Since the very beginning of 2023, Brazil has been putting all its attention on an unprecedent humanitarian crises that has affected the Amazonian indigenous people Yanomami. Starvation, deprivation of medications and basic services are consequences of the imbalance caused to the native population affected by one of the most lucrative criminal activities, illegal mining. In this case, illegal gold mining.
Illegal mining causes forest devastation, water pollution (mercury is used in extraction processes and discarded in nature) and encourages other kinds of criminal activities in the region.
While Federal Government is acting to rescue affected people, Law Enforcement Agencies have responded promptly. On February 15, Federal Police raided gold trading companies and a financial institution that were allegedly providing support to launder illegal extracted gold and export it to the US, Switzerland, Italy, Hong Long and United Arab Emirates. Federal Court determined R$ 2 billion in asset freezing.
Enforcement Actions expected to reach overseas:
Although there is no publicly available information on whether foreign companies are part of the investigation, is expected that they will be subpoenaed to clarify which kind of due diligence was taken prior to the transactions. It is also expected that Federal Government will sue for damages all the involved parties as per the Federal Constitution, all minerals in the territory of the country belong to the Federal Government, except if the extraction is authorized otherwise and disgorgement sentence applies in this case.
New Anti-Money Laundering Provisions for the mining sector coming this February:
The scenario also sped up legislation provisions on raising the governmental and internal control bar of gold, platinum, and precious gems mining activities as they are considered regulated business subject to AML provisions. The expectation is that by the end of this February, the National Mining Agency ("ANM") will ascribe the obligation of implementing typical AML controls and also the duty to report suspicious activities to the Brazilian Financial Intelligence Unit (COAF) to mining producers engaged in mineral extraction activity.
What to expect next from Brazilian Lawmakers:
Proposition n. 2159/2022, from the House of Representatives, aims to create a chain of custody in the gold mining supply chain using technology such as blockchain, by enhancing onboarding process of gold vendors and by prohibiting individuals from selling gold to financial institutions.
At a time when supply chain human rights due diligence raises concerns in Europe when it is related to agriculture, illegal mining activity cause even greater damages that cannot be neglected by compliance and ESG programs.
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