The Dubai Multi Commodities Centre (DMCC) on Wednesday said it "strongly rejects" any suggestion that it acted improperly after claims that a gold refinery member flouted international rules aimed at stopping trade in so-called conflict gold.
The UK's The Guardian newspaper claimed the Kaloti Group, a $12bn refining and trading business which owns the largest refinery in the Middle East, paid more than $5bn in cash for the precious metal and accepted gold from more than 1,000 customers without paperwork.
Citing a confidential 2012 inspection report by Ernst & Young, it was also claimed that the DMCC, which was set up to promote and regulate the gold industry, changed its rules in a way which resulted in the full details of the inspection reports being kept confidential.
But in a statement, DMCC's executive chairman Ahmed Bin Sulayem said the media report was based on information supplied by a "disgruntled former Ernst & Young (EY) partner... who has sought to publicise a number of baseless allegations".
He said that DMCC "strongly rejects any suggestion that it has acted in any way improperly in relation to the Responsible Sourcing Guidance and review process for member refineries".
"DMCC’s activities, including changes to the Protocol, have been entirely aligned with international standards of due diligence and responsible supply chain management when sourcing gold, and indeed this has been independently confirmed," he added in the statement.
Bin Sulayem said DMCC had never altered, amended or diluted its Responsible Sourcing Guidance or Review Protocol to favour any member refinery and had implemented "practical and transparent measures" to assure an inclusive and compliant conflict-free supply chain.
"We are confident that our regulatory practices are robust," he said.
Earlier on Wednesday, global auditing firm Ernst & Young also defended its role, saying it did nothing but “highly professional work”.
The company’s Dubai office came under fire by a former partner and head of the inspection division, Amjad Rihan, that it had succumb to pressure from Kaloti and the DMCC to water down findings in its review of Kaloti’s operations in 2012.
The Guardian said while there was no evidence that Kaloti accepted conflict gold, a term which refers to underground trade linked to African warlords and human rights abuses, major breaches in new gold trading guidelines were uncovered.
The new international rules, being championed by US President Barack Obama, the UN, EU and campaign groups, aim to stamp out illicit trade in conflict gold, with the UN pointing to growing evidence linking extortion at hundreds of mines in the Democratic Republic of Congo to armed groups involved in war crimes.
Kaloti said in a statement to The Guardian that it “had shortcomings in the initial stages of the long, multi-staged audit process” but its “fully compliant final result was confirmed by Ernst & Young”.
Managing director Tarek El Mdaka said in an open letter published on the Kaloti website late Wednesday it rejected all allegations it did not comply with the audit process or new regulations or that it covered up or altered any findings.
However, he accepted the company’s “shortcomings” related to “specific documentation anomalies” in E&Y’s initial audit, though did not detail what they were.
El Mdaka said all cash transactions were carried out for clients that were “on board by Kaloti and have full compliance KYC documentation” and “there is no evidence that Kaloti was involved in money laundering or any of our clients for that matter”.
El Mdaka also rejected allegations it had falsified any documentation regarding shipments from Morocco, saying it had proper documentation and invoices stating “this particular consignment was gold from Morocco”.
“Kaloti accepted it had a shortcoming in the initial audit, quickly remediated it, and is now fully compliant,” he said.
The original headline to this story was I’ve done
nothing wrong, says DMCC boss. DMCC and its public relations company
Brunswick Group complained that this was not accurate as Mr Bin Sulayem had not
spoken directly to Arabian Business. In fact, on Wednesday 26 February at
6.10pm, Mr Bin Sulayem sent a lengthy message by WhatsApp directly to one of
our reporters. As the original headline was not in quotation marks, it does not
purport to reflect any conversation with Mr Bin Sulayem. Furthermore,
Brunswick Group confirmed to Arabian Business on Monday 2 March that the
original headline I’ve done nothing wrong, says DMCC boss, is indeed
correct. Arabian Business changed the headline as a gesture of goodwill to
DMCC, and in no way accepts that the original headline was incorrect.
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