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The US Treasury Department has issued an advisory calling on banks and corporates to boost due diligence on gold supply chains, amid fears the Kremlin-linked Wagner Group is plundering mines across Africa.

In the guidance, the Office of Foreign Assets Control (OFAC) says the Wagner Group is lifting gold from Mali, Sudan and the Central African Republic (CAR) to fund military activities in Africa and Ukraine.

Against this backdrop, the sanctions enforcement agency says actors engaged in the international gold trade must assess their risk exposures and the industry should brace for greater US government attention.

“US individuals and entities engaged with the gold sector – whether as miners, traders, refiners, exporters, users, consumers, financial institutions, or otherwise – should carefully review the risks described in this advisory and ensure they conduct enhanced due diligence to address these,” OFAC says.

In late June, OFAC – which sits within the US Treasury – slapped sanctions on four companies based in Russia, the CAR and the UAE alleged to have ties to the Wagner Group and its chief Yevgeny Prigozhin.

Dubai-based Industrial Resources General Trading; Diamville, a Wagner-linked diamond and gold company in CAR; as well as Midas Resources, a mining company also based in CAR, were all blacklisted.

Jason Prince, a partner at law firm Crowell and Moring and former chief counsel to OFAC, tells GTR that US banks and companies will have to dig deep into ownership structures – if they were not already doing so – given OFAC’s rules cover companies at least 50% owned by a sanctioned individual.

“There will be more attention provided to mapping out the potential connections between a financial institution’s customers that are perhaps several steps removed from the companies that are on the specially designated nationals (SDN) list. Even if an entity is not technically caught by the 50% rule there will be de-risking by the banks.”

“Financial institutions that have clients in this space and are involved in transactions involving the UAE, and or Switzerland, are going to be taking a much closer look at this issue than perhaps they were previously,” he adds.

The OFAC actions come just days after the Wagner Group aborted its late-June mutiny against Russian military leaders and the subsequent exile of Prigozhin to Belarus.

Moscow has sought to ease concerns among allies about potential repercussions from the revolt, with Sergei Lavrov, the Russian foreign minister, reportedly telling Russia Today that Wagner Group instructors and military contractors would remain in CAR and Mali.

 

UAE risks

Since its founding in 2014, the Wagner Group has worked to advance Moscow’s foreign policy interests in Africa through the provision of security and military assistance to embattled governments, analysts say.

The US Treasury says the Wagner Group funds its “brutal operations” in part by exploiting African countries such as CAR and Mali for their natural resources, such as gold and diamonds, as well as timber.

The OFAC advisory zeroes in on the N’dassima mine in CAR, where Wagner operatives reportedly displaced civilians from the surrounding area and blocked government officials from visiting the site.

Since 2018, the Wagner Group has been fighting alongside groups loyal to President Faustin-Archange Touadéra and its Russian mercenaries have been accused of war crimes – including the murder of civilians – in the country.

Due to the CAR government’s lack of oversight on the N’dassima mine, OFAC claims the Wagner Group could be extracting and exporting gold outside of official channels to deprive CAR of royalties, and earn a “significant new income” of its own.

OFAC further warns private sector actors to be wary in downstream gold supply chains, particularly in refinery hubs, such as the UAE, “where open-source reporting indicates gold from CAR and Sudan is sent for refining”.

The UAE has previously been singled out as a hotspot for high-risk activity, including the trading of gold originating from conflict zones, due to lax disclosure requirements on origin and transit countries.

In adding the Dubai-based Industrial Resources General Trading to its SDN list last week, OFAC found the firm had taken part in a 2022 scheme whereby it helped Prigozhin-controlled companies in Africa exchange CAR-origin gold for US dollars.