Sustainability and Responsible Sourcing Report 2023
Chapter 5: 2022 Refiners’ Responsible Sourcing Performance
Since 2012, compliance with the RGG has been a mandatory requirement for all Refiners wishing to remain on the Good Delivery List (GDL).
Every year, each GDL Refiner must undergo an assurance engagement to demonstrate its compliance with the Responsible Gold Guidance (RGG) requirements. Mandatory assurance engagements are conducted on a 12-month basis within three months of the Refiner’s financial year-end.
The RGG has been updated nine times since its launch, demonstrating the continuous improvement required by all parties in the supply chain. The RGG assists these parties to minimise risks by adopting the OECD Guidance and its Five-Step Framework for Due Diligence into its management and operational systems.
The annual assurance process is not the only means by which LBMA measures a Refiner’s compliance with Responsible Sourcing and Good Delivery standards. Due Diligence is a key tool in LBMA’s risk management framework. In 2022, in accordance with our commitment to continuous improvement, LBMA reviewed and enhanced its Due Diligence Policy and Procedures.
These procedures examine the various risks presented to LBMA when Members and Refiners first join LBMA, and then on an ongoing risk-based basis. This continuous monitoring works alongside both the Responsible Sourcing Programme (RSP) and the Good Delivery Rules to ensure a further layer of scrutiny.
As part of LBMA’s internal due diligence practices, every GDL Refiner is subject to daily screening including PEPs, sanctions, adverse media and legal sources. Market intelligence, gleaned from NGO reports, industry partners or governments, can lead LBMA to engage with GDL Refiners to make them aware of certain sourcing concerns and to request an official response that provides clarity and comfort that no breaches have occurred. If LBMA feels the response or mitigation strategy by a Refiner is insufficient, the issue will be escalated.
How Does LBMA Review Refiners’ Assurance Reports?
• Each GDL Refiner is assigned a risk rating (low, medium, high) based against an internal LBMA assessment tool that factors such considerations as the complexity of the Refiner’s supply chain and the severity and type of nonconformances or sourcing issues identified during the previous year.
• The Responsible Sourcing team undertakes detailed analysis of the assurance engagements and produces reports on each of these. During the process, Refiners and Approved Service Providers (ASPs) are questioned to gain clarity or comfort regarding sourcing concerns or the omission of any relevant details. High-risk reports are sent to the Compliance Panel for final review. Unanimous agreement is required by Compliance Panel members for these reports to be approved.
• Assessment reports of medium and low-risk Refiners can be approved by the Head of Responsible Sourcing, unless the severity of non-conformances requires an escalation to the Compliance Panel.
• A risk-based approach is applied to each review, taking into consideration the:
- nature of any identified non-conformances or ASP recommendations;
- types of material received (and from which countries); and
- level of description and disclosure of detail set out in the RGG and the Third Party Assurance Guidance (TPAG).
• As 2022 was the first year for Refiners to be assessed against RGG v9 and the new TPAG, the Responsible Sourcing team paid close attention to how well the new, and substantive, changes are being implemented. • Country of Origin data is analysed against CAHRAs (conflict-affected and high-risk areas) and sanction regimes lists to ensure no breaches have occurred. A comparison is made against previous years' data to determine any anomalies. Implausible figures or source countries are queried with Refiners. If the total material sourced by a Refiner is below 10 tonnes, the GDL team is notified to investigate its throughput to ensure compliance with the GDL Rules.
• Any sourcing issues that may have come to LBMA’s attention during the year in review – perhaps through NGO and media reports or grievances logged on the Mineral Grievance Platform, an online portal hosted by colleagues at the Responsible Minerals Initiative (RMI) – are also considered in the assessment. Where further information is required, this will be requested.
• Where medium, high or zero-tolerance non-conformances with the RGG are identified within assurance engagement deliverables, Refiners must submit a Corrective Action Plan (CAP) to address the gaps in their system. The RGG stipulates that a CAP for medium non-conformances must be fully remediated within 90 days of the assurance engagement, for high-risk non-conformances within a month and for zero-tolerance breaches, immediately. Once completed, CAPs are then reviewed by the Responsible Sourcing Compliance Panel.
• Only once an assurance engagement fully satisfies the requirements of the RGG will a certificate of compliance be issued. Each certificate includes the Refiner’s assurance period and the date the review was approved by LBMA. Certificates are published on the LBMA website and Refiners must also publish their policies relating to their gold supply chains, their Assurance Report and Compliance Report. The only exception to this process is if the severity of non-compliances requires the issuance of a CAP, which then necessitates the approval of the Compliance Panel.
Refiner Risk Categorisation
LBMA has developed an internal tool to determine the appropriate level of scrutiny.
