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GIFF: Follow the Money: How to Formalise the Gold Sector

GIFF: Follow the Money: How to Formalise the Gold Sector

August 10, 2016, by Estelle Levin-Nally



In recent years, a combination of the United Nations Guiding Principles for Business and Human Rights, NGO and consumer attention, and existing and proposed legislation in consumer nations are compelling business to do due diligence on their supply chains of minerals, in particular the ‘3Ts’ and gold, and increasingly other minerals. Supply chain due diligence is helping embed responsible business practices along value chains, but it is also making it less desirable for the market to source from ASM.

Doing due diligence

Doing due diligence on this provenance is harder and more expensive, and the risks are extremely serious brand-wise - as we’ve seen from NGO ‘outings’ of companies who have allegedly engaged with this market. Aversion to sourcing from ASM is especially the case for gold, destined often (but not only) to jewellery markets for whom the ‘purity’ and beauty of the mineral is a core part of the product’s value.

Consequently, and quite understandably, where refiners do source gold from artisanal miners, they are prioritising those that are already formalised and legitimised, and of course, we all know that this is the minority. All that buying power focused on a few market leaders, where the risks have been mitigated by certification systems like Fairtrade and Fairmined, seems a waste of potential to me.

We need to find ways for the other millions of artisanal miners to be brought into the fold to widen the market opportunities for ASM generally and the sourcing opportunities for responsible buyers. We must formalise and legitimise more miners and to do this, we need to understand better the reasons for informality.

The causes for informality

I’m sure my readers could help me populate the long list of reasons for informality in the ASM sector. Indeed, a group of the sector’s leaders attempted to identify these in a meeting in April 2015, hosted by the IIED.

At The GIFF Project, we have chosen to focus on helping stakeholders understand what we think is a major – and overlooked – key to the intractability of formalising the ASM sector: illicit financial flows. We define IFFs as money or capital that is illegally earned, transferred, or utilised. Often it is moved from one country to another.

At The GIFF Project, we are seeking to uncover and categorise the people who actually exert power in, over and through the sector, and who dictate how and where ASM happens, and on what terms.

We want to know: What are the vested interests in keeping this sector informal? What is the commercial logic for supporting and inhibiting formalisation? Why and how are IFFs a barrier to formalisation? And what can we do to equip supply chain operators, governments, and markets to tackle these barriers, and unleash the ASM sector onto a pathway where formalisation and legitimisation makes more sense and is more feasible?

On 13th May, 2016, the GIFF Project hosted an international dialogue with 50 stakeholders to ascertain appetite for support on this issue, and to start to unpack some of the determining factors.

Take a look at the upcoming blog pieces, listed below, and you’ll see why we couldn’t contain the insights provided by my fellow panellists to the May event.

Next week, I’ll kick us off by contextualising the work of the GIFF Project, providing the beginnings of an analytical framework for making sense of IFFs and ASM. After that, we turn you over to my esteemed colleagues. I trust you’ll get as much out of the series of blogs as we have and look forward to hearing from you.

Blog Series Timeline

Estelle Levin-Nally is the founder and director of Estelle Levin Ltd. (ELL) a specialist consultancy dedicated to responsible sourcing and mining, with a focus on precious minerals and conflict minerals. Estelle is also the Director of the GIFF project, a partnership between ELL and the Global Initiative against Transnational Organised Crime, which is a global network to combat criminal networks, and Director of the ASM-PACE programme, which seeks solutions to mitigate the impacts of artisanal and small-scale mining in protected areas and critical ecosystems.

The GIFF Project is a joint initiative with the Global Initiative against Transnational Organised Crime. It enables practitioners to investigate and map financial flows linked to the ASM gold sector and strengthen programme design and policy formulation.

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