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Multiagency Burma Business Advisory: Gems and Precious Minerals

II. GEMS AND PRECIOUS METALS
Gems and precious metals generate billions of dollars of exports in Burma’s economy and accounted for nearly half of the country’s GDP in 2015, the last year for which credible data is available. However, because of the lack of regulation, transparency, and accountability, the sector is rife with potential for money laundering, corruption, and human rights abuses, including forced labor. These risks are only heightened by the military coup, consolidating both the industry and its oversight under military rule.
The mutual evaluation of Burma by the Asia Pacific Group on Money Laundering (APG), which tracks Burma’s compliance with the FATF Standards on combating money laundering and the countering of financing of terrorism and proliferation of weapons of mass destruction, identified several concerns in the gems and precious metals industries. These include the significant involvement of politically exposed persons (PEPs) and SOEs, insufficient anti-money laundering controls, corruption, and the reliance on cash-based transactions with poor record-keeping. Additionally, gem industries in Burma, specifically jade and rubies, were identified by the Department of Labor’s List of Goods Produced by Child Labor or Forced Labor10 as utilizing forced labor and child labor.
Further compounding these inherent risks identified by the FATF and the Department of Labor in Burma’s economy, the 2019 UN Fact Finding Mission report found that the military controlled a large portion of the gems and precious metal sector through two military holding companies, Myanma Economic Holdings Limited (MEHL) and Myanmar Economic Corporation (MEC), and their numerous subsidiaries, which has benefited senior military leaders involved in serious human rights abuse and other abuses. Furthermore, the UN Fact Finding Mission report found that the military has committed gross violations of human rights, including involving forced labor and sexual violence, in connection with their business activities in the gems industry.
In March 2021, MEHL and MEC11 were designated by the Office of Foreign Assets Control at the U.S. Department of the Treasury (OFAC) under E.O. 14014 in response to the coup and the military’s abuses throughout Burma, which was quickly followed by the additional designations of Myanma Gems Enterprise (MGE) and Myanmar Pearl Enterprise (MPE) in April 2021. As a result of these designations, all property and interests in property of these entities that are in the United States or are in the possession or control of a U.S. person are blocked. Unless authorized by OFAC, all transactions by U.S. persons, wherever located, or within (or transiting) the United States that involve any property or interests in property of the designated persons have been prohibited since the relevant designations.12
Given the insufficient reporting requirements in Burma for cross-border transfers of goods and funds, the U.S. government recommends that gem, pearl, and precious metal importers undertake enhanced due diligence to better understand their supply chains and to ensure they are not sourcing from or brokering through military-owned or -operated entities, even if their supply chain seems to be completely outside of Burma. A supply chain that, on paper, does not refer to or otherwise appear to touch Burma may still involve links in which the military is the ultimate beneficiary. For example, jade, rubies, and sapphires from Burma have been previously smuggled into countries like China and Thailand to be cut and sold on the international markets as “made in Thailand,” or “made in Hong Kong” and most lab-test certificates do not often show which company profited from their sale. It is the responsibility of businesses and individuals to ensure their sourcing is consistent with what is being reported from vendors and suppliers to avoid potential liability for sanctions violations.

Footnotes:

10 List of Goods Produced by Child Labor or Forced Labor. See https://www.dol.gov/agencies/ilab/reports/child- labor/list-of-goods
11 MEHL and MEC were also added to the Bureau of Industry and Security’s Entity List. See Annex I.
12 For more information, the U.S. Department of the Treasury encourages you to visit the OFAC website on Burma- related sanctions at: https://home.treasury.gov/policy-issues/financial-sanctions/sanctions-programs-and-country- information/burma.

Categories: Advisories Anti-Corruption Burma Sanctions Guidance Human Rights Sanctions Multiagency Advisories

eric9to5

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