BOGOTA – Deep in the jungles of Colombia, thousands of small, illegal mining operations, many under the control of Marxist guerrillas or drug traffickers, are working long hours to pull gold out of the ground. Miners are digging in out-of-the-way places such as Timbiquí and Río Quito. From there, the gold is hauled by boat, truck or small airplanes to smelters in Cali and Medellin.
Enter the international gold refiners, armed with certificates of good business practices, who buy the gold and in turn, sell to US corporations large and small. Underscoring just how fraught global supply chains can be, the gold finds its way into products ranging from smartphones to cars and gold coins made by the US Mint.
Corporations, buying in good faith, as well as companies that use gold for jewelry, rely on organizations whose task is assuring the legality of the gold. Many, including Apple and General Motors , also do independent audits of their supply chains, including gold and other metals. Despite those efforts, experts say, illegal gold slips through the system.
“It’s impractical and unfeasible to expect them to trace their gold to the mine of origin,” said Tyler Gillard, a legal adviser to the Organization for Economic Cooperation and Development.
While much has been said about the efforts to crack down on illegal mining in Africa, illicit gold mining and trading in Colombia, Peru and Venezuela continues to flourish quietly. About 85% of the 59 tons of gold produced last year in Colombia comes from operations without government licenses or environmental permits, said Santiago Angel, the head of the Colombian mining association. Colombia’s two main legal gold miners, Mineros SA and Gran Colombia Gold , together produced only 7 tons last year.
Though Colombia may ratify a new peace deal reached with the Revolutionary Armed Forces of Colombia, or FARC, many other groups there will continue to profit from illegal gold production. These outlawed operations range from large-scale mines equipped with massive digging machines worth hundreds of thousands of dollars, to single miners sifting for nuggets in jungle streams who hand over a%age of their production to local guerrillas.
It’s what Jeremy McDermott, a co-founder of the InSight Crime research institution, calls "blood gold." Illegal sales now surpass cocaine as the main source of income for illegal groups, police say. Beyond financing rebel activities, the illicit mining fuels prostitution, child labor and widespread environmental destruction, according to findings by the United Nations. Fighting among armed groups in Colombia over rich gold deposits has forced hundreds of thousands to flee their homes, contributing to the nation’s roughly 7 million internally displaced people.
The illegal mining industry is “contaminating our rivers, doesn’t pay taxes and mistreats workers,” Angel said.
Asahi Refining USA and Metalor Technologies USA are among the largest US-based refiners buying gold from Colombia. While these companies 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. That makes it mathematically impossible that they bought only the legitimate stuff.
Another US buyer, Elemetal , did not reply to requests for comment.
“You can ask how much gold a company is buying and how much a country produced legally,” said Quinn Kepes, program director at Verité, a US-based fair-labor organization. “We’ve seen a pattern of certain US refineries going into areas” that others have pulled out of.
Asahi Refining is “very proud of our record and business practices of responsible gold procurement," spokesman David Dorris said. The company “recognizes the unique opportunity it has to play a leading role in the development and implementation of systems designed to detect and prevent commercial activities that contribute to the finance of armed groups.”
Jose Ramon Camino, group general counsel for Metalor, said his company “is very much concerned with any possible trade of illegal gold or any kind of precious metal having a doubtful origin. Such material is not acceptable to Metalor. We have a limited number of suppliers in Colombia with whom we have been working for quite a while and that we know well.”
US gold importers hold certificates of responsible business practice from organizations including the London Bullion Market Association and the Responsible Jewellery Council. Both these groups say their members are subject to rigorous approval processes. Asahi Refining, Metalor Technologies and Elemetal all have such 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.
“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.
The dilemma for end users is that once gold arrives in the US, there is no way to know whether some of it may have been procured originally from illegal mines, leaving the gold free to enter the vast supply destined for manufacturing or other commercial purposes.
Apple, GM, General Electric, Verizon Communications and Johnson & Johnson are just a sampling of large American companies that bought gold from these US refiners, according to their 2015 Securities and Exchange Commission conflict-minerals reports. Many other companies didn’t report their suppliers.
GE, Verizon and J&J all say they strive for ethical sourcing, though, as Josef Skoldeberg, a GE spokesperson said, “accounting for all minerals throughout company supply chains is very difficult." GM has “a zero-tolerance policy" for corrupt business practices and abusive treatment of employees by suppliers, said spokesperson Patrick Morrissey. Apple hadn’t provided comment as of Tuesday evening.
In addition to buying gold only from refiners with certificates of good business practices, many of these corporations conduct independent audits of the sourcing for their components.
“When you are buying gold from a country where there is a risk of financing conflict, you need to do more than just checking certificates, and a lot of them are,” the OECD’s Gillard said.