News Column

Dubai's gold trade caught in crossfire over weak compliance

February 27, 2014

Manoj Nair Associate Editor



Dubai; While Dubai-headquartered Kaloti Jewellery Group is at the centre of some international media reports over alleged laxness on its bullion sourcing processed, Dubai's multibillion dollar gold trade itself has been caught in the crossfire over weak compliance requirements. This, market sources say, is "totally out of step" with reality.

In particular, the reports seem to suggest the supposed presence of "conflict area" gold washing up within Dubai's bullion industry, and inclusive of refining, wholesale and retail operations. Plus, there is the impression tied to the reports about less than secure control mechanisms on the part of the Dubai Multi Commodities Centre (DMCC), the commodities hub and which is closely associated with the physical storage and the futures contracts on the metal.

"Dubai has had a regime of tough compliance requirements on "hallmarking" (which confirms the purity of the gold sold in the emirate), regular surprise checks of the trade to make sure consumers do not get duped in any way, and close monitoring of practices," said Joy Alukkas, chairman of Joy Alukkas Group. "To overlook all of what Dubai has done to date for a transparent compliance programme and paint a distorted image of the trade just does not seem right."

A top official at Kaloti — which has refining interests in the UAE and overseas apart from being a bullion trader — has given a point by point rebuttal on some of the issues raised by the media, principally UK's €˜Guardian' and Global Witness. (The reports were based on details provided by a former partner at the Ernst & Young Dubai office, which was appointed by Kaloti to do an audit on its supply processes.)

"In all of Ernst & Young's reports and findings during the process, Kaloti was never found to be sourcing from conflict zones," said Tarek Al Mdaka, managing director at Kaloti. "Any non-compliance during the initial audit stage was related to specific documentation anomalies, which were swiftly rectified, and not to any findings of conflict gold within the supply chain."

"Kaloti did not cover up any compliance reporting nor did we alter any findings."

The Kaloti statement also confirms that the initial phase of the auditing did point out "shortcomings" in some of the company's process. However, "a corrective action plan" was submitted and a "remediation process" was launched immediately. This was done as per DMCC guidelines, Al Mdaka said.

"Kaloti has followed and adhered to the requirements of the audit and the DMCC Review Protocol at all stages, and both Kaloti Refinery and Kaloti Jewellery International, DMCC, remain fully compliant after the correction action plan."

Market sources in Dubai's gold trade say the timeline of when the auditing process was done is important. The E&Y audit at Kaloti took place in the late 2012/early 2013 — a period in which the message of responsible sourcing of bullion was only filtering down into the local marketplace and helmed by DMCC.

In fact, it was in November 2011 that the concept of €˜Responsible Sourcing' was first sounded out to the trade at the City of Gold conference.

"This was the starting point, since then DMCC and Dubai Gold & Jewellery Group have taken the lead in ensuring that miners and traders follow the guidelines of the Organisation for Economic Development (OECD) and Responsible Jewellery Council (RJC) in souring precious metals," said a spokesperson for Dubai Gold & Jewellery Group.

All refineries in the UAE are now following guidelines set by the Organisation of Economic Cooperation and Development (OECD). Also, jewellers are demanding proper documentation for all transactions of "dore" bars (conflict gold typically relates to such bars).

"On top of everything, is there even a single instance of a shopper buying gold in Dubai getting less than what he paid for? No would be the answer," Alukkas added.


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Source: Gulf News (United Arab Emirates)


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