Eleven gold trading hubs including the United Arab Emirates have declared their support for an initiative by the world’s most influential bullion market authority to improve regulation on issues such as money laundering and unethical sourcing of gold.
The London Bullion Market Association (LBMA) said on Friday authorities in the eleven hubs had responded positively to a letter it sent last month laying out regulatory standards.
The letter, reported by Reuters, said that if any centre did not enforce the standards, the LBMA could stop precious metals refineries it accredits from accepting bullion from them.
That would effectively block their access to the mainstream international bullion market because large banks that dominate gold trading tend to deal in metal only from LBMA-accredited refiners.
The LBMA letter asked recipients to declare their support by Dec. 11 and share an implementation plan by the end of January.
“National authorities and other representative bodies have expressed their willingness to collaborate with LBMA,” it said in a statement.
“None has voiced opposition.”
“We welcome this initiative,” UAE Economy Minister Abdullah bin Touq al-Mari said in a statement to Reuters. “It is a welcome additional step to better understand and address the potential risks in precious metal supply chains.”
He said the UAE was “committed to embedding the highest international standards” and would develop a ‘good delivery’ standard for gold market participants.
He also said it would create a committee to oversee its national anti-money laundering and anti-terror financing strategy, calling this a “critical national priority”.
The UAE is one of the world’s largest gold trading hubs. It imports close to 1,000 tonnes of gold a year — worth some $60 billion at current prices — and exports bullion worth billions of dollars to refiners accredited by the LBMA.
The Financial Action Task Force (FATF), an intergovernmental anti-money laundering monitor, has criticised its controls, as have non-governmental organsations (NGOs).
LBMA rules prohibit refineries from handling gold from sources contributing to human rights abuses, conflict, crime or environmental degradation. Its standards are based on standards drawn up by the Organisation for Economic Co-operation and Development (OECD).
The LBMA sent its letter to authorities to China, Hong Kong, India, Japan, Russia, Singapore, South Africa, Switzerland, Turkey, UAE, the United Kingdom and the United States.
It said some respondents to its letter raised concerns about its timeline and that it recognised that different centres may move at different paces.
One centre had not yet replied but was expected to, the LBMA said, declining to say which one.
Hundreds of tonnes of gold are dug up every year by small scale and artisanal miners who often work in difficult and unregulated conditions. Bullion smuggling networks are worth billions of dollars.