Responsible Sourcing Report 2021
Section 8: Programme Governance
Programme Management
The Responsible Sourcing Manager (RSM) is responsible for the day-to-day running of LBMA’s Responsible Sourcing Programme (Programme), supporting the development of the Programme and reporting into the General Counsel. The General Counsel has ultimate responsibility for the Programme Strategy, leading the Incident Review Process (IRP) and chairing the Compliance Panel.
The RSM is the first point of contact for all Responsible Sourcing queries, dealing directly with stakeholders, and also refiners and auditors, to ensure a consistent application of the Programme.
The RSM works with the Good Delivery List (GDL) team, headed by the Chief Technical Officer (CTO), to review the annual audits, address issues and, where appropriate, escalate issues to the Compliance Panel. The RSM is also responsible for reviewing and managing the Approved Service Provider List, by ensuring that the auditors are adhering to the Audit Guidance and maintaining regular contact with them. Any issues with the Approved Service Provider List are escalated to the Compliance Panel.
Compliance Panel: Supporting the Programme Review
Purpose
The Compliance Panel was established to support the Audit Review process. Its purpose is to monitor adherence to the Programme, review zero-tolerance non-compliance immediately, as well as risks and incidents emanating from the Responsible Sourcing Audits, and address any concerns and issues. In addition, the Compliance Panel also reviews the performance of the auditors and ensures that they remain suitable as Approved Service Providers. When an incident has been raised, the Compliance Panel may consult the Physical Committee, which will provide industry intelligence for guidance. The Compliance Panel will also determine when to raise an IRP, and a full comprehensive report will be submitted to the LBMA Board, the independent Non-Executive Directors and the Executive Directors, to review and make final determination. Redacted versions of the IRP report will also be issued to the Physical Committee and the Board.
Audit Review
The RSM and the CTO determine which reports are low and high risk. All high-risk reports are therefore passed to the Compliance Panel for further review and discussion. There are many factors that help to determine which reports are considered high risk. This can include, but is not limited to, reports that have:
- Identified several medium- and/or high-risk non-conformances
- Repeated non-conformances from previous years
- Diverse list of Country of Origin (CoO) data, which may also include high-risk jurisdictions
- Market intelligence that has raised questions about the refiner’s sourcing practices.
The Responsible Sourcing team provides a detailed report on the first-level review to the Compliance Panel. The Compliance Panel reviews and scrutinises all the high-risk reports. Further questions are raised with both the refiner and the auditor, and the answers need to satisfy all the members of the panel to determine the final outcome of the review. All decisions are minuted.
Incident Review Process (IRP)
The Compliance Panel is also responsible for reviewing the IRP (see Section 17 on Whistleblowing and IRP Procedures for further details), which is led by the General Counsel and supported by the RSM. The Compliance Panel determines whether a particular set of facts warrants an IRP, or whether it can be addressed during the current audit cycle. Once the IRP has been initiated, the Compliance Panel supports the review process. It is responsible for reviewing the relevant information being provided, raising questions on process and information obtained, as well as providing the final recommendation for the Sub-Board Group to consider. The Sub-Board Group takes the final decision on the outcome of the IRP. See below for more information on decision-making.
Compliance Panel Terms of Reference
The Compliance Panel has authority to determine the outcome of the high-risk audit reports only. The decision must be unanimous. If the decision is unanimous, then there is no further escalation. If the decision is based on a majority, then this will be escalated to the ExCom, and ultimately to the Sub-Board Group, who have the final right to decide the outcome. The Compliance Panel otherwise provides guidance on the IRP, as well on the Programme strategic direction.
The Compliance Panel convenes every four to six weeks, depending on the agenda. It is composed of the CEO, General Legal Counsel, CTO, RSM and the GDL Officer.
LBMA Physical Committee: Guiding the LBMA Executive
The Physical Committee comprises representatives from the physical services delivered within the precious metals market, which include the Chair of the Vault Managers Group. The representatives from the Bank of England are appointed as independent observers of the Committee’s work.
The Committee is primarily responsible for monitoring, developing and enforcing the GDL. With an emphasis on continuous improvement and transparency, the Committee works to improve disclosures, scrutiny and risk management of both LBMA and the wider market. The Committee aims to ensure that the integrity, quality and standards set by the GDL are maintained, which involves collaboration with the LBMA Executive on all matters relating to the Programme and refiners’ compliance.
Sub-Board Group: Decision-making
The ultimate decision to remove a GDL refiner for Responsible Sourcing failures lies with the Sub-Board Group. Elected members of the Board are not involved in any decision involving refiners on the Good Delivery List. The Sub-Board Group is defined in the Membership Rulebook as:
“The independent members of the Board, which include the independent Non-Executive Directors (NEDs), Chief Executive and the Executive Directors of the Board with the delegated authority to review matters arising in relation to Incidents or Enforcement with regard to members. Any decision by this group is considered final.”
LBMA Board: Setting and Reviewing Strategy
The LBMA Board is chaired by an independent Non-Executive Director and comprises two additional independent NEDs, six market representatives and two LBMA Executive Committee members (Chief Executive and General Counsel). The role of the LBMA Board is to set the strategic and business vision for LBMA. The overall aim of the Board is to enhance the governance and achieve the performance of LBMA’s short- and long-term objectives in full support of its membership’s needs.
LBMA’s Executive Committee ultimately oversees the development and implementation of the Responsible Sourcing Programme and Strategy. The Executive Committee ensures that the Programme management and governance remains appropriate.