Regulation

Due Diligence Regulation

Explore an overview of the critical roles played by Anti-Money Laundering (AML) and Combatting Terrorism Financing (CTF) legislation in safeguarding the precious metals market, as well as the evolving landscape of supply chain due diligence.

Anti-Money Laundering and Combatting Terrorism Financing

Precious metals can be vehicles for money laundering and terrorist financing due to their inherent characteristics such as anonymity, portability, value retention, and the decentralised nature of the physical precious metals market. These characteristics provide opportunities for criminals and terrorists to engage in illicit activities.

AML (Anti-Money Laundering) and CTF (Combatting Terrorism Financing) legislation is essential for preventing financial crimes, such as bribery, corruption and fraud. Over the years, AML legislation has increased financial institutions’ responsibilities, requiring them to identify customers, monitor transactions, and report suspicious activities. CFT regulations, which also address legitimately earned money used for terrorism, work alongside AML efforts, collectively known as AML/CFT obligations.

In addition to legislation, there are standards and organisations supporting the global effort to combat money laundering and terrorist financing. These include the Financial Action Task Force, Wolfsberg Principles, Joint Money Laundering Steering Group Guidance, and LBMA’s Responsible Sourcing Programme.

Supply Chain Due Diligence

The global stage is abuzz with sustainability, transparency and accountability initiatives, ushering in significant supply chain regulation from international and regional bodies.

Since its inception in 1999, the United Nations Global Compact has seen more than 12,000 companies worldwide commit to its principles of corporate responsibility. Building on this foundation, the 2011 United Nations Guiding Principles on Business and Human Rights addressed human rights within business operations, relying primarily on voluntary compliance from governments and companies. However, voluntary efforts have seen limited success. As a result, governments are now drafting mandatory supply chain legislation, imposing new due diligence obligations on companies. These include defining internal processes, conducting risk analyses, establishing preventative complaints mechanisms, and publishing annual reports.

Gold supply chains were one of the first to have mandatory due diligence obligations with the Dodd Frank Act and EU Conflict Mineral Regulation. However, the scope and transparency of supply chain due diligence continues to grow.

Members and Refiners can find out more on the portal.