In the Democratic Republic of the Congo five million people have died in conflicts fueled largely by the gold trade. It’s worrying then that shady gold-mining practices seem to be largely untouched by new conflict minerals regulation.
The conflict minerals regulation, which was attached to the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, requires publicly traded companies in the United States to disclose whether or not their products contain tin, tungsten, tantalum and gold—or 3TG for short—from conflict zones within the DRC.
The regulation is an attempt to curb the violence and human rights abuses in the DRC and adjoining countries. Such violence is perpetrated by warlords who control the trade of the three T’s and gold commonly found in cellphones, electronics and other products.
But while many companies struggle to comply with the conflict minerals rule, a new study by the International Peace Information Service (IPIS), a Belgian organization, has found that hard-to-trace gold may be falling through the cracks.
According to the IPIS, nearly 500 out of the 800 mines it surveyed in the DRC are run by armed groups or the corrupt Congolese army. Many of these are gold mines, and because the market value of gold has skyrocketed in recent years, the mines have become very profitable for armed factions.
Gold like diamonds is easy to smuggle because it has a higher value-to-weight ratio, and documenting and certifying the origin of gold is extremely difficult. While it may be possible to accurately trace the origin of tin, tungsten, tantalum and other minerals though lab testing, gold is trickier. It’s easily melted, and once it is, tracing it by its physical properties becomes almost impossible.
Even if the origins of such minerals could be traced through lab testing, it seems highly unlikely that many companies would invest the time and money required to test every part and component in its supply chain in order to ascertain a geological background.
The new conflict mineral law (which officially goes into effect May 2014) requires U.S. manufacturers to demonstrate a conscientious effort to establish a conflict-free supply chain, and some U.S. companies have already spearheaded responsible trade initiatives in the DRC region.
Motorola’s Solutions for Hope Project has created a closed-pipe supply line with all suppliers—mines, exporters, processors, component manufacturers and end users—identified in advance. As well, the Conflict Free Tin Initiative has brought together companies like Tata Steel and BlackBerry in an effort to build a responsible supply chain. Still many other companies have chosen simply to boycott the DRC entirely.
See more articles on Congo and the new conflict minerals rule.
While the electronics industry scrambles to meet the May deadline for conflict minerals disclosure, others for now, get a free pass. The retail industry, for the most part, is not required to report conflict-mineral connections, meaning that big-box stores like Wal-Mart— the largest gold retailer in the U.S.—and Target escape scrutiny.
Experts on Congo say that there are strong links between gold buyers in bordering Uganda and Rwanda and armed groups in the DRC. In this case, it may be that the gold trade can be better controlled by focusing on gold buyers at the local level.
Rwanda has already disciplined several traders, and the Congolese government penalized some gold buyers last year, when it suspended the export licenses of two Chinese companies amid allegations they dealt in conflict minerals.
Visit the Conflict Minerals Compliance Resource Center to learn more about the conflict minerals regulation, compliance solutions, and emerging best practices from leading organizations.
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