A LARGE proportion of banks and investors are not screening for illegal mining risks despite operating in sectors vulnerable to illicit extraction, according to Reuters which cited a report by the World Wide Fund for Nature and financial crime risk platform Themis.
The study, based on a survey of 647 financial institutions across 22 countries, found that roughly 40% do not include illegal mining in their due diligence processes, even though 84% are active in at least one high-risk sector such as transport or transit, said Reuters.
Illegal mining is estimated to generate at least $48bn annually in criminal proceeds, connected to offences including money laundering, corruption, tax evasion, sanctions violations and terrorist financing. Rising prices for copper, gold and silver, combined with growing demand for minerals used in electric vehicles and data centre infrastructure, are expanding opportunities for illicit extraction networks.
The report noted that minerals are frequently shipped in containers, fewer than 2% of which are inspected, allowing illegally mined resources to enter global supply chains undetected. One respondent cited clients mislabelling precious stones as apparel to circumvent audits.
Illicitly sourced commodities such as gold and cobalt can be absorbed into legitimate markets, making the sector attractive to organised criminal groups seeking both revenue and a vehicle for laundering proceeds. Financial institutions may be exposed through trade finance, lending to mining companies, commodity trading and investment portfolios.
The report recommended improved screening tools, staff training and greater supply chain transparency as measures to help institutions identify transactions linked to illicit mining activity, said Reuters.
