The US State, Treasury, Commerce, Homeland Security, and Labor Departments, along with the United States Agency for International Development (USAID), today issued an advisory to warn US persons and companies about the involvement of illicit actors in the gold trade in sub-Saharan Africa. Issued in coordination with sanctions against four companies linked to US-designated Russian warlord Yevgeny Prigozhin, the advisory encourages US firms and individuals to strengthen due diligence practices in an effort to prevent malign actors from exploiting the sector, which is essential to the livelihoods and communities in the region.
The US government encourages responsible investments in the sector and highlights the significant potential to further develop the gold sector in the region by improving efforts to incorporate artisanal and small-scale gold mining activities into the formal gold trade in Sub-Saharan Africa, developing refining capabilities in the region, and other related activities that can help develop the industry in the region. The advisory urges responsible investments in all aspects of the gold sector in Africa, including mining, trading, refining, manufacturing, and retail.
But significant risks do exist, and US entities and individuals must be cautious to perform adequate due diligence to identify suspicious behaviors that could indicate sanctions evasion, money laundering, financing of terrorism, forced labor and other human rights abuses, corruption, smuggling, and environmental dangers to mitigate those risks.
Expert risk analysts can help your firm identify risky behaviors and file suspicious activity reports (SARs) when appropriate. Recognizing risk indicators is critical to protecting your business and preventing reputational damage. Red flags associated with money laundering, labor and human rights abuses, environmental damage, and corruption must be identified and examined. The use of cash-intensive businesses and operations, fraudulent declaration of gold as scrap, involvement of high-risk individuals, sanctioned individuals or entities, or government officials flagged for corruption, can all be indicators of illicit activities in the mining sector.
Due diligence should include a comprehensive examination of labor practices to steer clear of links to worker exploitation, including children, which is unethical and can cause significant reputational damage. Thorough research can also help US firms avoid being subject to Withhold Release Orders (WROs), which authorize the US Customs and Border Protection (CBP) to detain questionable goods at all US ports of entry unless the importer can prove the absence of forced labor in its shipment’s supply chain, which can negatively impact profits.
Specific due diligence focused on environmental concerns to avoid commercial and reputational risks associated with contributing to environmental degradation is also critical. Industry participants should identify these risks in their supply chains and work to find alternatives to mercury and cyanide used in gold mining, which damage the environment.
The designation of several entities linked to Wagner chief Yevgeny Prigozhin today targets entities involved in mining operations in the Central African Republic (CAR) and Sudan. Since several Wagner entities were designated in 2020, Prigozhin and the Wagner Group have continued to actively participate in Russia’s war in Ukraine and in various engagements across Africa, which help the Kremlin fund its aggression.
This activity has resulted in extreme violence, civilian casualties, and extensive corruption. Recent reporting indicates that the Wagner Group is working to expand its gold mining and processing operations in N’dassima in CAR, potentially earning the organization significant new income. The Wagner Group has prevented officials from visiting the region where this mine is located, raising further concerns about the extent of its operations and impact on local communities. This also allows the Wagner Group to extract and export gold outside of official channels, thus depriving CAR of royalties and other revenues.
FiveBy assesses that engagement with expert analysts to identify red flags associated with gold mining in Sub-Saharan Africa, mitigate reputational and business risks, and restrict illicit actors access to this lucrative source of funds is critical to protecting your firm from possible financial and even criminal penalties.
For a free consultation, please click below.