- Brazilian Attorney General Augusto Aras requested the Federal Supreme Court to overturn a law establishing the concept of “good faith” of gold buyers, which eases illegal gold laundering.
- Under the law, passed in 2013, the word of gold traders is enough to ensure that the mineral came from a legal mine, opening a route to the illegal gold extracted from protected areas and Indigenous territories, such as the Yanomami reserve.
- The Federal Police and the Public Ministry are investigating authorized gold trading companies, known as DTVMs, suspected of laundering the Amazon’s illegal gold.
- Indigenous federal deputy Célia Xakriabá is trying to speed up the vote of a new bill that establishes new rules for the gold trade in Brazil, including overriding the “good faith” concept.
In January, a wave of outrage swept Brazil after photos and footage of sick and starving Yanomami were made public. The newly sworn-in Brazilian president, Luiz Inácio Lula da Silva, and his team flew to the state of Roraima, home to the Yanomami reservation, to provide assistance and set up a plan to evict illegal gold miners from the territory.
Gold mining in Indigenous territories — illegal under any circumstances in Brazil — is considered the cause of the humanitarian crisis. Miners bring diseases, infect rivers with mercury, hunt animals that are part of the Yanomami diet, and lure Indigenous people with gold and alcohol. The situation was only possible due to the intentional inaction of former President Jair Bolsonaro, who left office on Dec. 31. Bolsonaro viewed the Yanomami as an obstacle to the exploitation of the region and tried for years to revoke the demarcation of the territory during his terms in the Brazilian Congress.
The first actions of Lula’s administration are showing results: Miners are fleeing the region, police forces are controlling human transit and removing mining machinery and thousands of Indigenous people are receiving food donations and medical care.
The crisis has also helped create a favorable setting for changes in Brazil’s gold trading laws, considered weak and full of loopholes, which had resulted in a pro-crime scenario.
On Feb. 7, Attorney General Augusto Aras requested to the Brazilian Supreme Court that a section of a law passed in 2013 be considered unconstitutional for facilitating the laundering of illegal gold. The bill allows gold trade based on the principle of “good faith.” The clause exempts buyers from verifying the origin of the metal, leaving the door open for gold mined in protected areas and Indigenous lands to be traded legally. Under the law, the word from the seller — i.e., “good faith” — is enough to ensure that the mineral came from legal mining.
A Federal University of Minas Gerais (UFMG) report indicated that 30% of the gold produced in Brazil from January 2021 to June 2022 could be considered irregular — and that huge amount was laundered into the legal gold trade thanks to the good faith concept.
Experts hope the Supreme Court will strike down the law as soon as possible — although there is no deadline for the decision. “Many measures need to be taken to build a system to combat illegal gold in Brazil, but ending the logic of good faith is a priority,” Larissa Rodrigues, portfolio manager at the Instituto Escolhas, which advocates for sustainable economic development, told Mongabay by phone. “This law discourages enforcement actions and protects companies that buy illegal gold from [the] Amazon.”
The first trading points for extracted gold are security distributors, or DTVMs, the only financial companies authorized to trade gold. These companies buy gold from miners, which need to fill out a form to indicate where the mineral comes from. Based on the good faith concept, the DTVMs don’t need to conduct any checks or investigations before acquiring the gold.
According to Aras, the good faith law exempts companies from liability, allowing illegal gold from the Amazon to be sold with an appearance of legality to the national and international markets. “The DTVMs, as institutions authorized to participate in the trading of gold, have obligations and must be committed to the legality of the operation,” wrote Aras in his legal opinion.
The bill was proposed in 2013 by federal deputy Odair Cunha of Lula’s Workers’ Party (PT). The original proposal was intended to regulate agricultural incentives, but the good faith article was included as a last-minute addition and sanctioned by President Dilma Rousseff. Cunha admitted amitted to the GloboNews television network that the proposal was a request from the National Gold Association, which represents traders from the gold mining sector. Mongabay tried to contact the entity but received no reply.
DTVMs under suspicion
That kind of lobby shows that the DTVMs worked actively to avoid accountability for the illegal gold trade in the Amazon, according to experts. “The DTVM does not need to check the origin of the gold,” a source who asked to remain anonymous for security reasons told Mongabay by phone. “In practice, the company makes the gold offered, any gold, legal.”
However, these companies are in the sights of the authorities. According to investigative journalism outlet Repórter Brasil, the Federal Police and the Federal Prosecution Service are investigating the activities of at least three DTVMs linked to gold mining in the Amazon. The investigators suspect the companies are purchasing gold extracted from the Yanomami Indigenous Territory. A Folha de S.Paulo newspaper report indicated that almost all of the Amazon’s illegal gold was legalized in the financial system by only five DTVMs.
On Feb. 7, Supreme Court justice Gilmar Mendes requested information from the Central Bank and the National Mining Agency (AMN) about the miners’ situation in the Amazon. Although they are protected by law when buying illegal gold, DTVMs operate under Central Bank oversight.
“The DTVM is authorized to operate by the Central Bank, which has the role of supervising these institutions. And it needs to exercise this role appropriately,” Rodrigues from Instituto Escolhas said. She said the suspicions fell on a few DTVMs accused of laundering illegal gold from gold miners, which made this inspection easier.
When asked by Mongabay about the relationship of DTVMs with the illegal gold market in the Amazon, the Central Bank sent an email that said “it is not the role of central banks, in Brazil or in other countries, to act in the supervision of activities related to gold mining and extraction.” The bank said it supports the end of the presumption of legality in gold purchases and initiatives that could improve the supervision of Brazil’s gold trade, but did not comment on the suspicions involving DTVMs authorized by the institution. Brazil’s Securities and Exchange Commission, which also has responsibility for overseeing the gold market and the performance of DTVMs, told Mongabay by phone that it would not comment.
The Federal Prosecution Service received a complaint to investigate the president of Brazil’s Central Bank, Roberto Campos Neto, for an alleged omission in the oversight of financial institutions associated with illegal gold from the Amazon. It is still being decided whether an investigation will be opened.
Another step to curb illegal gold mining in the Amazon is digitalizing documents and integrating gold data into a single platform. Similar systems already regulate timber and meat trades in Brazil, but mining still operates on paper.
“The digitalization of records such as invoices and transport documents is essential,” Rodrigues said. “These and other information about the gold market need to be integrated into a single system to facilitate enforcement.”
In January, the Brazilian Mining Institute (IBRAM), representing large mining companies, requested the Brazilian Federal Revenue Department to implement a system for issuing electronic invoices to control gold traded in the country. The large mining companies fear that the illegal mining scandals in the Amazon could affect the legal gold market.
“To contain the destructive and criminal illegal mining, it is decisive to close off market access. And this action depends on an efficient tracking system that starts from issuing the electronic invoice,” IBRAM told Mongabay in an email.
Asked about the request, the Brazilian Federal Revenue Department confirmed by email that electronic document models would replace the current paper registration models. The agency said the new digital system is in the specification phase for further development without a deadline for implementation.
On Feb. 13, members of the Socialism and Freedom Party (PSOL), led by Indigenous federal deputy Célia Xakriabá, successfully requested urgency for a bill that establishes new rules for tracking the gold trade. The bill was presented in 2022 by Joenia Wapichana, a former Indigenous lawmaker who took charge of Brazil’s Indigenous affairs agency (Funai) under President Lula’s new administration.
The project also aims to digitalize documents and end the good faith concept, along with other initiatives that could curb the illegal gold market. The Yanomami crisis may drive the bill to a vote in the coming weeks. Still, the proposals regulating mining activity will undoubtedly encounter resistance in the new conservative Congress, elected in October 2022.
“Illegal mining, the predatory mining model, and the invasions in our territories are the main focus of deaths, violence, sexual abuse, and crises like the one we are witnessing today with the Yanomami people,” Célia Xakriabá told Mongabay by WhatsApp. “There must be laws and control tools allied to public policies for Indigenous peoples.”
The bill also clearly defines the supervisory role of the Central Bank of Brazil, which would be obliged to create a database of all the companies operating in the gold market and their clients. Another proposal praised by experts attacks conflicts of interest, prohibiting DTVMs, the companies that buy gold, from connecting with gold miners or other areas of the chain.
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