Illegal gold from Brazil linked to Italian refiner and big techs -Federal Police

The Brazilian Federal Police allege that an Italian refiner bought gold from a company that illegally acquired it in the Amazon rainforest. According to police documents, corporate disclosures show that the refiner supplied the precious metal to four of the world’s biggest tech companies.

Public records from Amazon.com, Apple, Microsoft, and Google’s parent company Alphabet name the private Italian company Chimet as the source of some gold used in their products. Technology companies often use small amounts of this metal in circuit boards for consumer electronics.

According to police documents obtained by the investigative journalism organization Repórter Brasil and reviewed by Reuters, the Federal Police allege that Chimet bought millions of dollars in gold from the company CHM do Brasil, which allegedly acquired the precious metal illegally from gold miners.

CHM do Brasil, responding to questions through a lawyer, said that all its gold was acquired legally with proper documentation.

Unregulated mines destroy rainforest land in the Amazon while polluting rivers with mercury. Illegal miners engaged in violent confrontations with the indigenous communities protecting their lands, leaving a trail of death, disease, and intimidation.

Brazilian sustainability entity Escolhas Institute estimated that the country produced 84 tons of illegal gold in 2019 and 2020, a 23% increase over the previous two years and equivalent to nearly half of Brazil’s total gold production.

“A company that is buying gold that comes from Brazil, it already knows that it has a very high risk of being buying gold with irregularity — a blood gold from the Amazon,” said Larissa Rodrigues, author of the Escolhas Institute report.

A Chimet representative said the company severed relations with CHM upon learning of the allegations in October 2021, when police conducted operations in nine Brazilian states and the Federal District targeting CHM and others allegedly involved in the illegal gold trade.

A police document summarizing the investigation dated August 2021 states that Chimet allegedly bought R$2.1 billion (US$391 million) in gold from CHM between 2015 and 2020.

A spokesperson for the Federal Police in Pará declined to comment on the investigation because it is ongoing and remains under secrecy. He said indictments would likely be announced when the investigation is completed later this year.

He added that federal prosecutors would then have to decide whether to file charges.

The four U.S. technology companies listed Chimet among more than 100 gold refiners in their supply chains during the five years of the investigation and in the most recent 2021 disclosures.

Chimet does not have a direct relationship with the big four tech companies but sells gold to banks that can resell it for various uses, company representative Giovanni Prelazzi said in a statement to Reuters. He did not name the banks.

Apple did not specifically address Chimet but said in a statement that its policies prohibit using illegally mined minerals. The iPhone maker said that companies that fail to comply are removed from its supply chain.

Amazon, Alphabet, and Microsoft declined to comment.

Chimet said that after learning of the investigation into CHM, it hired accounting firm Deloitte to conduct an audit of its other suppliers and, in April 2022, was re-certified by the bullion market association LBMA as meeting responsible gold sourcing standards.

An LBMA representative told Reuters that Chimet’s actions showed that similar problems did not exist with other suppliers and that verification methods were being strengthened.

UNREGISTERED

Police documents report that CHM was not registered with the Central Bank of Brazil as an entity legally authorized to buy and sell gold, known as DTVMs.

CHM does not appear in the Central Bank’s online directory of registered DTVMs. It is illegal for anyone except miners and their associations to buy and sell gold in Brazil without such registration.

CHM said it did not buy gold as a financial instrument and that no registration is required to buy gold as a commodity.

The Central Bank said it does not regulate “operations with gold classified as a commodity.”

A 2020 review of relevant laws by federal prosecutors showed that such registration is required for anyone who is not a miner to buy and sell gold, regardless of its use.

Financial records of bank transfers show that CHM bought gold from cooperatives and directly from several individuals in southern Para, which is part of the Brazilian Amazon.

The cooperative COOPEROURI has a license to conduct mining in an area near the protected Kayapó indigenous reserve, but police found that both CHM and the cooperative were buying from independent miners without a license, according to investigation documents.

COOPEROURI could not be reached for comment.

According to the police report, cooperatives and individual miners were allegedly extracting ore illegally in the indigenous reserve, although it did not state the basis for this claim.

In the police report, satellite images of the Kayapó reserve — a region larger than Belgium — show vast strips of muddy mining and clandestine airstrips to access them.

With information from Reuters