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DMCCs Responsible Sourcing Initiatives and Guidance for Market Participants India International Gold Convention 16 th August 2013 Presented by Chirag Sharma Commodity Services, DMCC Key developments and implications for the Indian gold

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DMCC’s Responsible Sourcing Initiatives and Guidance for Market Participants

India International Gold Convention

16th August 2013

Presented by Chirag Sharma Commodity Services, DMCC

SLIDE 2

Key developments and implications for the Indian gold industry

OECD guidance is a globally accepted benchmark for conducting due diligence for

responsible sourcing of gold

US regulation - Section 1502 of the Dodd-Frank Act requires companies to publicly

disclose their use of conflict minerals (i.e. tin, tantalum, tungsten, gold, etc)

– Directly or Indirectly, this requirement is applicable to gold exporters to the US – India exports a significant portion of jewellery to the US directly and via other regional jewellery hubs

The EU and Canada are developing responsible sourcing regulations using the

OECD guidance as a base

Compliance with the OECD guidance can assist the Indian gold industry to

comply with US regulations and potentially future regional/national regulations

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Dubai Good Delivery (DGD) standard incorporates OECD’s guidance

DGD standard is an internationally accepted benchmark for the quality and

technical specifications for the production of gold and silver

Robust technical evaluation by expert testing agencies for 1kg gold bars of minimum 995 purity

(and/or high purity 999.9) – this form of gold is relevant for ANY jewellery producing hub

Currently, 14 gold refiners across 10 countries as DGD members
Compliance with OECD’s guidance on responsible sourcing is a MANDATORY requirement for

member refineries, along with adherence to DMCC’s AML/CFT policy and other requirements

Dubai Multi Commodities Centre is a ‘Government of Dubai’ authority and is the

regulator and owner of the DGD standard

DMCC approve refinery membership applications and enforces DGD rules to ensure all members

are fully compliant

A significant portion of the gold used in jewellery manufacturing in India is

produced by DGD refiners

In 2011, India imported 23% of their annual gold bars requirement from Dubai (222 tonnes) of which

90% are produced by DGD refineries

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DMCC’s involvement with the OECD

Since 2011, DMCC has been a member of the OECD’s drafting committee for

developing the OECD’s guidance, alongside other gold industry participants

Joint OECD/DMCC seminars held in Dubai
Following OECD’s finalization of their guidance, DMCC was part of their Interim

Governance Group, and assisted the group to globally implement the OECD’s guidance

In 2013 the OECD’s new Multi-Stakeholder Steering Group was constituted,

wherein DMCC is one of the six members representing the global gold industry (others include LBMA, PAMP, RJC, Signet Jewelers and WGC)

Development of guidelines and/or regulations including existing OECD guidance Increase outreach by innovative channels (i.e. simplified multi-lingual guidance, pictorgraphs, webinars, etc) Development of tools for the industry to use for conducting due diligence

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DM CC’s implementation of the OECD’s guidance

Issued a ‘Practical Guidance for responsible sourcing of precious metals for market

participants’ based on OECD’s guidance in April, 2012

Mandatory requirement for DGD refineries to implement the practical guidance since

June 2012

Issued the ‘Review Protocol’, a guidance to assurance providers for conducting
perational audits on DGD refiners supply chains
Approved list of assurance providers comprises the big 4 auditing firms (Deloitte, E&Y,

KPMG and PWC)

All UAE based DGD refineries (Emirates Gold, Kaloti and Etihad Gold) have

engaged approved reviewers

Conducted workshops for UAE governmental agencies, members and DGD refineries
Launched Arabic, Hindi and Malayalam translated versions of the Practical Guidance

DM CC is committed to complement efforts of the OECD and assist market participants for implementation of the OECD’s guidance

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DMCC’s initiatives complement the OECD’s efforts on outreach

Globally

14 DGD refineries across 10 countries
500+ DMCC licensed companies in the precious metals segment

United Arab Emirates (UAE)

Various UAE ministries
Customs
Other bodies such as Law Enforcement Agencies, Trade License Authorities,

Chamber of Commerce, etc

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Challenges in implementing responsible sourcing practises and potential solutions

Non standardized risk matrices and evolving metric of conflict affected and/or high risk area
Global gold industry should develop and standardize these risk assessment tools
Source of origin documentation is falsified directly by government entities to hide the
riginal origin
OECD through their multi-stakeholder forum should focus efforts on mitigating risks at root level
Difficult to establish if artisanal and small scale mining sites are conflict free; extent of cash

transactions; relevant supporting documentation;

National level and/or Government to Government programs on assuring conflict free ASM sites

need to be robust and credible

Intermediaries and brokers resist providing full documentation due to confidentiality reasons
Independent 3

rd party reviews for wider market participants to provide assurance on implementing

responsible sourcing best practices

Smaller gold producers, jewelers, etc, may not possess the relevant resources to

adequately implement responsible sourcing best practices

Auditors are available, but need to increase global pool of trainers on implementing responsible

sourcing best practices at reasonable costs

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Future direction and implications with regards to responsible sourcing

Increase in Regulation is imminent (i.e. EU and Canada are in process of developing

regulations, other regions/nations could soon follow)

Directly or indirectly this would also become applicable to importers and exporters in any location that are conducting business with regulated regions/nations

Financial institutions will prefer to keep client relationships where assurances on

responsible sourcing can be provided

Businesses relying on securing financing and related facilities will be forced into complying with responsible sourcing best practises

Supply chains that have fewer counter-parties and are fully transparent are likely to

emerge as preferred opportunities

Role of intermediaries and brokers will be reduced, unless they too are able to demonstrate compliance with responsible sourcing best practises

Responsible sourcing will eventually become a mandatory requirement for ALL market participants

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Recommendation For Indian market participants to comply with the OECD’s guidance

Users of DGD gold are assured of quality and compliance with responsible

sourcing best practices

Sourcing bullion from DGD accredited refineries automatically ensures

compliance with OECD guidelines and Dodd-Frank regulatory requirements

Wider adoption of DGD in India will benefit market participants such as

Users of gold bars (i.e. banks, traders, importing agencies, jewellers, etc) Gold refineries can become DGD accredited members

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Conclusion

Complying with responsible sourcing best practices is directly or indirectly a

requirement for the global gold industry

DMCC is committed to implementing the OECD guidance and assisting

market participants for the same

DGD standard incorporates the implementation of the OECD guidance as a

mandatory requirement for member refineries

DGD is relevant for jewellery producing hubs due to certification based on

1kg gold bars of minimum 995 purity

India sources significant amounts of gold from Dubai and it would benefit

market participants to adopt the DGD standard for complying with the OECD guidance

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