Responsible Gold Supply Chains: Due Diligence Standards and Swiss Compliance

Responsible gold supply chains have moved from a niche concern to a central element of the global gold industry’s operating framework. For Switzerland — home to the world’s largest gold refining cluster — the ability to demonstrate credible supply chain due diligence is both a regulatory requirement and a commercial imperative. This article examines the standards, regulations, and practical challenges governing responsible gold sourcing.

The Responsible Sourcing Imperative

Gold supply chains present unique integrity risks:

• Conflict financing: Gold mining in conflict-affected areas (Democratic Republic of Congo, Central African Republic, Sudan, Colombia) can finance armed groups
• Money laundering: Gold’s high value-to-weight ratio and fungibility make it attractive for money laundering
• Human rights abuses: Forced labour, child labour, and hazardous working conditions in artisanal mining
• Environmental damage: Mercury use in artisanal gold mining, deforestation, water contamination
• Sanctions evasion: Gold as a vehicle for circumventing financial sanctions

These risks have driven the development of a comprehensive framework of standards and regulations governing gold supply chain due diligence.

Key Standards and Frameworks

OECD Due Diligence Guidance

The foundational international standard is the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (2011, updated). It establishes a five-step framework:

Step 1: Establish Strong Company Management Systems

• Adopt a supply chain policy consistent with Annex II of the OECD Guidance
• Structure internal management systems to support due diligence
• Establish a system of controls and transparency over the mineral supply chain
• Strengthen company engagement with suppliers
• Establish a company-level grievance mechanism

Step 2: Identify and Assess Risks in the Supply Chain

• Identify the factual circumstances of gold extraction, trade, handling, and export
• Assess risks of adverse impacts (conflict, human rights, money laundering)
• Assess risks at specific points in the supply chain

Step 3: Design and Implement a Strategy to Respond to Identified Risks

• Report findings of the risk assessment to designated senior management
• Devise and adopt a risk management plan
• Implement the risk management plan, monitor and track performance
• Take additional risk mitigation measures where needed

Step 4: Carry Out Independent Third-Party Audit of Supply Chain Due Diligence

• Have the due diligence practices audited by an independent third party
• Audits should be aligned with the OECD Guidance framework

Step 5: Report Annually on Supply Chain Due Diligence

• Report publicly on supply chain due diligence policies, practices, and risks
• Publish information on steps taken to implement the OECD Guidance

LBMA Responsible Gold Guidance (RGG)

The London Bullion Market Association’s Responsible Gold Guidance translates the OECD framework into sector-specific requirements for gold refiners. As all four major Swiss refineries are on the LBMA Good Delivery List, compliance with the RGG is mandatory for maintaining market access.

Key RGG requirements include:

Responsible Jewellery Council (RJC)

The RJC’s Chain of Custody (CoC) and Code of Practices (COP) standards provide complementary frameworks:

• CoC Certification: Tracks gold through the supply chain from refiner to retailer
• COP Certification: Broader ethical, human rights, social, and environmental standards

Swiss refineries holding RJC certification demonstrate compliance across a wider range of responsible business practices.

Swiss Legislation

Switzerland’s domestic legal framework for responsible gold supply chains includes:

Indirect Counterproposal (2022): Requires companies dealing in minerals and metals from conflict-affected areas to implement supply chain due diligence aligned with the OECD Guidance. This provision specifically targets gold, tin, tantalum, and tungsten.

Ordinance on Due Diligence and Transparency in relation to Minerals and Metals from Conflict-Affected Areas and Child Labour (DDTrO): The implementing ordinance that specifies thresholds, reporting requirements, and compliance details.

Anti-Money Laundering Act (AMLA): AML requirements for financial intermediaries — relevant where gold trading activities constitute financial intermediation.

Practical Implementation

Supplier Due Diligence

Implementing effective supplier due diligence in the gold supply chain involves:

Tier 1 — Direct Suppliers:

• Full KYC (beneficial ownership, corporate structure, licence verification)
• On-site visits and inspections where feasible
• Contractual obligations regarding responsible sourcing
• Ongoing monitoring and periodic re-assessment

Tier 2 — Indirect Suppliers (Through Supply Chain):

• Identification of origin countries and mining operations
• Risk assessment based on origin, counterparty type, and transaction characteristics
• Enhanced due diligence triggers for high-risk indicators
• Traceability systems to track gold from mine to refinery

Artisanal and Small-Scale Mining (ASM):

• Dedicated ASM sourcing policies
• Partnership with formalisation programmes (e.g., Swiss Better Gold Association)
• Enhanced monitoring and support for ASM suppliers
• Gradual improvement approach rather than blanket exclusion

Red Flags and Risk Indicators

The gold supply chain presents numerous red flags that due diligence systems must detect:

Technology Solutions

Technology is increasingly deployed to support gold supply chain due diligence:

Blockchain Traceability: Platforms such as the Aura Blockchain Consortium and IBM’s Trust Your Supplier enable digital tracking of gold provenance. While promising, these systems face challenges in verifying the accuracy of data entered at the mine level.

Isotopic Analysis: Gold from different geological formations has distinctive isotopic signatures, enabling forensic verification of claimed origin. Swiss research institutions, including ETH Zurich, have contributed to developing these techniques.

Satellite Monitoring: Remote sensing can identify mining activity in declared source areas, cross-referencing with supplier claims about origin.

AI-Powered Screening: Machine learning models process counterparty data, media reports, and transaction patterns to identify potential compliance risks.

Challenges and Controversies

Effectiveness Debates

The effectiveness of current due diligence standards is debated:

Critics argue:

• Due diligence focuses on process rather than outcomes
• Major refineries have continued to process gold from questionable sources despite certification
• ASM gold is increasingly excluded from formal supply chains rather than responsibly sourced
• Audit quality varies significantly

Proponents respond:

• Due diligence standards have significantly raised the bar since their introduction
• Perfect traceability in artisanal gold is inherently challenging
• Continuous improvement frameworks acknowledge the complexity
• Alternative to due diligence (outright bans on high-risk origins) would harm vulnerable communities

ASM Dilemma

The treatment of artisanal and small-scale mining gold presents a genuine dilemma:

• ASM provides livelihoods for 15 to 20 million people in developing countries
• ASM gold is associated with higher due diligence risks (informality, conflict, mercury use)
• Strict due diligence requirements can incentivise refineries to avoid ASM entirely
• Avoidance pushes ASM gold into informal channels with less oversight

Swiss refineries have adopted varying approaches. PAMP, through its partnership with the Swiss Better Gold Association, has pioneered responsible ASM sourcing programmes. Other refineries have reduced or eliminated ASM sourcing to manage compliance risk.

Russian Gold Post-2022

The Swiss sanctions regime imposed following Russia’s invasion of Ukraine has created significant challenges for gold supply chains:

• Swiss refineries have ceased processing newly mined Russian gold
• Russian gold bars already in circulation (pre-sanction) remain legally tradeable but face market stigma
• Re-refining of Russian-origin bars raises complex compliance questions
• Alternative refining centres (UAE, Turkey) have absorbed some displaced Russian gold flows

Audit and Verification

LBMA Audit Process

The LBMA’s audit programme for Good Delivery refineries involves:

1. Scope: Annual audit covering all gold-bearing materials received by the refinery
2. Auditor Qualification: Audits must be conducted by firms on the LBMA’s approved auditor list
3. Assessment Areas: Management systems, KYC procedures, origin assessment, CAHRA procedures, transaction monitoring, reporting
4. Grading: Pass, conditional pass, or fail — with consequences for Good Delivery status
5. Publication: Summary audit reports are published on the LBMA website

Swiss Regulatory Oversight

Swiss authorities’ oversight of gold supply chain due diligence includes:

• Federal Precious Metals Control inspections
• FINMA oversight (where applicable through banking relationships)
• Cantonal compliance reviews
• Criminal investigations by the Office of the Attorney General for serious violations

Outlook

The responsible gold supply chain landscape is evolving rapidly:

Regulatory Convergence: International standards (OECD, LBMA, EU) are converging, creating an increasingly consistent global framework. Switzerland’s domestic requirements are largely aligned with these international standards.

Enhanced Transparency: Beneficial ownership registers, public reporting requirements, and digital traceability are increasing supply chain visibility. The trend is toward less opacity and more accountability.

ESG Integration: Responsible sourcing is increasingly integrated into broader ESG frameworks, with investors and customers demanding comprehensive sustainability performance rather than narrow compliance.

Enforcement Escalation: Both international bodies (LBMA) and national regulators (Swiss authorities) are increasing enforcement activity, raising the consequences of non-compliance.

Emerging Risks: New challenges include the governance of gold from increasingly complex recycling streams (electronic waste), the implications of digital gold assets (tokenised gold, gold-backed cryptocurrencies), and the governance of gold supply chains disrupted by geopolitical fragmentation.

For Swiss refineries and traders, responsible gold supply chain management is no longer a compliance burden to be minimised — it is a core business competency that determines market access, banking relationships, and commercial reputation. Those that invest in genuine, outcome-oriented due diligence will strengthen their position in an industry where trust is the ultimate competitive advantage.

Donovan Vanderbilt is a contributing editor at ZUG COMMODITIES, covering supply chain governance, precious metals regulation, and commodity compliance. Based in Zurich, he draws on two decades of experience in commodity market analysis and institutional research.