The US government has multiple regulations in place to prevent abuse in the supply chain.
In the pages of this magazine, many authorities in the jewelry industry have spoken out on what should be done to address the problem of human rights abuses in the jewelry supply chain. Of course, the US government has long focused on this issue, both for US businesses in general and, in some cases, specifically for the jewelry industry. This guidance comes from a myriad of US federal agencies, each regulating a different link in the jewelry supply chain.
Understanding and complying with these laws and regulations can be challenging for any jewelry business; some of the largest companies in the industry have entire departments dedicated to ensuring compliance. These laws and regulations are in addition to the general corporate responsibility to consider the human costs of a company’s supply chain.
Fight against money laundering
The cornerstone of responsible sourcing in the jewelry industry is anti-money laundering (AML) regulations. These regulations, stemming from the Bank Secrecy Act (1970) and the USA PATRIOT Act (2001), aim to prevent the use of the American banking system for the purposes of money laundering or the financing of terrorism. Regulations require dealers of precious metals, gemstones, and jewelry made from these materials to implement an AML program in their businesses.
This process has five parts: appoint a compliance officer; conduct a risk assessment to identify where a business could be used for money laundering or terrorist financing; write an AML program and policy; train company employees to recognize the signs of money laundering; and periodically testing the program to ensure that it functions as intended.
Having a compliant AML program also requires checking suppliers and customers against certain lists the government maintains of bad actors and known criminals around the world, with whom US companies are not allowed to do business. The Office of Foreign Assets Control (OFAC) maintains the Specially Designated Nationals (SDN) List, which is how sanctions are imposed on individuals and entities, preventing them from using the US banking system and doing business with American companies.
It is through this mechanism that the US government prevents companies from doing business with known perpetrators of human rights abuses – for example, the military leaders who seized power in Myanmar (Burma) during the violent coup February 2021 and murdered over 1,400 Burmese citizens in the ensuing events. protests. The state-owned gemstone mining and marketing agencies they now control are all on the SDN list.
Mineral springs and forced labor
Another measure is Section 307 of the Tariff Act of 1930, which prohibits the importation of goods produced in whole or in part in a foreign country that uses forced labor. US Customs and Border Protection (CBP) enforces this law by investigating and acting on allegations of forced labor in supply chains. CBP will seize specific goods at a port or issue hold release orders designating a particular foreign country known to use forced labor. These orders mean that goods imported from a specific region will be held at a customs port until the importer can provide proof that the goods were not produced using forced labor. For those looking to learn more about the use of forced labor in specific countries, the U.S. Department of Labor offers a downloadable educational app called Sweat & Toil: Child Labor, Forced Labour, and Human Trafficking Around the World.
Another important law to be aware of is the Foreign Corrupt Practices Act, which prohibits offering, paying, or promising to pay money or anything of value to a foreign official for the purpose of obtain or retain business. This law is enforced by both the Securities and Exchange Commission (SEC) and the Department of Justice. The SEC, of course, also enforces the provisions of the Dodd-Frank Conflict Minerals Act, requiring any publicly traded company to report its use of gold, tin, tantalum, or tungsten from the Democratic Republic. Congo (DRC) or one of the nine surrounding countries. This rule exists because of concerns that the mining and trade of conflict minerals by armed groups is helping to fund conflict in the DRC region and contributing to an emergency humanitarian crisis.
Although these laws are complicated and this article does not list all laws related to human rights, it is important to know that the US government is focusing on this issue in global supply chains. By starting with a strong AML program, companies can develop their compliance programs to ensure that they are not contributing to or funding human rights abuses around the world.
Sara E. Yood is associate general counsel for the Jewelers Vigilance Committee (JVC).
Image: Burmese demonstrators gathered around the Myanmar embassy in Washington, DC, in March 2021 to protest against the Asian country’s military coup. (bgrocker/Shutterstock)
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