Banks failing to screen for illegal mining risks, report finds

Many banks and investors are failing to screen for illegal mining risks despite operating in high-risk sectors, according to a report by the World Wide Fund for Nature (WWF) and financial crime risk platform Themis.

The study, shared with Reuters, found that about 40% of surveyed financial institutions do not check for illegal mining risks as part of their due diligence, even though 84% operate in at least one high-risk sector such as transport or transit.

Based on a survey of 647 institutions across 22 countries, the report said minerals are often shipped overseas in containers, fewer than 2% of which are inspected, creating opportunities for illegally mined resources to enter global supply chains.

New opportunities for organized crime

“One respondent noted clients mislabelling precious stones as ‘apparel’ to avoid audits, highlighting a known loophole,” it said.

Illegal mining is estimated to generate at least $48 billion a year in criminal proceeds, linked to offences including environmental and sanctions breaches, money laundering, corruption, tax evasion and terrorist financing.

Rising prices for metals such as copper, gold and silver, together with stronger demand for minerals used in electric vehicles and data centre infrastructure, are creating new opportunities for illicit extraction networks.

Illicitly mined resources such as gold or cobalt can be integrated into global supply chains and sold through legitimate markets, making the sector attractive to organized criminal groups seeking revenue and a way to launder proceeds.

Banks and investment firms may be exposed through activities including trade finance, lending to mining companies, commodity trading and investment portfolios, the report said.

It added that better screening tools, staff training and greater supply chain transparency could help financial institutions identify transactions linked to illicit mining.

(By Clara Denina; Editing by Mark Potter)