Questions have been raised that global corporations such as Tesla, Amazon, and Volkswagen may have included gold refiners under Western sanctions on the lists they submitted to authorities after reviewing their raw material supply chains. With more than 160 U.S. corporations involved, some point out that companies themselves may be unable to properly verify whether sanctioned firms are actually in their supply chains as raw materials pass through multiple tiers of suppliers.
On the 3rd (local time), the Financial Times (FT) analyzed materials submitted by corporations to regulators and found that more than 160 U.S. corporations and at least 10 corporations outside the United States listed one or more of the four gold refiners under Western sanctions as firms that could be included in their supply chains in recent disclosures related to conflict minerals or supply chains.
Representative corporations included Tesla, Amazon, Volkswagen, and Nokia. The firms at issue are four companies: Russia's Uralelectromed, Krastsvetmet, Uganda's African Gold Refinery, and Rwanda's Gasabo Gold Refinery. These companies are under sanctions by the United States, the European Union (EU), and the United Kingdom over allegations such as handling illegally mined gold from African conflict zones or being linked to rebels, or due to Russia's invasion of Ukraine.
Behind the appearance of sanctioned firms on disclosure lists by global corporations lies a complex raw material supply chain. This is because final products pass through multiple tiers of suppliers. Some listed U.S. corporations investigate the sources of conflict minerals such as gold and tin every year and report to authorities. The aim is to confirm whether those minerals were produced in conflict regions or became a funding source for armed groups. Large corporations in Europe and Japan are also disclosing information related to mineral procurement.
However, not all suppliers provide sufficient information about the origin of raw materials. This is because metals produced in multiple regions can get mixed during processing. This is also why corporations broadly include firms whose actual transactions have not been verified in their disclosure lists. From the perspective of corporations that sell final products, it is difficult to trace to the end whether a particular refiner's gold was used in their products.
FT reported that none of the corporations identified this time said they had a direct transactional relationship with the sanctioned refiners. Tesla disclosed that all four sanctioned firms "potentially exist" in its supply chain, but said it could not confirm whether they are actually included. Amazon included Russia's Krastsvetmet on a list of refiners that "may have processed" gold used in products subject to its disclosure. Amazon said it could not verify the accuracy of this list.
Volkswagen included all four sanctioned firms on its list. However, it told the FT that it could neither confirm nor rule out whether these firms actually participated in its supply chain, adding, "We have no direct business relationships with any of the corporations mentioned." Nokia also included the sanctioned refiners on its disclosure list. Nokia said that since 2020 it has required suppliers to exclude African Gold Refinery from the supply chain and, since 2024, has also required the exclusion of Uralelectromed and Krastsvetmet.
The issue is that under U.S. sanctions rules, corporations may face legal liability even if they did not transact directly with sanctioned firms. A former U.S. Treasury official cited by the FT explained that even if there are five intermediaries between a corporation and a sanctioned firm, the company could be held legally liable if it sourced raw materials from a firm sanctioned by the Treasury's Office of Foreign Assets Control (OFAC).
An international sanctions attorney also explained that OFAC follows a principle of "strict liability," under which it can hold parties liable regardless of whether the transactions were direct or indirect. However, the attorney added that OFAC is not currently prioritizing enforcement against minor indirect transactions.
In this situation, the limitations of the conflict-minerals disclosure regime itself are also being pointed out. Michael Littenberg, global human rights compliance head at Ropes & Gray, criticized that "there are limits to the accuracy of the data corporations obtain," and that the U.S. Securities and Exchange Commission (SEC) is not allocating resources to enforce related rules.
FT said the analysis shows the legal risks corporations can face in a tangled global supply chain and the limits of international systems to track and block the use of conflict minerals. However, as some note that the current lack of rigorous scrutiny by authorities of indirect transactions with sanctioned firms does not guarantee that the level of tolerance allowed now will continue in the future, the key question will be how accurately global corporations can trace and block links with sanctioned firms within complex supply chains.