terrorists, or have been implicit in serious human rights abuses, or in direct or indirect support to illegitimate non-state armed groups
- Records are identified as being falsified by the Refiner, or with the knowledge and acceptance of the Refiner, by any actor in the Refiner’s supply chain
- The Refiner partially or fully denies access to relevant evidence to the Assurance Provider
- The Refiner attempts to influence the outcome of the assessment through unethical means
- The Refiner deliberately misrepresents facts through deception, coercion or interference
Any instances of known or suspected zero-tolerance non-conformances results in:
- Immediately stopping the assurance engagement
- Reporting known or suspected deviations to those charged with governance at the Refiner and to LBMA General Counsel within 24 hours by the Assurance Provider, with due consideration of local and international legal requirements
- A review of each case in a timely and objective manner by the LBMA Executive.
The investigation may result in the Refiner being delisted from the LBMA GDL.