While much has been said about efforts to crack down on illegal mining of “conflict minerals” in Africa, illegal gold mining and trading in Colombia, Peru and Venezuela is big business. Indeed, roughly 85 percent of the 59 tons of gold produced last year in Colombia comes from operations without government licenses or environmental permits, Santiago Angel, head of the Colombian mining association, says in a Bloomberg article. Notably, Colombia’s two main legal gold miners, Mineros SA and Gran Colombia Gold Corp., together only produced seven tons of gold last year.

 

It’s what Jeremy McDermott, a co-founder of the InSight Crime research institution, calls “blood gold.” Beyond financing rebel activities, the illegal mining fuels prostitution, child labor and widespread environmental destruction, according to findings by the United Nations, Bloomberg reports. What’s more, fighting among armed groups in Colombia over the gold deposits has forced hundreds of thousands of Columbians to flee their homes, contributing to the nation’s roughly seven million internally displaced people, according to findings by the United Nations.

 

The gold faces a long trip to market. It begins in the jungles of Colombia, where thousands of workers in small, illegal mining operations—many under the control of Marxist guerrillas or drug traffickers—work long hours to mine the gold. Next, the gold is shipped by boat, truck or small airplanes to smelters in Cali and Medellin. International gold refiners, armed with certificates of good business practices, buy the gold and, in turn, sell to U.S. corporations.

 

The conflict gold is unintentionally used in products ranging from smartphones to cars and even gold coins made by the U.S. Mint because corporations as well as companies that use gold for jewelry buy gold in good faith from organizations tasked with assuring the legality of the gold. Although many companies also conduct independent audits of their supply chains, including for gold and other metals, illegal gold slips through the system.

 

“It’s impractical and unfeasible to expect companies to trace their gold to the mine of origin,” Tyler Gillard, a legal adviser to the Organization for Economic Cooperation and Development, says in the Bloomberg article.

 

U.S. gold importers hold certificates of responsible business practice from organizations including the London Bullion Market Association (LBMA) and the Responsible Jewelry Council (RJC). Asahi Refining USA Inc. and Metalor Technologies USA Corp. are among the largest U.S.-based refiners buying gold from Colombia, and have those certificates.

 

“All LBMA accredited refiners on the Good Delivery List have set up internal-management and risk-assessment systems to avoid sourcing gold linked to conflict, human rights abuses, terrorist financing practices, as well as ensuring that they comply with high standards of anti-money laundering,” a spokesman for the association said, Bloomberg reports. “All RJC member companies are required to carry out human rights due-diligence processes to assess the heightened risks of adverse human-rights impacts,” according to a council statement.

 

Although Asahi Refining and Metalor Technologies say they are careful to buy only legally mined gold, each purchased more gold from Colombia last year than was legally produced, according to data from Colombia’s statistics agency, Bloomberg reports. That makes it mathematically impossible for the companies to have only purchased legitimately sourced gold, the article explains.

 

“You ask how much gold a company is buying and how much a country produced legally,” Quinn Kepes, program director at Verité, a U.S.-based fair-labor organization, says in the Bloomberg article. “We’ve seen a pattern of certain U.S. refineries going into areas” that others have pulled out of.

 

The dilemma for end users is that once gold arrives in the U.S., there is no way to know whether some of it may have been procured from illegal mines. In addition to buying gold only from refiners with certificates of good business practices, a growing number of companies conduct independent audits of the sourcing for their components. However, as would be expected, accounting for all minerals throughout company supply chains is very difficult.

 

What are your thoughts on illegally sourced gold? What can be done to stop its trafficking?