Sudan, Mali, CAR: US goes after Russia’s gold operations

The departments of State, Treasury, Commerce, Homeland Security and Labor along with the US Agency for International Development (USAID) released the first-of-its-kind Africa Gold Advisory to tackle what they described as “increasingly concerning” reports of “illicit actors in the gold trade,” particularly jihadists and the Wagner mercenary group.

African nations produce about 870 metric tons of the precious metal – a quarter of the worldwide annual output – that is used in everything from electronics to fashion to banking and finance.

“US individuals and entities engaged with the gold sector — whether as miners, traders, refiners, exporters, users, consumers, financial institutions, or otherwise — should carefully review the risks described in this Advisory and ensure they conduct enhanced due diligence to address these risks, as appropriate and necessary,” the guidance says. “Further, they should consider, address, and report publicly on their efforts related to these risks where possible.”

Industry participants, the guidance says, “should be prepared for increased US government attention to the relationship between gold and these groups’ revenue streams and should be prepared for the possibility that US sanctions could be used to disrupt these groups’ operations.”

A confluence of factors, from Russian influence to gold’s unique role across multiple supply chains, informed the decision to develop the guidance, a senior State Department official tells The Africa Report.

“Its importance to so many economies [made it] feel like if we were going to go down this road, this would be a worthy sector and a worthy time to try it,” the official said.

LBMA (formerly the London Bullion Market Association), the international trade association for precious metals, said it “fully supports and welcomes” the advisory.

“It outlines well known sourcing challenges unique to the ASM (Artisanal and Small-Scale Mining) sector, but brings into focus the under-appreciated role Wagner is playing in the gold industry in certain countries,” spokesman Simon Rostron said via email on behalf of the group.

“LBMA has already taken several steps to address some of the vulnerabilities the advisory references, like adding the need for enhanced due diligence on recycled gold and a requirement for an OECD aligned audits of high risk suppliers in high risk areas into the latest version of the Responsible Gold Guidance,” Rostron said. “LBMA is also currently developing a framework by which [LBMA-accredited] refiners can directly source ASM material that meets credible but attainable due diligence requirements.”

CAR, Mali, Sudan  

While the presence of corruption and illicit actors in Democratic Republic of Congo is well documented, the US government insists that “newer risks in areas such as Sudan, the Central African Republic (CAR), Mali, and elsewhere in connection with the Wagner Group have made clear the need for this Advisory”.

In Mali and CAR, Yevgeny Prigozhin’s mercenaries are known to exploit the countries’ natural resources in exchange for fighting jihadists and rebel forces while protecting government officials.

In conjunction with the release of the advisory, the US Treasury Department this week sanctioned two mining firms in the CAR – Diamville SAU and Midas Resources SARLU – for their alleged illicit gold dealings funding Wagner operations, along with two other participants in the scheme: Industrial Resources General Trading of Dubai and Andrei Ivanov, a Russian Wagner executive whom the US accuses of working with Malian officials on weapons deals, mining projects and other Wagner Group activities.

Meanwhile in Sudan, the clash between rival generals Abdel Fattah al-Burhan and Mohamed Hamdan Dagalo ‘Hemeti’ has exposed the role of gold in funding both fighting forces, including Wagner’s support for Hemeti’s Rapid Support Forces. Late last month, the US government updated its business risk advisory on Sudan in light of the conflict that erupted in April.

“Businesses and individuals engaging in commerce involving gold that may be mined, processed, or exported from Sudan,” the new Sudan guidance says, “are urged to adopt practices in line with the OECD Due Diligence Guidance [OECD DDG] on Responsible Supply Chains of Minerals from Conflict Affected and High Risk Areas to assess and mitigate the most serious risks associated with such activity.”

Beyond Russia

Despite its tone, the new guidance is voluntary and merely “encourages” actors to “consider responsible investment” in Africa’s gold sector. Meanwhile, a number of legal frameworks, such as Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations, are already in place, but haven’t stopped illicit gold from entering international supply chains.

More scrutiny on gold linked to conflict and corruption is very welcome, but the US should not stop at the Wagner group

The LBMA, however, sees value in spelling things out.

“Criminals will always break the law, so in that sense the advisory may have limited impact interrupting the illicit activities of groups like Wagner,” the group tells The Africa Report. “However the primary audience and purpose of this advisory is the first and second tier of actors in the gold supply chain who are being warned that they need to up their due diligence procedures, that feigning ignorance about the sources of material coming from high risk areas is no longer a credible or acceptable business practice. An advisory like this also reinforces the need for refineries and smelters in developed countries to broaden their due diligence beyond their first tier of suppliers.”

Good governance groups agree the new guidance could prove useful – if African governments themselves take action.

“Wagner aside, the US guidance is similar to what African governments need to do to enhance transparency and address corruption, illicit financial flows and environmental challenges from gold production and trade,” says Denis Gyeyir, the Accra-based senior program officer for Africa at the Natural Resource Governance Institute. “The US efforts, if complemented by African governments’ reforms, should help to address challenges in the sector.”

Many of the risks associated with the gold value chain in Africa that the guidance identifies, Gyeyir adds, are “already known to authorities in the various countries and in some cases, public officials are accomplices in the offences”.

“As long as African governments are unwilling to — or lack capacity to — take practical steps to address the sources of these risks, the guidance will be of limited use. Even if US companies adhere to the due diligence guidelines prescribed in the guidance, non-US companies may not undertake similar due diligence, and little would change.”

The new guidance does list several “development programs” that support “industry, communities, and partner governments to enhance responsible extraction and integration into value chain”, but makes no mention of beefing them up.

Collaboration “beyond the issuance of guidelines is important”, Gyeyir tells The Africa Report. “This is especially so for mercury usage in artisanal gold mining in Ghana. Such collaboration might be a more useful approach to addressing identified risks and associated challenges.”

The US official said engagement was a high priority in terms of implementation of the guidance. The official pointed to a 31 January roundtable with State Department sanctions coordination chief James O’Brien and leading companies and associations across the gold sector as a case in point.

“Implementation is doing whatever we can as the US government to work with partners with the industry, with civil society and partner governments, civil society and industry, to see positive change on the issues we highlighted,” the official said.

Other actors?

Others noted that the focus on Russia appears to be politically motivated even as US-friendly countries appear to get a pass.

Rights and Accountability in Development (RAID), a British charity, for example, denounced the murder of indigenous Kurya people in security operations at Tanzania’s North Mara gold mine, while Al Jazeera investigated gold smuggling implicating three South African banks. The International Consortium of Investigative Journalists documented the US Treasury Department’s decision not to charge the Dubai-based Kaloti Jewellery Group, one of the largest gold traders and refiners in the world, for its suspected role in potential money laundering, including in Sudan.

“More scrutiny on gold linked to conflict and corruption is very welcome, but the US should not stop at the Wagner group [whose] involvement in African gold mining is indeed problematic,” says Alex Kopp, a campaigner with Global Witness, an international non-governmental organisation.

“It should do the same where US interests are concerned,” says Kopp. “The starting point should probably be where western companies are involved as governments have a responsibility to hold their own companies accountable. But western governments have missed good opportunities to do so in the past.”

The senior US official said that the guidance is by no means restricted to Russian-linked gold operations.

“I think if it was just focused on Russia, it would have been, frankly, much shorter and probably [have] a narrower focus,” the official said. “It was important to the agencies that worked on this, that we do provide a broader scope of issues. That’s why we don’t just cover the kind of conflict and money laundering pieces, but we also get into environmental issues and forced labor issues, which cover a wide array of of countries.”

For example, the State Department’s congressionally mandated list of countries with poor records on child labour and forced labour, which is mentioned in the guidance, fingers 15 sub-Saharan African countries including Ghana, Senegal and Tanzania.

Healthy debate

Far from seeking to curtail US and international investment in Africa’s gold sector, the US official said the goal of the guidance is to encourage beneficial partnerships.

“Our aim here is not to drive anyone away, or to sort of cause people to think twice about engaging in the sector,” the official said. “But rather, by making a clear statement about what the concerns are, and where the opportunities are, we sort of hopefully lay a path for more direct and responsible engagement over time.”

By creating a one-stop-shop for “what it is the US government thinks,” the official said, companies in the gold sector should have more clarity.

The LBMA agrees.

“This advisory should not impact any company — American or otherwise — that operates in a legal manner,” the group said. “While there is a health debate between ‘legitimate’ ASM actors operating illegally due to the nature or absence of supportive mining laws, the actions of Wagner –a listed terrorist organization — are firmly criminal in nature. No legitimate company should be doing business with an entity such as Wagner.”