Metal Fingerprint: Countering Illicit Trade in Precious Metals and Gemstones

Policy Report | June 28, 2008

International efforts to disrupt terrorist and organized crime networks must pay special attention to how these networks are financed.

Executive Summary

International efforts to disrupt terrorist and organized crime networks must pay special attention to how these networks are financed. Global trade in precious metals and gemstones has become a significant source of financing for both organized crime and terrorist groups. As the demand for materials bearing precious metals and stones continues to grow, criminal and terrorist networks will exploit weak national and international monitoring of the trade to finance activities that threaten us all. Public-private partnerships offer a real chance of increasing transparency and monitoring in the trade of precious metals and gemstones, thus undermining the financial foundation of global terrorist networks.

Serious efforts have been undertaken by governments, international organizations, and the global business community to stem illegal trade in many commodities used in money laundering and terrorist financing—especially since the terrorist attacks of September 11, 2001, in the United States. Significant success has been seen in disrupting the trade of illegal rough diamonds through the Kimberly Process. But success has been elusive in the illegal trafficking of precious metals and gemstones. Efficient law enforcement in this area is hampered by the lack of internationally recognized procedures for certifying batches of primary precious metals-bearing raw materials and a lack of well-established methods of identifying the origin of both precious metals and gemstones. These shortcomings complicate the process of distinguishing between legal and criminal supplies and place a substantially greater burden on the due diligence efforts of precious metals refiners and stonecutters to ascertain the veracity of their customers.

Russian research institutes and forensic laboratories, led by the mining and metallurgical company Norilsk Nickel, have devised advanced methods to identify the origin of semi-products bearing platinum-group metals (PGM). This methodology can be expanded to other metal groups and gemstones, taking the form of a Platinum Initiative to ensure efficient certification procedures in the international metal trade and strengthen existing certification schemes in the diamond and gemstones industries.

In July 2007, an informal international working group, including experts from the private sector, government, and independent think tanks, was established under the auspices of the G8 in order to explore the potential of the Platinum Initiative. The conclusions and recommendations formulated in this policy paper are to a large extent based on the initial findings discussed at the first three meetings of this Working Group held in July and October 2007 and February 2008.

Key Recommendations

  • Develop the Platinum Initiative into a strong industry-focused program that includes:
    • an international register of verified and legitimate traders in PGM;
    • enhanced customs control procedures to identify PGM-bearing goods;
    • internationally shared databases of PGM-bearing raw materials;
    • enhanced control measures in mining and metallurgical companies;
    • an international network of certified forensic and expert laboratories capable of tracing the origins of the goods and commodities in question.
  • Coordinate the enforcement mechanisms of the Platinum Initiative with the relevant international organizations—in particular, the World Customs Organization (WCO), appropriate UN agencies, the Financial Action Task Force (FATF), and the G8 governments.
  • Incorporate data on platinum-metals bearing goods and materials into the existing WCO framework using tracking systems such as the Harmonized Commodity Description and Coding System and the Customs Enforcement Network.
  • Establish standardized procedures for information-sharing between national law enforcement agencies and PGM-producing companies to respond rapidly to the appearance of suspicious consignments of unfinished precious metals-bearing materials on the market.
  • Strengthen the implementation and regulatory framework of the World Bank’s anti-money laundering (AML) program to reflect the significant role of illegal precious metals trading as an instrument of terrorist financing.