利来国际

Version: D

Date of Issue: October 22, 2021

In accordance with the LBMA Responsible Gold Guidance, the risk management requirements of Shanghai Gold Exchange, and the requirements of environmental protection and sustainable development, these Management Measures of Dongwu Gold Group Co., Ltd. for Due Diligence of Supply Chain (“these Measures”) are hereby formulated with a view to cracking down on systematic or widespread torts or violations of human rights, avoiding giving donations for armed conflicts, and complying with high standards on anti-money laundering and anti-terrorism financing.

1. Scope

These Measures are applicable to all suppliers related to gold trading, entrusted gold refining and other relevant sectors of Dongwu Gold Group Co., Ltd. (“the Company”), and cover gold ores, recycled gold, and various forms of gold in stock produced after January 1, 2012.

2. Terms and Definitions

The terms and expressions used in these Measures should have the same meanings given in the LBMA Responsible Gold Guidance.

3. Organizational Structure and Staff Responsibilities

3.1 Organizational Structure

The Company has set up a specialized organization for due diligence of the gold supply chain, with the following structure:

 

3.2 Staff Responsibilities

3.2.1 Senior Management

1) Preside over and take full responsibility for the due diligence of the Company’s gold supply chain, and supervise the framework and results of the due diligence of supply chain;

2) Take charge of the examination and approval related to the gold supply chain, ensure the effectiveness of the policies and procedures for due diligence of supply chain, and promote continuous improvement of these policies and procedures;

3) Provide resources to support the operation and monitoring of the due diligence of supply chain;

4) Appoint the Compliance Director who are responsible for all matters related to the gold supply chain;

5) Be responsible for the internal management (e.g., “warning, punishment and termination of labor contract”) of misconducts in risk control;

6) Be responsible for the approval of compliance reports.

3.2.2 Compliance Director

1) Take full responsibility for all matters related to the due diligence of the Company’s gold supply chain;

2) Draft and revise the policies, guidelines and systems related to the Company’s gold supply chain, and ensure the effective operation of the management structure and communication process;

3) Review the due diligence process and system of the gold supply chain, consult due diligence documents and risk classification, and evaluate the adequacy of due diligence to meet the goals and requirements of risk management;

4) Provide resources to support the operation and monitoring of the due diligence of supply chain;

5) Provide regular training for employees on the Responsible Gold Guidance and the Management Measures for Due Diligence of Supply Chain;

6) Take appropriate measures for identified high-risk gold supply chain or transaction to reduce and eliminate risks;

7) Report to the senior management and take strict control measures when high-risk gold supply chain or transaction is found;

8) Provide appropriate and timely data and information for the senior management to fulfill their duties;

9) Review the due diligence system, and prepare Compliance  Reports.

3.2.3 Compliance Supervisor of Business Department

1) Take charge of communication and contact with LBMA, Shanghai Gold Exchange and third-party business organizations;

2) Take the due diligence measures for supply chain, and implement the evaluation criteria for high-risk gold supply chain;

3) Collect and verify the data and information required for the due diligence of supply chain, and evaluate the risks of supply chain;

4) Code suppliers, and collect and keep sufficient supporting documents of gold supply chain;

5) Check the qualifications of transportation companies and insurance companies, and track and properly keep all waybills;

6) When necessary, conduct an on-site investigation on all links of the high-risk gold supply chain;

7) Publicize the Company’s Supply Chain Due Diligence Policy to gold suppliers, confirm in writing with suppliers that they will comply with relevant regulations, and assist and encourage suppliers to build their own supply chain risk control systems;

8) Conduct compliant accounting transactions, and prohibit  cash transactions;

9) Keep suppliers’ due diligence data and transaction information for at least 5 fiscal years;

10) Report the abnormalities in due diligence and gold  trading to the Compliance Director in time.

3.2.4 Compliance Supervisor of Financial Service Department

1) Take the due diligence measures for supply chain and implement the evaluation criteria for high-risk gold supply chain;

2) Collect and keep sufficient supporting documents of gold supply chain;

3) Keep all transaction vouchers and financial vouchers of gold suppliers for at least 5 fiscal years;

4) Evaluate the financial data of gold suppliers, and find out the purpose and intention of gold suppliers;

5) Conduct compliant accounting transactions, and prohibit cash transactions;

6) Report the abnormalities in transactions to the Compliance Director in time.

3.2.5 Compliance Supervisor of Settlement Center

1) Take the due diligence measures for supply chain and implement the evaluation criteria for high-risk gold supply chain;

2) Collect and keep sufficient supporting documents of gold supply chain;

3) Check and record the information of each batch of gold products, document materials flow and weight, preserve test reports, and mark and store the materials;

4) Keep all transaction vouchers and records of gold suppliers for at least 5 fiscal years;

5) In case of any abnormality, mothball the materials involved and report to the Compliance Director in time.

4. Evaluation Criteria and Approval of High-Risk Gold Supply Chain

4.1 The Company should identify the risks of the gold involved in the supply chain in strict accordance with the LBMA Responsible Gold Guidance and the risk management provisions of Shanghai Gold Exchange. In addition, the Company should pay close attention to the following incidents in the gold supply chain (including but not limited to):

1) High-risk incidents released by the United Nations and recognized by the Chinese government;

2) High-risk incidents released by any other international organization or any other country (region) and recognized by the Chinese government;

3) High-risk incidents released by LBMA and recognized by the Chinese government;

4) High-risk incidents released by the Chinese government;

5) Systematic or widespread violations of human rights related to gold mining, transportation or trading;

6) Directly or indirectly supporting any illegal non-governmental armed group or any public/private security force;

7) Bribery or fraudulent misrepresentation of the true source of gold;

8) Violations of the government regulations on taxes, fees or royalties related to mineral mining, trading or export to conflict-affected or high-risk regions;

9) Money laundering or terrorist financing;

10) Contribution to conflicts;

11) Artisanal and small-scale mining (“ASM”) which is non-compliant or illegal;

12) Mining gold which contains mercury mineral or cyanide;

13) Failing to meet the requirements on environmental protection and sustainable development, or mining gold from any world heritage site or domestic natural ecological reserve;

14) Low social credit;

15）Violations of environmental, health, safety, Labour and community-related local legislation trigger ESG risks with a high likelihood of adverse effects.

4.2 Based on the actual situation of the Company, we set the following evaluation criteria for high-risk gold supply chain:

1) High-risk incidents released by the United Nations and recognized by the Chinese government;

2) High-risk incidents released by any other international organization or any other country (region) and recognized by the Chinese government;

3) High-risk incidents released by LBMA and recognized by the Chinese government;

4) High-risk incidents released by the Chinese government;

5) Systematic or widespread violations of human rights related to gold mining, transportation or trading, including but not limited to any form of torture, inhuman or degrading treatment, forced labor, child labor, widespread sexual violence and other serious violations of human rights, as well as war crimes, crimes against humanity and crimes of genocide;

6) Directly or indirectly supporting any illegal non-state armed group or any public/private security force (e.g., illegally control mines, fields, traders, other intermediaries or the transport routes of the supply chain, or illegally collect taxes or extort money or minerals through the supply chain);

7) Bribery  or fraudulent misrepresentation of the true source of gold;

8) Violations of the government regulations on taxes, fees or royalties related to mineral mining, trading or export to conflict-affected or high-risk regions;

9) Money laundering or terrorist financing;

10) Contribution to conflicts;

11) Failure to meet the requirements on environment and sustainability, including mining of gold from any world heritage site or domestic natural ecological reserve, poor environmental management, mining of gold which contains mercury mineral or cyanide,  poor management of tailings facilities, poor management of labors, poor management of social and economic development and land use, etc.;

12) Low social credit;

13）Violations of environmental, health, safety, Labour and community-related local legislation trigger ESG risks with a high likelihood of adverse effects.

When any of the above criteria is met objectively, the gold supply chain will be identified as a high-risk supply chain.

4.3 ESG Factors

1) Compliance with environmental, health, safety and labour regulation in country of operation and/or company policy;

2) Environmental management, including:

a.  Air, water, land pollution and incident management plans;

b.  Water stewardship, especially in water  scarce and stressed areas;

c.  Unauthorised sourcing from World  Heritage Sites and Protected Areas;

3) Storage, handling, and disposal of hazardous chemicals, including mercury and cyanide;

4) Management of labour issues, including remuneration, working hours, collective bargaining,discrimination, diversity, disputes and safeguarding of workers;

5) Community engagement and management programmes (land acquisition and community resettlement,cultural heritage sites and indigenous people, closure planning and safeguarding of vulnerable populations);

6) Management of business integrity and ethical conduct, and supporting the implementation of relevant initiatives such as the Extractive Industry Transparency Initiative (EITI).

4.4 The Compliance Supervisor of the Business Department should immediately conduct detailed due diligence on the high-risk supply chain and report to the Compliance Director, who should report to the senior management. The senior management should examine and approve the high-risk supply chain.

5. Due Diligence of Supply Chain

5.1 Principles

Before establishing business relationship with any gold supplier, the Company should conduct due diligence on the supplier by the method based on risk management, so as to have an overall grasp of the supply chain and evaluate the risks.

5.2 Procedures

5.2.1 Supplier Information Collection

1) Distribute due diligence questionnaires to collect supplier information.

2) Create supplier files, including: company name, legal representative, identity information, account information, address, contact information, relevant qualifications, environment and sustainable development information, operation mode, production mode, transaction contracts, etc.

3) Identify customers, enterprises and beneficial owners of enterprises, and verify their identities with reliable documents, data or information from independent sources.

4) Obtain suppliers’ commercial and financial information, purpose of gold trading and commercial operation information.

5) Regularly reevaluate qualified suppliers.

6) Carry out due diligence in time according to the due diligence procedure of supply chain in case of any change of supplier information to keep the databased up to date.

7) Assist suppliers to establish their own risk control systems.

5.2.2 Additional Due Diligence Requirements for Mined Gold

1) Obtain gold source information.

2) Obtain suppliers’ mining license information.

3) Obtain suppliers’ import and export license information  (if import and export trade is involved).

4) Collect and evaluate mining information.

5) Obtain mining capacity data.

6) Assess whether the gold source is legal in case of artisanal and small-scale mining; collect relevant qualification certificates of the supplier if the goal source is legal; terminate the transaction and refuse to purchase gold from the supplier or accept the supplier’s processing entrustment if the gold source is illegal.

7) Collect relevant information on suppliers’ compliance with environmental protection and sustainable development requirements.

8) Carry out an on-the-spot investigation on suppliers when necessary.

5.2.2 Additional Due Diligence Requirements for Recycled Gold

1) Obtain the source certificate of recycled gold.

2) Obtain beneficiary information.

5.2.4 Additional Requirements for Intensified Due Diligence on High-Risk Supply Chain

1) Conduct an on-the-spot investigation on the high-risk supply chain to verify whether the due diligence results are true or not.

2) Large-scale gold mining: verify the due diligence information of all links of the supply chain from mines to refineries (including producers,  middlemen, dealers, exporters and transporters) by using reliable documents, data and information from independent sources.

3) Artisanal and small-scale mining: verify the due diligence information of all links of the supply chain from miners to refineries (including producers, middlemen, dealers, exporters and transporters) by using reliable documents, data and information from independent sources.

4) Recycled gold: verify the information of all beneficiary owners involved in the supply chain from gold suppliers to refineries by using reliable documents, data and information from independent sources.

6. Supply Chain Risk  Assessment and High Risk Mitigation Measures

Based on the information collected by due diligence, the Business Department should fill in the Supplier Evaluation Form, give scores item by item, assess suppliers’ risk level according to the total score, and then submit the Supplier Evaluation Report. Qualified suppliers should be regularly re-evaluated (at least once a year). In case of any change in the information of a qualified supplier, the supplier should be investigated and evaluated again in time according to the due diligence procedure of supply chain to keep the database up to date.

 

S/N	Total score (R)	Risk level	Remarks
1	Total score (R) ≥50	High risk	A supply chain with any high-risk supplier, trading material or trading process will be directly identified as a high-risk supply chain
2	26≤ total score (R) <50	Medium risk
3	Total score (R) < 26	Low risk

For a high-risk supplier, the Company will take the following measures:

1) Refuse to establish business relationship with the  supplier.

2) Suspend the business relationship with the supplier, and resume the business relationship if the supplier can meet our evaluation requirements again within a reasonable period.

3) Suspend the business relationship with the supplier, and finally terminate the business relationship if the supplier cannot meet our evaluation requirements within a reasonable period.

The evaluation process and the Supplier Evaluation Report should be reviewed by the Compliance Director and submitted to the senior management for approval.

7. Examination and Approval of Risk Assessment Report

The Compliance Director should review the due diligence data, Supplier Evaluation Form and Supplier Evaluation Report and then submit them to the senior management for approval.

The senior management should examine and approve the gold supply chain according to the Supplier Evaluation Report, and decide whether to develop or maintain business relationship with relevant suppliers.

The senior management holds the ultimate control over and the highest responsibility for the gold supply chain.

8. Trading Supervision

The Company reviews and supervises the whole process of gold trading to ensure that gold trading is consistent with our understanding of the supply chain and our risk profile. The Company supervises gold trading by a risk-based method.

Obtain and record the following information for each batch of gold received:

1) Mined gold: estimated and measured weight (provided by the supplier); shipping documents (invoices, waybills, proforma invoices, etc., if possible); import and export forms for high-risk transactions.

2) Recycled gold: estimated weight (provided by the supplier); source information; shipping documents (invoices, waybills, proforma invoices, etc., if possible); import and export forms for high-risk transactions.

After gold products are received by the Company, the Business Department should cooperate with the Settlement Center to complete the registration of supplier code and material information; the Settlement Center should be responsible for the record of transaction weight, identification and storage of materials, and preservation of test results; the Financial Service Department should be responsible for current account payment through the company account and bank channel. The Company should supervise the whole transaction process, make the supply chain traceable and keep close contact with the competent administrative law-enforcement department.

In case of high-risk materials in the process of trading, the Settlement Department should identify and isolate the materials, and notify the Compliance Director to make a check, and the Business Department should notify the supplier or the competent administrative law-enforcement department to dispose of the materials.

The Business Department should conduct due diligence again on high-risk suppliers.

9. Review and Compliance Evaluation of Supply Chain Risk Management System

9.1 The Compliance Director should review the supply chain risk management system for its suitability and effectiveness every year, and prepare a Compliance Report according to the review results. The report should be submitted to the senior management for approval.

9.2 An independent third-party audit should be carried out on the supply chain risk management system.

 

10. Training

The Compliance Director should develop training plans and organize regular training to deepen employees’ understanding of the knowledge related to supply chain risk management, including but not limited to:

1) LBMA Responsible Gold Guidance and the updates on the LBMA website;

2) Risk management requirements of Shanghai Gold Exchange and updates thereof;

3) Supply chain due diligence policy;

4) Management measures for due diligence;

5) Other requirements.

11. Record Keeping

Collect and keep sufficient supporting documents and records of the supply chain, evaluate the risk level of the gold supply chain and take effective risk mitigation measures according to the supply chain due diligence system, so as to prove that the Company has fully completed the due diligence and risk management of gold supply chain.

Relevant information and documents such as due diligence information, supporting documents, evaluation records and transaction records should be kept for at least 5 years.

12. Information Communication Mechanism

An external person or internal employee who finds any violation or abnormality in gold supply chain management or trading may communicate with us by phone  (+86-0512-67168171) or email (pub@kacoo.com.cn). The Compliance Officer will regularly check complaint emails. The Company will always keep confidential the informers’ information and protect the privacy in complaints.