The illegal trade in gold, tin, tantalum and tungsten (3TG) fuels conflict, human rights abuses, and environmental degradation worldwide. While the EU Conflict Minerals Regulation aims to curb these issues, is it truly the best legal response? Tackling these challenges calls for a balanced mix of voluntary and mandatory measures that strengthen business integrity, address financial crimes, empower local communities, and provide access to remedy for affected stakeholders.
Below, we explore the strengths and limitations of the EU regulation and compare it with other frameworks like the OECD Minerals Guidance and sector-specific standards, highlighting why we need deeper engagement and cooperation to tackle the illegal gold trade.
1) Is the EU Conflict Minerals Regulation currently the best "response" to tackle the illegal gold trade (along with 3T minerals) from a legal perspective?
Market regulations are not enough. We have to put in place a smart mix of voluntary and mandatory measures that create the pressure on businesses and governments to conduct business responsibly. This is especially important once a mineral’s political economy has become captured by transnational organized crime or hostile states, as we are seeing play out in the Sahel.
It is right that the market should put controls around higher-risk minerals, but the onus should not sit with mineral off-takers alone. Responsible trade is a partnership between two businesses and is enabled by their respective political and legal environments; there are multiple points of control.
There are three other domains where additional legal controls are important: finance, host nation laws, and access to remedy.
- Laws that manage financial crimes play a big role. Gold is a financial instrument, and refiners must abide by financial regulations. International and national laws for ensuring business integrity and minimizing financial crime do not work as successfully as we need them to, owing to corruption, lenient thresholds for triggering deeper due diligence, and lack of adequate transparency on ultimate beneficial owners. These factors enable dirty money to flow, be hidden, and be laundered through gold. (See our work on Gold and Illicit Financial Flows.)
- The second lever relates to the legal regime that governs the production and export of minerals. The probability of illegal gold mining occurring in the first place relates to conditions in the local political economy, including the national and provincial policy and legal frameworks, as well as the political disposition of ruling parties. For example, in Brazil, Bolsonaro’s regime weakened the environmental and social safeguards that are supposed to empower local communities to control their natural resources. The regime was complicit in the harassment and murder of environmental and human rights defenders.
- Producer nations have the primary responsibility to address illegal mining. Besides creating realistic and achievable regulatory frameworks, they can also support the advancement of local community rights and women’s rights; improving protections for environmental and human rights defenders and growing civic space; supporting good quality conflict management and grievance mechanisms; and improving access to fundamental human rights like freedom of expression and protest and the right to organise. They can implement international treaties like the Escazú Agreement, the UNDRIP, and so on.
- Lastly, there is a significant gap in the OECD Minerals Guidance and the EU Conflict Minerals Regulation. They don’t adequately address the issue of remedy for harms caused. If affected rights-holders had greater confidence and ability to seek justice through the courts or through non-judicial mechanisms, this would increase the risk for illegal actors and could deter a portion of the illegal trade. Since the Minerals Guidance’s publication in 2011, the OECD has included remedy as a sixth step in their Responsible Business Conduct Guidance, which is increasingly being adopted in minerals value chains. Having legal instruments only refer to the Minerals Guidance is a barrier to remedying harms caused, so it is exciting to see that recent minerals-relevant sourcing and reporting EU laws such as the Batteries Regulation, the CSDDD and the CSRD now reference the UNGPs as the benchmark for corporate due diligence. Remedy is the third and fundamental pillar for the guiding principles for business and human rights.
2) How does the EU Conflict Minerals Regulation differ from other initiatives, such as the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas and sectorial measures, such as the LBMA Responsible Gold Guidance or the WGC’s Conflict Free-Gold Standard?
The OECD Council adopted the OECD Minerals Guidance in 2011 following a multistakeholder process to build an international response to address the ways in which the extraction, trade and transportation of gold, tin, tantalum and tungsten (3TG) were used to finance a brutal conflict in the Democratic Republic of Congo. It was the first instrument to set out how companies should control risks when they are sourcing from Conflict-Affected and High-Risk Areas (CAHRAs). The Minerals Guidance’s aim is to enable trade to continue in such settings because, through responsible business conduct, industry can support economic stability as the basis for improving the conditions under which peace can be recovered and embedded. When we are using the guidance, we must remember this higher objective.
Conformance with the OECD Minerals Guidance is the lowest benchmark of acceptable practice to procure minerals from CAHRAs. It is a ‘table stakes’ standard. Nonetheless, its core principle is that business partners should seek continuous improvement in their management of risk by building a trustful relationship in which they can be transparent with each other and enable each other to manage risk better and competently tackle incidents should they arise. It is actually a tool for deepening business relationships and supporting risk management through cooperation.
Whilst the Guidance sets out the worst human rights abuses and business integrity issues that a company must do due diligence on, it is expected that over time companies will include the full set of issues that are most salient to their supply chains. For example, women’s rights, occupational health and safety, and other fundamental rights at work are not part of Annex Two, but we know many downstream actors who’ve voluntarily chosen to include these issues in their due diligence because they recognize that they are particularly high risk in their provenances, but also that doing so helps address the root causes of some of the priority issues in the Guidance. For example, addressing fundamental rights at work can build individual and thus household security, so reducing the likelihood of child labour occurring within a mining community.
As such, the OECD Minerals Guidance is a foundational and flexible standard that allows companies and countries to adopt it and build upon it. It has been domesticated into numerous legal frameworks in Africa, Europe, and North America as well as into voluntary schemes for industry. Levin Sources has been involved in many of these initiatives.
The EU Conflict Minerals Regulation domesticates the OECD Minerals Guidance into law across all EU jurisdictions. The text is directly adopted into national legal frameworks. As such, it develops it in the following ways:
- It supplements it with checks that governments must do
- It puts an implementation framework around the Guidance.
- It has led to additional guidance for how small and medium enterprises (SMEs) can implement the EU Conflict Minerals Regulation and the OECD Minerals Guidance (supported by Levin Sources)
- The EU has committed to publishing a list of recognised due diligence schemes and recognised smelters and refiners. This links the LBMA’s Responsible Sourcing Programme, for example, to this legal framework.
The WGC’s Conflict-Free Gold Standard (2012)was incorporated into the Council’s Responsible Gold Guidelines for use by industrial-scale gold mining companies only. It assures business partners that the gold has been extracted in ways that do not fuel armed conflict or the human rights abuses that conflict generate. This makes it easier for investors and companies doing due diligence on miners to have confidence that by sourcing from a WGC-certified mine, they will be aligned with the OECD Minerals Guidance.
The LBMA’s Responsible Gold Guidance, now in its ninth iteration, is an assurance framework for refiners that source precious metals from all types of miners, including artisanal and small-scale mining. Its scope covers a set of human rights and business integrity issues broader than the link between minerals and conflict.
Ultimately, companies that were already part of the WGC or LBMA were compliance-ready by the time the EU Regulation was passed. This gave them an advantage and shows a benefit of being part of industry schemes.
3) How does the EU Regulation apply to the Amazon Basin and CAHRAs?
Unlike Section 1502 of the US Dodd-Frank Act, the EU Conflict Minerals Regulation is global in scope. Companies are supposed to determine themselves if a provenance should be classified as a CAHRA, but to help reduce the costs of due diligence and barriers to trade, the EU has published an indicative list of CAHRAs.
The EU asserts that this is NOT an exhaustive list, so if a country or region falls outside of the list, then companies should seek to determine status for themselves. Levin Sources has been helping companies with this since 2017, using a proprietary tool that we developed for midstream and downstream clients.
In the Amazon Basin, only Colombia and Venezuela are listed as a CAHRA. However, based on Levin Sources’ experience and own CAHRA classification tool, we would expect to see other Amazonian regions feature as high risk, especially in Brazil, Peru, and Ecuador. We would expect companies sourcing from these countries to do deeper due diligence on the broader set of environmental, human rights and governance risks that they would determine to be most likely to transpire, and with the most severe impacts should they transpire. Companies that do this would align with the UNGPs and the OECD’s expectations for environmental due diligence in minerals value chains.
Unfortunately, the Conflict Minerals Regulation alone won’t flick the switch to suddenly legalise all gold mining in CAHRAs. Often, companies are so focused on complying with it that they miss its main point. We haven’t seen it result in enough dialogue and engagement with parties in producing countries. To drive the changes needed to really address the root causes of conflict and reduce the harm for affected stakeholders, we have to go beyond compliance and really do due diligence properly. We’ve written more about this here.
If you want help building a robust but practicable due diligence system for responsible mineral sourcing, get in touch.
Acknowledgements and Other Resources
The impetus for this blog was an interview with Mario Margarò for Italy’s Radio24, which was published on 20 October 2024. Mario’s two-part audio feature delves into the illegal gold mining boom in the Amazon, with a particular focus on the Peruvian region of Madre de Dios. Highlighting the unprecedented surge in gold prices as the main driver behind these illicit activities, the reportage examines the environmental and human cost of illegal mining across the Amazon, as well as the involvement of organized crime, lured by the immense profits it generates. Finally, it examines the scope of the EU Conflict Minerals Regulation, with a focus on its broad application on the ground.
Levin Sources supported the European Union in developing and implementing its Conflict Minerals Regulation through the design and implementation of a comprehensive support system for SMEs.
