Once gold is illicitly extracted from the ground using unregulated chemicals, and in some cases child labor or forced labor, it enters the market outside any regulatory oversight. From that moment, there are only two ways for this gold to be laundered: Declared as newly mined primary gold Declared as recycled or secondary gold
Since 2011, with the Dodd-Frank Act and OECD due-diligence guidance, mined primary gold has been placed under strong scrutiny. These frameworks established robust risk-based controls, mandatory traceability, and enhanced due diligence for high-risk areas.
The result: • Most LSM gold is sold directly to refiners • Supply chains are short and controlled • Agregators are eliminated • Origin must be identified
Even artisanal and small-scale mining supply chains, which often include aggregators, typically require identification of the mine and verification of environmental, social, and governance permits.
Because of this level of oversight, criminal networks tend to avoid using primary supply chains to launder illicit gold.
They move to the secondary gold market
Secondary gold has effectively been artificially de-risked. While mined gold is subject to extensive scrutiny and traceability expectations, recycled gold is typically governed by far lighter requirements. In many frameworks, recycled material is addressed only briefly, with limited guidance and little to no meaningful traceability. The recent EU conflict-minerals regulation also treats recycled material differently, placing it largely outside the core scope of the regulation and its most stringent due-diligence obligations.
This creates a structural vulnerability
Illicitly mined gold is sold to local aggregators who create falsified invoices describing the doré as scrap jewelry. These documents then become the new documented source of the gold. The material is subsequently sold to a second aggregator engaged in international trade and shipped internationally, effectively laundered at the very first tier of the supply chain.
International aggregators function as buffers, distancing refiners from the original criminal source. A simple contractual declaration asserting that the gold is legally sourced is often enough to shift liability away from downstream actors. This approach sits at the center of the RMI (Responsible Minerals Initiative), which places significant emphasis on this type of clause.
The result is a transnational laundering mechanism embedded within the recycled gold trade.
According to the London Bullion Market Association sourcing report, a significant share of the gold processed by major refiners is reported as secondary material (64%), while ASM accounts for only a very small fraction (2%). This imbalance does not reflect how gold is actually produced. It reflects incentives, including the ability to commit crime and launder illicit gold under the secondary classification.
When traceability is weak, laundering becomes easy
Estimates suggest that roughly one in four grams of secondary gold may originate from illicit sources. If bullion flows, which already have a defined origin, were separated from unprocessed recycled material, that proportion could be even higher, potentially rising to as much as one in every two grams.
Without traceability, recycled gold becomes the preferred entry point for illicit material.
No traceability. No meaningful due diligence. No credible claims.