BC evaluates new system to inspect gold mining – 02/13/2023 – Market

The Central Bank stated, in a statement sent to the Federal Supreme Court (STF), that it is discussing, together with other public bodies, a new inspection system that allows the traceability of gold extracted from mining.

The model under study includes the “adoption of electronic invoices for the first purchases of gold, which would allow the supervision of this activity”.

According to the autarchy, public entities, with the participation of the MPF (Federal Public Ministry), seek to find technological solutions so that transactions with recently mined gold become more “transparent and auditable”.

As shown by Sheet, a 2001 Federal Revenue instruction, amended in 2010, which deals with gold as a financial asset, says that the invoice must be issued by a financial institution or prospector cooperative authorized by the BC. But the norm also determines that this document, in the middle of the 21st century, must be issued on paper.

There was, in the rule, no justification for the decision, considered more strange by the fact that gold as a commodity has an electronic note.

Last week, Minister Gilmar Mendes requested information from the ANM (National Mining Agency) and the BC on the subject. He is the rapporteur of a lawsuit filed by the PV to question a section of the DTVMs (Title and Securities Distributors) law regarding the acquisition of gold produced in mining areas.

According to the party, the norm reduces the liability of distributors for irregularities related to the origin of the ore, by allowing them to buy the metal based on the principle of good faith, which exclusively considers information provided by sellers.

DTVM is a fundamental link in the chain of legalization of gold taken from indigenous lands and reserve areas. It is in these companies that the illegal prospector can present a forged mining permit and leave with the invoice that makes the product legal to be transported and traded.

In the document presented to the STF, the BC says that its action is focused only on “financial active gold”, that is, it states that it is responsible for supervising the ore from the moment it is acquired by a financial institution, even in its raw state. .

The extraction of the metal and other actions, such as transport, refining or trade, would not then be the object of action by the monetary authority, as they are not part of the financial system.

“From the moment it is acquired by an institution that is part of the financial system, gold becomes part of the supervised institution’s assets and, in that capacity, is subject to the supervision of the Central Bank”, he says.

“The supervision that is incumbent upon the Central Bank is solely that of the regularity of accounting for gold in the accounting records of the entities subject to its supervision”, says the text.

Prior to that, according to the monetary authority, the responsibility for inspecting gold lies with the ANM and the Federal Revenue Secretariat, responsible for the tax issue.

“The classification of gold as a financial asset or commodity, unusual in the international market, has strictly tax relevance, without any implication within the scope of the regulation of the financial system. In other words, gold is not distinguished from other assets traded within the scope of the financial market” , he says.

Different organizations concerned with combating illegal mining consider the presumption of good faith to be the main instrument for “heating up” illicit gold in Brazil.

Today, with Law No. 12,844, the ore seller’s word is enough to attest that the origin of the gold is legal. The buyer assumes that he is telling the truth, and will not be punished if the contrary is proven one day.

In practice, however, this law limits BC’s inspection of financial institutions accredited to operate with gold. It also compromises the criminal punishment of these establishments, if an investigation proves that the gold came from an environmental reserve, for example.

The end of the presumption of good faith would pave the way for breaking this cycle.

In July of last year, BC president Roberto Campos Neto was alerted to the growing damage to good faith by a group that included representatives from Ibram (Brazilian Mining Institute), Ethos Institute, Isa (Socio-environmental Institute) and Instituto Escolhas, which has already published several surveys on the socio-environmental and economic consequences of illegal mining.

As shown to Sheetsurveys and investigations into illegal trade indicate that gold extracted from clandestine mines is legalized in the financial system by a small group of institutions.

The Gold Bulletin, for example, identified that practically seven tons of illegal gold produced between January 2021 and June 2022 were “heated” by five DTVMs and a laboratory. The researchers do not disclose the names, because the companies are under investigation by different authorities.