Inner Mongolia Qiankun Gold & Silver Refinery Share Co., Ltd.
Gold (Silver) Supply Chain Due Diligence Policy
(Version C)
The gold (silver) supply chain due diligence policy of Inner Mongolia Qiankun Gold & Silver Refinery Share Co., Ltd. has been established to combat systematic or widespread abuses of human rights and to avoid the contribution of armed conflicts in accordance with high standards of anti-money laundering and combating terrorist financing practice as well as the requirements of the London Bullion Market Association (LBMA) Responsible Gold (Silver) Guideline.
1. Scope
The Policy applies to all suppliers related to the gold (silver) transaction, gold (silver) commissioned refinery, and other businesses of Inner Mongolia Qiankun Gold & Silver Refining Co., Ltd. (hereinafter referred to as the “Qiankun Company”). Sources of gold (silver) covered in the Policy include mineral gold, recovered gold, and various forms of inventory gold (silver) produced after January 1, 2012.
2. Terms and definitions
The terms and definitions involved in the Policy are those established in the LBMA Responsible Gold Guideline (version 8) and the LBMA Responsible Silver Guideline (Version 1).
3. Organizational structure and personnel responsibilities
3.1 Organizational structure
The Qiankun Company has set up a special organization for gold (silver) supply chain due diligence work. Its structure is as follows:
3.2 Responsibilities of various personnel
3.2.1 Responsibilities of the Compliance Director
1) In charge of and be fully responsible for the gold (silver) supply chain due diligence work of Qiankun Company.
2) Supervise and inspect the gold (silver) supply chain due diligence process and evaluate whether the due diligence is adequately conducted; if necessary, ask for additional documents or information.
3) Take appropriate actions to reduce and eliminate risks in the gold (silver) supply chain or transaction where risks have been identified.
4) In case there is a high-risk gold (silver) supply chain or transaction, promptly report it to the senior management of Qiankun Company and take strict control measures; be responsible for approving new gold (silver) supply chains that are rated as high-risk after authorized by the senior management.
5) Conduct regular training on the responsible gold (silver) guideline and the supply chain due diligence policy.
6) Be responsible for drafting and revising the gold (silver) supply chain compliance report of Qiankun Company.
7) Provide necessarily accurate information for the senior management of Qiankun company to fulfill their due diligence responsibilities.
3.2.2 Brand management department
1) Be responsible for communication and liaison with LBMA and audit institutions.
2) Be responsible for the preparation, revision, and re-edition of the due diligence system documents for gold and silver supply chains.
3) Be responsible for the centralized management of relevant records, including the review, numbering, collection, and sorting of the records.
4) Be responsible for making a training plan and checking the training completion of each department.
5) Be responsible for assisting the Compliance Director to conduct an internal review on the due diligence system of gold and silver supply chains, and to prepare and organize management review.
3.2.3 Responsibilities of the Compliance Officer of the marketing center
1) Strictly implement the Company’s gold and silver supply chains due diligence policy and high-risk gold (silver) supply chain evaluation criteria.
2) Be responsible for collecting and maintaining sufficient gold (silver) supply chain documents.
3) Verify the qualifications of shipping companies and insurance companies, track and properly keep each batch of waybills, analyze and evaluate the routes through which goods are transported.
4) Regularly conduct on-site investigations on key gold (silver) suppliers.
5) Assist and encourage gold (silver) suppliers’ commitment and confirm in writing to comply with the provisions in Appendix II of the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas.
6) Be responsible for collecting and reporting the opinions and suggestions of internal employees of the Qiankun Company on the due diligence of the gold supply chain.
7) Report to the Compliance Director in case of abnormality in the due diligence process and gold (silver) transaction.
3.2.4 Responsibilities of the Compliance Officer of the Financial Management Department
1) Strictly implement the supply chain due diligence policy and high-risk gold (silver) supply chain evaluation criteria.
2) Be responsible for collecting and maintaining sufficient gold (silver) supply chain documents.
3) Keep all transactions and financial vouchers of gold (silver) suppliers for at least 5 financial years.
4) Evaluate the gold (silver) supplier’s financial data and clarify the purpose and intended information of their business relationship.
5) Be responsible for collecting and reporting the opinions and suggestions of internal employees of the Qiankun Company on the due diligence of the gold (silver) supply chain.
6) Report to the Compliance Director in case of abnormality in the due diligence process and gold (silver) transaction.
3.2.5 Responsibility of the Compliance Officer of the Dispatch and Settlement Center (Warehouse)
1) Strictly implement the supply chain due diligence measures and high-risk gold (silver) supply chain evaluation criteria.
2) Be responsible for collecting and maintaining sufficient gold (silver) supply chain documents.
3) Verify and record the weight and test results of each gold (silver) product received, analyze and evaluate whether these data are consistent with the supply chain knowledge; in case there is any discrepancy, a detailed investigation shall be conducted and a written investigation report shall be produced.
4) Be responsible for collecting and reporting the opinions and suggestions of internal employees of the Qiankun Company on the due diligence of the gold (silver) supply chain.
5) Report to the Compliance Director in case of abnormality in the due diligence process and gold (silver) transaction.
4. Evaluation criteria for high risk gold (silver) supply chains
Regardless of mineral gold (silver) or recycled gold (silver), the Qiankun Company will identify risks in strict accordance with regulations in Appendix II of OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas. In case of the following risks in gold (silver) supply chain sources, the Qiankun Company should pay close attention to:
1) Systematic and widespread human rights abuse associated with the extraction, transport or trade of minerals.
2) Direct or indirect support to non-state armed groups, public or private security forces.
3) Bribery and fraudulent misrepresentation of the origin of gold (silver).
4) Money laundering and terrorist financing.
5) Contribution to armed conflicts.
6) Small mines with incomplete procedures and illicit mining in China, and gold (silver) mining originated from manual mining.
7) Gold (silver) mining produced from mercury.
8) Breach legal requirements of environmental and sustainable development, and mined gold (silver) originated from world heritage sites or domestic natural ecological reserves.
9) Other high-risk areas specified by LBMA.
According to LBMA and OECD associated regulations and in combination with actual conditions of the Qiankun Company, the following evaluation criteria for high-risk gold (silver) supply chains are specified:
1) Mineral gold (silver) or recycled gold (silver) is originated from, transited in, and transported across high-risk areas affected by conflicts and with human rights abuse.
2) It is claimed that mineral gold (silver) comes from a country with limited known reserves, resources, or gold production.
3) Recycled gold (silver) is originated from known high-risk areas affected by conflicts and with human rights abuse, or there are reasons to doubt that it is transited in the area.
4) The company or its known upstream company in gold (silver) supply chains is located in a country with high risks of money laundering, crimes, and corruption.
5) The beneficial owner of the company or its known upstream company in gold (silver) supply chains is a politically sensitive person.
6) The company or its known upstream company in gold (silver) supply chains actively participates in high-risk business activities, such as weapons gambling, bookmaking, antique, artwork, religion, and being a religious leader.
7) Mineral gold (silver) is originated from small mines with incomplete procedures and illicit mining in China, and gold (silver) mining originated from manual mining.
8) Mineral gold (silver) or recycled gold (silver) is produced from mercury.
9) Mineral gold (silver) or recycled gold (silver) is originated from world heritage sites or domestic natural ecological reserves in violation of law requirements of environmental and sustainable development.
10) Check whether there are other high-risk conditions identified by Chinese governments.
In case any of the above evaluation criteria exists objectively, the gold (silver) supply chain shall be evaluated as the high-risk supply chain. The Compliance Officer of the department shall immediately prepare materials and report them to the Chief Compliance Officer. The Chief Compliance Officer shall report to executives of the Qiankun Company and reapprove the high-risk supply chain with the authorization.
5. Due diligence for supply chain
5.1 Principle
In order to master the supply chain and assess risks effectively, Qiankun Company must perform due diligence for the supply chain in accordance with a risk-based approach before entering into business relations with any gold (silver) suppliers. The risk assessment shall begin with investigation of geographical origin of gold (sliver).
Qiankun Company will constantly carry out due diligence for the supply chain of gold (silver), so as to ensure effective compliance with LBMA rules.
5.2 Procedure
5.2.1 Information collection and assessment of the Supplier
1) Create files of the supply chain customer, including: enterprise name, legal representative, address, contact information, operation manner, production mode and business contract, etc.
2) Carry out regular inspection of supply chain customer. If there is new-add or modification in customers, it is needed to check their archives to keep the archive database up to date.
3) Identify every customer, company and benefit owner of company. Use reliable independent source documents, data or information to verify their identification.
4) Confirm that every customer, company and benefit owner of company is not in the wanted list of money laundering, defraud or terrorism of the government.
5) Obtain detailed information for business and financial affairs, purposes of engagement in gold trading and business operation situation of supply chain customers regularly.
5.2.2 Additional investigation requirements for the gold (silver) derived from mineral gold (silver)
1) Obtain the geographical origin information of gold (silver)
2) Obtain the mining license information of the Supplier, if possible.
3) Obtain the import and export license information of the Supplier, if possible.
4) Collect and make an assessment on the information of mining situation.
5) Obtain mining capacity data, if possible.
6) When the mineral gold (silver) comes from manual or small mines, it is needed to assess whether it is legal at first. If it is legal, it is important to ask the other party to provide relevant qualification certificates. If it is illegal, it is a must to suspend the transaction and refuse to procure from them or accept their manufacturing consignment.
7) Carry out investigation on their lawsuit, administrative penalty and other risk information via the website.
8) The Company will constantly perform due diligence for the suppliers of mineral gold (silver).
9) Carry out investigations on the miners of wearing labor protection article, health and safety training and occupational disease physical examination.
10) Carry out investigations on compliance with the legal requirements of environment and sustainable development, whether environmental policies and control procedures are formulated, whether environmental assessment certification by the related authorities has been obtained.
11) Carry out investigations on whether there is an impact on local residents.
5.2.3 Additional investigation requirements for gold (silver) derived from recycled gold
1) The institutional supplier of recycled gold shall provide legal commercial relationship, including: proof of recycled gold source, beneficiary proof, etc., and risk information of the institutional supplier such as litigation, administrative punishment, discredit condition, etc. shall be investigated through the website.
2) The natural person supplier of recycled gold shall provide copies of ID cards and proof of renewable gold. The discredit condition of the natural person shall be investigated through the website.
3) The company will continuously conduct the due diligence on renewable gold suppliers.
If possible, collect and estimate policy action documents about anti-money laundering and anti-terrorism financing of recycled gold (silver) suppliers
5.2.4 Additional investigation requirements for strengthening due diligence under high-risk circumstance
The Qiankun Company determines the extent to which the due diligence measure will be implemented based on the type of supplier company, business relationship, transaction type, and location or transportation region of the company. For higher-risk circumstance, the Qiankun Company will take strengthened due diligence, and take the following additional processing procedures:
1) Investigate or visit high-risk supply chains on the site to verify if the document record of the due diligence result of high-risk supply chains is true.
2) For large scale mining of gold (silver): verify condition with documents, data, and information from trusted independent sources. Each return owner and government surveillance list information of each company in the supply chain (including manufacturer, middleman, trader, exporter, and transporter) requires verification from mines to refineries.
3) For ASM gold (silver) from manual or small-scale mining: verify condition with documents, data, and information from trusted independent sources. Each return owner and government surveillance list information of each company in the supply chain (including international gold dealer and transporter) requires verification from gold (silver) exporter to refineries.
4) Verify the condition with documents, data, and information from trusted independent sources. Each return owner and government surveillance list information of each company in the supply chain (including transporter) requires verification from gold (silver) supplier to refineries.
6. Transaction supervision
Investigation and supervision go throughout the gold (silver) trading process of the Qiankun Company to ensure the transaction is consistent with understanding and risk prediction of the supply chain of the Qiankun Company. The Qiankun Company supervises transactions based on risks.
The Qiankun Company requires obtainment and record of the following information of each batch of received gold (silver):
1) For mined gold (silver): Estimated weight and test results (provided by the supplier); Shipping or cargo documents (delivery documents，shipping documents, proforma invoice, etc. if possible); If possible, import and export form of high-risk transaction.
2) For recycled gold (silver): Estimated weight (provided by the supplier); Shipping or cargo documents (delivery documents，shipping documents, proforma invoice, etc. if possible); If possible, import and export form of high-risk transaction.
The Qiankun Company will verify if the documents above verify each other and are consistent with the understanding of the supply chain. In case of any transaction background discrepancy, an investigation will be conducted and a written survey result will be obtained.
7. Compliance report
The refinery executes 5 step requirements of LBMA responsible gold (silver) codes (version 8) seriously and prepares Compliance Report.
Executive conditions of the Company’s compliance with the 5 major steps of the codes shall be described in the compliance report:
1) Reflection of the establishment of management systems in the whole reporting year;
2) Recognition and evaluation of the supply chain risks and conditions of relevant due diligence performed;
3) Design and implementation of management systems to cope with all recognized risks;
4) Conditions of the arrangement of independent third party audit for the supply chain due diligence;
5) Implementation of reports concerning supply chain due diligence.
In the compliance report, a conclusion on whether the London Bullion Market Association (LBMA) Responsible Gold Guideline is met within the reporting period shall be made.
8. Record retention
Qiankun Company collects and reserves sufficient supply chain documentary evidence records and assesses risk requirements according to standards of the supply chain due diligence system, so as to prove that it adequately and continuously completes gold (silver) supply chain due diligence work.
It is required to preserve supply chain documentary evidence records for at least 5 accounting years.
9. Training
Qiankun Company regularly carries out training about due diligence policies for all personnel in the gold (silver) supply chain each year and incorporates training plans into its annual training plans.
10. Information communication mechanism
Compliance Officers of departments regularly collect, summarize, and submit opinions and suggestions of the Company’s internal personnel towards the gold (silver) supply chain due diligence work.
When finding violation mattes or abnormal conditions in daily gold (silver) transaction and supply chain management work, personnel of the Company shall immediately report it to Compliance Officers of their departments; Compliance Officers shall report it to the Compliance Director at once after their verification, and report to the Company’s senior management in writing if necessary.