Dubai refiner responds to conflict gold charges
Yesterday human rights group Global Witness released a whistleblower report on Dubai-based Kaloti Jewellery International alleging the gold refiner, one of the world's largest, breached international rules to combat the underground trade in gold and industrial metals linked to money laundering, African warlords and human rights abuses.
The report states Kaloti in 2012 "failed to report potentially suspicious cash transactions" worth over $5 billion and that the metals regulator of the Emirate of Dubai then turned to a blind eye to an audit by global accounting firm Ernst & Young which detailed the abuses.
Below is Kaloti's response to the charges sent to various media outlets:
Kaloti response to media reports
Dear valued stakeholder,
You may have seen recent media reports related to Dubai’s gold market, which include claims that Kaloti Jewellery Group’s gold trade business did not fully comply with regulatory requirements following an audit by accountancy firm Ernst & Young.
As you are a valued stakeholder to the company, I would like to take this opportunity to reassure you that these allegations are false and without any substantiation. Kaloti has strongly denied these claims and any implication relating to regulatory non-compliance in the gold trade. Articles published in the UK’s Guardian, BBC, and in a report by Global Witness are full of contradictions and inaccuracies.
Please note the following points on some of the issues raised:
Conflict gold in the supply chain
In all of Ernst & Young’s reports and findings during the process, Kaloti was never found to be sourcing from conflict zones. Any non-compliance during the initial audit stage was related to specific documentation anomalies, which were swiftly rectified, and not to any findings of conflict gold within the supply chain. There has been no evidence in any of E&Y findings that Kaloti sourced gold from conflict zones and that is clearly stated in the media publications and in Global Witness’ report:
“There is no evidence that the refinery accepted conflict Gold” – The Guardian
“While there is no evidence that Kaloti bought Congolese gold that had funded conflict, the findings outlined above point to a substantial risk that such gold entered the refiner’s supply chains” – Global Witness
”EY Dubai did not find any evidence that any gold from conflict zones in Africa had been moved through the client’s refinery, nor is EY Dubai aware of evidence of this” – EY response to Global Witness
All cash transactions mentioned in the report were conducted for clients that were on boarded by Kaloti and have full compliance KYC documentation. Each transaction was monitored by E&Y and each of the suppliers were checked by E&Y. There is no evidence that Kaloti was involved in money laundering; or any of our clients for that matter. This is highlighted in Global Witness’ own report:
“No evidence of money laundering was ever found, rather that the refiner needs to tighten procedures to eliminate risk” – Global Witness
“The follow-up audit report indicates that Kaloti had stopped accepting gold from these customers and conducted enhanced research on high-risk suppliers, including those from Sudan” – Global Witness
There is absolutely no evidence that Kaloti falsified any documentation. In its audit report, E&Y clearly stated that its findings were related to “inadequate documentation in the supply chain.”
Kaloti had full KYC documentation on all its Moroccan clients and had proper import documentation and invoices stating that 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.
Kaloti did not cover up any compliance reporting nor did we alter any findings.
“The Guardian has seen no evidence that published reporting of Kaloti failings was out of line with regulatory rules or industry practice.” – The Guardian
These audit findings were approved by the E&Y Dubai team after consultation with their global team including the Group Chairman and CEO. E&Y also sought the expertise of an external consultant.
“Within two weeks the issue had been further escalated to Mark Otty, E&Y’s London based managing partner for Europe, Middle East, India, Africa, who assembled a team of senior figures to deal with the matter, also calling in law firm LinkLaters to provide outside advice. “We are taking this issue very seriously,” Otty wrote in one of a number of e-mails on the subject. “I have taken the lead in relation to our investigation of it.”” – The Guardian
As stated in the audit’s Consolidated Report, published on our website in accordance with the requirements of the regulator, Kaloti had shortcomings in the initial stages of the multi-staged process. However, as per DMCC Guidelines, Kaloti submitted a corrective action plan and immediately started the remediation process. The company received a fully compliant final audit result, which was confirmed by Ernst & Young.
Kaloti has followed and adhered to the requirements of the audit and the DMCC Review Protocol at all stages, and both Kaloti Refinery and Kaloti Jewellery International, DMCC remain fully compliant after the correction action plan.
Should you like to discuss this matter in further detail, I am more than happy to make myself available at your convenience.
Tarek El Mdaka