Latest News (14 march 2019): Suspicions of Peruvian Public Prosecutor's Office
At the end of march 2018 the Peruvian customs authorities seized nearly 100 kilograms of gold from Minerals del Sur, destined for the Swiss refinery Metalor. Now the competent Peruvian authorities have suspicions against the gold-exporting firm Minerales del Sur because of money laundering and illegal gold mining. This is shown by documents made available to the Society for Threatened Peoples (STP).
After the seizure of nearly 100 kilograms of gold that should have been delivered to the Swiss refinery Metalor, the competent Peruvian authorities have started a preliminary judicial investigation. In December 2018 a Peruvian court decided that the seized gold should be confiscated. And on 25 February 2019, a higher court rejected Minerales del Sur’s appeal against the seizure. The STP has the corresponding documents from the courts and the Peruvian Public Prosecutor’s Office at its disposal. In these documents the authorities formulate suspicions against Minerales del Sur concerning the likelihood of both money laundering and illegal gold mining. The Peruvian Public Prosecutor has cited, inter alia, the following circumstancial evidence — currently the presumption of innocence applies to all those involved in the proceedings.
- The Peruvian Public Prosecutor alleges 16 “high-risk suppliers” of Minerales del Sur, for the period from January to March 2018. An example: A gold supplier delivered three kilos of the seized gold and gave its concession as origin. But a visit by the authorities revealed that no gold was mined on this concession. According to the Peruvian Public Prosecutor there is a high probability that this gold and gold from other “high-risk suppliers” could be of illegal origin.
- According to the Peruvian Public Prosecutor at times Minerales del Sur had 900 suppliers at the same time.
- According to the Peruvian Public Prosecutor even the state-owned company Activos Mineros, that awarded Minerales del Sur its license, which the Swiss refinery Metalor relied on, reported irregularities at Minerales del Sur to the customs authorities.
- According to the Peruvian Public Prosecutor, Minerales del Sur has purchasing points in the mercury-contaminated areas of La Rinconada and Ananea, and also in the disputed Madre de Dios zone.
Minerales del Sur was until the seizure the third largest gold exporter in Peru. According to the Peruvian Public Prosecutor, between 2001 and 2018 the Swiss refinery, Metalor, was the only buyer of gold from Minerales del Sur and obtained more than 100 tons of gold to the value of around 3.5 billion dollars during this period.
The program Rundschau [Broadcast] has researched the situation surrounding Minerales del Sur. In its transmission of Wednesday 13 March, the Swiss refinery Metalor also clarified its point of view on the matter. According to Rundschau , Metalor confirms that it obtained gold from the controversial “La Rinconada” mine in Peru. In the broadcast Metalor is quoted as follows: «Metalor hat ausschliesslich Gold von registrierten und legal schürfenden Minen bezogen.» According to Metalor’s own information, it has not obtained any gold from gold trading companies in Peru since the seizure, according to the Rundschau. According to the broadcast, Metalor stated that they would have stopped business relations earlier if there had been signs of discrepancies. „Wir sind sicher, dass Minersur keine kriminelle Organisation ist. Und wir sind überzeugt, dass die Firma kein illegales Gold gewaschen hat», wird Metalor in der Rundschau zitiert.
Also the company Minerales del Sur (Minersur) takes position in the Rundschau. A lawyer of the company questioned the investigations of the Peruvian authorities. Quintano Méndez of Minerales del Sur told the Rundschau: „Wir sind schon seit zwanzig Jahren im Geschäft und haben die Gesetze immer eingehalten.“
Latest news: Customs Administration decides transparency over gold imports
In January 2019, the Swiss Federal Customs Administration (EZV) complied with the Society for Threatened Peoples’ (STP) request and decided to disclose the origin of gold from the four biggest gold refineries. Last year, the STP requested that the Directorate General of Customs facilitate a detailed inspection of gold trade statistics. The STP supported this using the Freedom of Information principle. Initially the Directorate General of Customs refused to hand over this information. In November 2018, the Freedom of Information Officer recommended that the STP should be allowed access to these figures. The significance of the fact that the Customs Administration is now following this recommendation is no mean feat, despite the refineries meanwhile lodging an appeal with the Federal Administrative Court. With such an inspection, the export firms would be visible and thus the provenance of import gold for example from Dubai, a potential hub for conflict gold.
Switzerland is a country poor in raw materials. Despite this, it processes around 70 percent of globally traded gold. Four of the world’s largest refineries are located in Switzerland and have important gold buyers in the jewelry and watch industry as well as in banks. As such, Switzerland has a responsibility in the fight against gold linked to human rights violations and environmental pollution.
The STP has been monitoring the various effects of the global mining of raw materials for several years now and draws attention to related human rights violations and environmental damage. With the “No Dirty Gold!” campaign, it is committed to ensuring that the (Swiss) business with gold becomes clean. The STP defines clean gold as gold that has been mined and traded legally without human rights violations and environmental pollution. The affected local population is involved and gives its consent to gold mining, external auditors check all companies along the supply chains in this regard. Companies not complying with these requirements are penalized.
One focus of the campaign is Peru. The regions of Puno and Madre de Dios in Peru are particularly affected by gold mining, where it often leads to serious human rights violations and destroys the rainforest and thus the habitat of the local, mostly indigenous, population. In addition, the STP has analyzed the human rights situation in connection with the gold mining carried out by the company Minera Yanacocha S.R.L. in northern Cajamarca, where the rights of the local population have been violated.
Another focus of the current campaign is the United Arab Emirates (UAE). Insufficient controls make the UAE a popular destination for conflict gold or smuggled gold, including from Sudan, the Democratic Republic of Congo and Liberia. This gold of doubtful origins is traded throughout the world via the UAE – also to Switzerland.
In a report published in March 2018, the STP concludes that Switzerland has imported gold of doubtful origins from Peru and the United Arab Emirates and is very likely to continue importing it. The report was researched with the support of Greenpeace Switzerland.
As the past has shown, voluntary industry initiatives and guidelines are not sufficient to prevent the business with dirty gold. The STP therefore accuses some Swiss gold refineries and traders of insufficient due diligence. We demand greater transparency in gold trading and a legal duty of care from both the Swiss government and the industry. Companies that violate human rights or destroy the environment should be held responsible and expect legal consequences. The Swiss Corporate Responsibility Initiative based on the United Nations Guiding Principles on Business and Human Rights (UNGP) is a step in the right direction.
Region Madre de Dios (Peru)
As early as 2015, the STP disclosed that gold from informal and illegal small-scale mining in Peru was reaching Switzerland. The latest findings of the report published by the STP in March 2018 suggested that the Neuchâtel-based refinery Metalor continued to import gold from Peru that is associated with human rights violations and environmental destruction. Metalor itself did not see any reason to change its business practice until July 2018.
Peru is South America’s largest gold producer and ranks sixth worldwide. While industrial mining is the main activity in the north, small-scale mining is flourishing in the south-eastern Amazon region. This releases large amounts of mercury and other toxins and damages or even destroys rainforests and ecosystems. The regions affected by the gold rush have developed into a lawless Eldorado with major social problems, violence, crime and suffering.
The two regions of Puno and Madre de Dios are hotspots for human rights violating and environmentally destructive gold mining. In 2011, Peru’s Ministry of Environment published a study on the consequences of gold panning in Madre de Dios. It concluded that virtually all gold production in the region was illegal. Besides attracting impoverished gold-panners in search of a livelihood, the gold rush is also attracting unscrupulous companies, some of them with great criminal energy, to trade in illegal gold. As the STP pointed out in 2015, gold mined and traded under such conditions is supplied to customers all over the world.
Link with Switzerland
In this report from 2015, the STP disclosed that gold from informal and illegal small-scale mining in Peru was reaching Switzerland, among other countries. In January 2014, for example, Peru’s customs authorities confiscated gold headed for the Swiss refinery Metalor.
The latest findings of the STP report published in March 2018 suggested that the Neuchâtel-based refinery Metalor was very likely to continue purchasing gold from Peru that is linked to illegal mining and trading, tax evasion and environmental destruction. The supplier of this gold was the export company Minerales del Sur, that exclusively supplied the Swiss refinery, being its main supplier of gold from Peru.
According to the Peruvian media outlets La República and Ojo Público, a few days after the report was published, Peru’s customs and tax authorities seized 100 kg of gold of allegedly suspicious origin. It was the largest gold seizure since the authorities stepped up their action against illegal gold mining at the end of 2013. Even after the seizure of gold in Peru, Metalor let it be known that it would not be changing its purchasing policy in Peru. At the end of July 2018, it wrote on its home page: “In light of the overall situation and till further notice, Metalor has decided on a precautionary basis since March 2018 to put on hold any business relationship with collectors/aggregators in Peru.”
Further information on the confiscated gold: at the very beginning of this campaign page under “Suspicion of the Peruvian Public Prosecutor’s Office”.
At the turn of the millennium, the top authority for National Customs and Tax Inspectorate (SUNAT) and the Peruvian public prosecutor’s office had already investigated Minerales del Sur and its main owner Francisco Quispe Mamani for tax evasion and trade in illegal gold. As the STP has now learned, Francisco Quispe Mamani changed his two surnames from “Quispe Mamani” to “Quintano Méndez” shortly after the above-mentioned investigations. The research also revealed that Francisco Quintano Méndez now has four concessions in Huepetuhe, a hotspot of illegal gold mining in Madre de Dios. Three of these concessions do not meet national environmental protection requirements, one of them overlaps with the buffer zone of a protected area for indigenous peoples.
The export company Minerales del Sur is officially only allowed to buy and sell on gold in Puno. However, the research shows that the company has branches in Puno as well as one in Madre de Dios and has exported more gold per year to Switzerland since 2014 than is officially mined in the province of Puno. The obvious conclusion was that the difference could be the gold that Minerales del Sur buys or mines in Madre de Dios.
From Metalor’s point of view, however, the difference was a result of informal miners not being obliged to declare their gold in the formalization process.
Indigenous communities and gold mining in Madre de Dios
Since 2015, the STP has been visiting the Madre de Dios region, where numerous indigenous peoples live. During their visits to the affected communities, the STP noted that the human rights situation on the ground was desolate: there is a lack of clean water, health facilities and food.
The expanding gold mining in the region is leading to further human rights violations. On the one hand, indigenous communities are faced with raids, land theft, unclear usage conditions and health problems due to the rivers being heavily polluted by gold mining. In addition, serious conflicts are arising within communities between those people trying to secure their existence as gold miners and those who are fighting against the progressive environmental destruction that is a result of these very activities.
Cajamarca region (Peru)
Since 2012, the STP has been addressing the human rights situation in the northern Peruvian province of Cajamarca, where the company Minera Yanacocha S.R.L. runs South America’s largest gold mine. In 2016, the STP published a human rights report on Yanacocha.
United Arab Emirates
The STP report of March 2018 focuses on rising gold import figures from the United Arab Emirates (UAE) to Switzerland. This country does not mine gold itself but sells about 20 to 25 percent of the gold traded worldwide.
The STP investigated gold imports from the producing countries Sudan, the Democratic Republic of Congo (DRC) and Liberia and found that some companies in Dubai were, and most likely still are, trading centers for smuggled and conflict gold.
The armed conflict in Sudan has claimed hundreds of thousands of victims since 2003. Hundreds of thousands more have been displaced. Gold feeds this conflict: Most of these gold mines are controlled by armed groups that earn an estimated 54 million dollars a year with their activities. The STP report reveals that Kaloti, Dubai’s largest gold refinery, imported over 50 metric tons from Sudan alone in 2012. That is about 4 tons more than were officially mined in Sudan in 2012.
According to the UN Comtrade database, the UAE imported 94 percent of gold exported from Sudan in 2015 and gold smuggling from Sudan was still continuing in 2017.
In 2012, e.g., Kaloti purchased hundreds of kilos more from Liberia, one of the poorest countries in Africa, than were officially produced in that country. It can be assumed that this difference would have contributed significantly to Liberia’s economy and provided the government with urgently needed income.
In addition, the STP has information proving that gold was imported from the Congolese civil war region to gold traders in Dubai between 2012 and 2014 and the UN assume that conflict gold from the Democratic Republic of Congo is still reaching Dubai.
Link to Switzerland
Inadequate controls are making the United Arab Emirates a prime destination for conflict and smuggled gold, from where it is traded all over the world – including Switzerland. Switzerland is one of the most important buyers of gold from the UAE. At over 370 metric tons, the volume of imports had never been as high as in 2016. According to Swiss foreign trade statistics, Switzerland bought more gold from the UAE than from any other country that year. While refineries and banks gave different answers to a request for information, Kaloti has indicated that it has gold trading relationships with partners based in Switzerland. How can Swiss customers ensure they know where the gold actually comes from and under what conditions it was mined?
Switzerland plays a central role in both the trade and processing of gold. About 70 percent of the globally tradede gold is refined here. Part of the STP’s work is to communicate with representatives from the world of business and politics.
Switzerland is one of the most important buyers of gold from Peru and the United Arab Emirates. Four Swiss refineries, Metalor Group SA in Neuchâtel, Valcambi SA in Balerna, PAMP SA in Castel San Pietro and Argor Heraeus SA in Mendrisio, are among the largest refineries in the world. For many years, around 70 percent of gold traded worldwide has been refined in Switzerland.
The risk of gold refined in Switzerland having been mined under conditions involving human rights violations and environmental destruction is high. The STP is committed to investigating the alleged human rights violations in connection with gold mining on a global scale and to holding those responsible to account. According to UN guidelines, the Swiss refineries would have to guarantee the socially and ecologically responsible origin of the gold. From the STP’s point of view, this means that raw material and infrastructure projects for gold extraction can only be realized with the consent of the local population.
In order to achieve these goals, Swiss companies should either completely renounce gold when the origin cannot be clearly determined or carry out in-depth due diligence audits. Business relationships that are considered problematic in these audits must be terminated. The STP also considers the Swiss government and policymakers to be responsible. The current situation clearly demonstrates that voluntary mechanisms are not sufficient to prevent human rights violations and environmental destruction. Due diligence audits must be legally binding, and the Swiss gold trade must become transparent. Therefore, the Swiss Corporate Responsibility Initiative (KOVI) is necessary, which is demanding sanctions for non-compliance and internationally applicable liability mechanisms, in accordance with existing international standards.
Banks and the jewelry and watch industry
Switzerland plays a central role not only in the refining of gold. The watch industry, in which many Swiss companies are significantly represented, is one of the most important customers for gold. The global jewelry and watch industry uses more than half of the world’s refined gold every year.
The major Swiss banks are also making a significant contribution to global gold trading. The gold business is still a well-kept secret in Switzerland. Hardly anyone knows the exact routes this precious raw material takes in Switzerland between the refineries, the jewelry and watch industry and the banks.
OECD Due Diligence Guidance
The OECD has elaborated Due Diligence Guidance to promote responsible supply chains for minerals from conflict and high-risk areas, with a specific Supplement on Gold. The principles require refineries to carry out thorough due diligence in five steps, in which the origin of the gold, in particular, must be determined: “The assessment of risks along the supply chain begins with the origin of the gold”. Refineries are also required to undergo thorough audits (third party audits) in order to report to the public on the refinery’s due diligence audit processes and their compliance with relevant standards.
Based on its findings, the STP has drawn up the following list of demands directed at Swiss refineries, the Swiss government and policymakers, regulatory bodies and the OECD.
Demands relating to gold refineries and traders
- Due diligence audit: Precise due diligence audit of all customers/suppliers in accordance with the OECD Due Diligence Guidance. Promotion of responsible supply chains of minerals from conflict-affected and high-risk areas, combined with third party audits by independent, reliable and specialized auditing firms.
- Transparency: Annual publication of the risk assessment, the names of producers and the origin of the gold.
- Business relations: Immediate termination of business relationships that are considered problematic during the due diligence audit or a continuation linked to clear conditions that lead to solving the problems.
Demands relating to the Swiss government and policymakers
- Increased transparency: Breakdown of annual Swiss foreign trade statistics by actual country of origin of the gold, not merely the country the goods were received from. Disclosure of both the suppliers and the recipients with corresponding gross/net quantity information.
- National monitoring: Establishment of a national central office to monitor the gold trading flows and to license Swiss gold refineries and traders who can demonstrate transparent, systematic and in-depth due diligence and comply with the OECD Guidance.
- Legally binding nature: Introduction of a legally mandated duty of care with corresponding list of sanctions for non-compliance, as required by the Corporate Responsibility Initiative (see below).
Demands relating to the Swiss Association of Precious Metal Manufacturers and Traders (ASFCMP)
- Commitment and public statement: Commitment to the OECD Guidance and public statement on the development of the individual members of the association with regard to the Guidance.
Corporate Responsibility Initiative
If human rights and the environment are endangered by economic activities abroad, companies based in Switzerland are also to be considered responsible. For this reason, the STP supports the Corporate Responsibility Initiative (KOVI) as supporting organization. Its purpose is to ensure that Swiss companies integrate the protection of human rights and the environment into their business practices in a binding manner.
The KOVI demands that Swiss companies introduce a due diligence audit for their business relations with regard to human rights and environmental protection. This means that Swiss companies must, in future, check their activities and those of their subsidiaries and suppliers for risks to people and the environment, take appropriate measures to eliminate them and report publicly on them. If a firm does not comply with its duty of due diligence, it should also be liable for any damage caused by itself or its subsidiaries abroad.
Indigenous peoples, in particular, suffer human rights violations by multinational corporations. Although their right of co-determination is enshrined in the “Free, Prior and Informed Consent (FPIC)”, the reality is different. Indigenous people have the right to say “yes”, the right to say “no” and the right to say how a project should be carried out. Denial of this right is often the cause of bloody conflicts. The initiative is an important step towards solving such conflicts!
Reports and press releases
Contact at STP
Julia Büsser, Campaign Manager Economy and Indigenous Rights
Tel. +41 (0)31 939 00 13