LBMA receives an audit report from a Good Delivery List (GDL) refiner for its previous 12 months’ production. For example, during 2021, LBMA reviewed audit reports for 2020 production. Audit reports for each year’s production are due within three months of the GDL refiners’ financial year end.

In 2021, the review process for all 2020 audits was further strengthened. This was supported through the addition of more resource, to provide for an enhanced first-level review, by both the Responsible Sourcing Manager (RSM) and the Responsible Sourcing Officer (RSO). During the assessment process, the Responsible Sourcing (RS) team routinely requests additional information from refiners and auditors in order for LBMA to achieve maximum comfort from the audit reports. However, during this year’s review, out of an abundance of caution and in line with changes made to RGG Version 9, refiners were asked to voluntarily disclose additional information on recycled material listed in their Country of Origin (CoO) data. This included disaggregating recycled material according to source (i.e. grandfathered stock, industrial by-products or jewellery), and listing the number of suppliers. While out of scope of RGG Version 8, most refiners willingly provided this information.

Each report received has always been assessed in conjunction with the previous year’s report, to help better understand the improvements and challenges – and to ensure that any previous non-conformances are not repeated. The RSM together with the RSO review all reports as a starting point and determine which reports will be escalated to the Compliance Panel. The review includes an assessment of a refiner’s compliance and management reports, CoO data and any Corrective Action Plan (where applicable).

Detailed reports are then provided to the Compliance Panel for review and discussion. Once the review is completed, provided that the only non-conformances identified are low risk, the refiner will pass the audit for the year. However, if any medium- to high-risk conformances are identified, the refiner will be given a period of time to address them. However, where there is a zero-tolerance finding, the refiner will be removed from the GDL and will not be able to apply to become GDL accredited for another five years. See Section 15 for details on programme deliverables, risk categorisation and the review outcomes.

During 2021, the RS team had several extended interactions with auditors and refiners to seek clarity regarding information in audit reports or concerns that were raised outside the audit process.

For example, one refiner disengaged from a high-risk supplier without naming them or giving the reason why. The supplier was also closely associated with an individual who had recently been listed on several sanctions regimes. In this instance, the refiner was asked to confirm that it had not taken any material from the sanctioned individual after its listing date – and to provide an assurance statement from its auditors attesting to that fact.

In another instance, our audit process uncovered that the business licence of one supplier in Latin America had been suspended and that the company had moved to a neighbouring country. This required the refiner to demonstrate to LBMA that the material in question had been sourced prior to the suspension and that the CoO data was correct.

In a third case, the audit discovered that a refiner did not make its suppliers sign its supply chain policy, which prohibits suppliers from breaching Annex II violations as defined in the OECD Due Diligence Framework. LBMA worked with the refiner to agree to a timetable by which its supplier contracts would be amended to correct this oversight. In 2020, no GDL refiner was moved to the Former List for failure to comply with the Responsible Sourcing Programme (Programme). Despite the higher than normal reliance on virtual audits, LBMA did not encounter any deleterious impacts to the integrity of the audit framework.

Whilst there were several escalations related to sourcing concerns during 2020, each one was addressed appropriately, with full co-operation from the GDL refiner in question. As highlighted earlier, LBMA relies on two important processes to help identify Responsible Sourcing issues. Firstly, the annual audit reports, and the information provided in these reports, will flag non-conformances. Also, market intelligence, media reports and credible NGO reports may provide information that will then instigate inquiries with refiners to better ascertain the circumstances surrounding a particular issue or incident. If the severity of a particular case warrants it, an Incident Review Process (IRP) will be launched.

Non-conformances: What the numbers tell us

Metal Year Low risk Medium risk High risk Total
Gold 2020 31 10 0 41
2019* 82 9 5 96
2018 29 8 2 39
2017 37 2 0 39
2016 33 5 0 38
2015 46 4 1 51
Silver 2020 45 12 2 59
2019 93 35 10 138
2018 64 44 24 134

*First year of RGG Version 8

Gold – Non-conformances

Overall, 2020 saw a marked decline in the number of non-conformances from the previous year, and a return to the median recorded over the earlier years. The improved numbers were largely reflected in the low-risk category, while the number of medium non-conformances remained steady. The implementation of RGG Version 8 in 2019, specifically the transition from the ISO to ISAE 3000 assurance framework, was largely responsible for the increase in non-conformances as refiners adapted to the new reporting requirements. The improved audit reports demonstrate a better awareness of supply chain vulnerabilities by refiners. In line with LBMA best practice, all medium-risk non-conformances for gold were referred to the Compliance Panel for consideration.

No zero-tolerances or high-risk non-conformances were reported in 2020. However, LBMA did suspend one refiner— Kyrgyzaltyn JSC—for failing to meet the requirements of the Programme. The audit of another refiner determined it to be non-compliant with the RGG and required the implementation of a 90-day Corrective Action Plan to bring them back into conformity. All CAPs require an additional assurance statement from their auditors confirming that identified non-conformances have been remedied before the annual certificate can be issued.

Silver – Non-conformances

As with gold, there was a significant drop in reported non-conformances in silver, with incidents dropping by more than 50 percent from 2019 figures. Improvement was noted across the risk spectrum and indicates refiners have moved past some the teething stages associated with 2019 implementation of RGG Version 8. It was especially welcomed to see progress in the more complicated medium and high-risk non-conformances which dropped to their lowest levels since LBMA began keeping records. No refiners were found to have any high risk or zero-tolerance non-conformances.

Common Themes of Medium and Low-Risk Non-Conformances

Below is a breakdown of the most common types of non-conformances raised against the five steps of the RGG and RSG.