Dubai refiner Kaloti denies report over gold-sourcing compliance

Kaloti Jewellery Group yesterday denied claims that its gold trade business fell short of compliance requirements, as detailed in a report by Global Witness, a UK-based NGO.

The report, issued on Tuesday, claimed that an inquiry by the accountancy firm Ernst & Young (EY) into Kaloti’s supply-chain compliance for 2012 found a number of serious failures that should have immediately been made public.

These are alleged to have included the failure to report a series of suspicious cash transactions totalling US$5.2 billion over the year and knowingly accepting four tonnes of gold disguised as silver imported from Morocco by suppliers with falsified paperwork.

Kaloti, Dubai’s biggest gold refiner, also lacked adequate supply-chain information on several tonnes of gold from Sudan, the report claimed.

Global Witness said that the audit findings pointed to an increased risk of money laundering and of dirty gold from the Democratic Republic of Congo and other conflict zones entering the refiner’s supply-chain during 2012.

But Kaloti strongly denied that any of its gold had been sourced from conflict areas such as DR Congo.

“Any non-compliance during the initial audit stage was related to specific documentation anomalies, which were swiftly rectified,” said Tarek El Mdaka, Kaloti’s managing director. “There has been no evidence in any of EY findings that Kaloti sourced gold from conflict zones.”

Mr El Mdaka said that all cash transactions mentioned in the report were conducted for clients that had full compliance documentation.

“Each transaction was monitored by EY and each of the suppliers was checked by EY. There is no evidence that Kaloti was involved in money laundering – or any of our clients for that matter,” he said.

Global Witness further alleged that the Dubai Multi Commodities Centre (DMCC), which regulates the emirate’s gold trade, changed its Responsible Sourcing Guidance and related Review Protocol after becoming aware of the negative findings in EY’s report.

Global Witness, which campaigns to prevent natural resource-related conflict and corruption, said that EY should have rejected the changes the DMCC made to its guidelines, and walked away from the audit engagement with Kaloti.

“I tried to put pressure on the firm [EY] to change their minds and do the right thing,” Amjad Rihan, a former partner at EY Dubai who was in charge of the Kaloti audit, told The National. “I told them I’m not signing the audit and I stepped out.”

DMCC has denied that the change was made in response to the audit.

“DMCC’s activities, including changes to the protocol, have been entirely aligned with international standards of due diligence and responsible supply chain management when sourcing gold, and indeed this has been independently confirmed,” it said yesterday.

“We have already made clear that DMCC never concealed instances of non-compliance or protocol breaches by any member refiner, nor sought to influence EY or any independent reviewer in carrying out their duties in the review process. We have also never altered, amended or diluted our [guidelines] to favour any member refinery.”

EY has also denied any wrongdoing.

“EY Dubai refutes entirely the suggestion that we did anything but highly professional work in relation to our compliance engagement with Kaloti,” the firm said.

jeverington@thenational.ae