How to Manage Due Diligence & Sanctions in Responsible Sourcing Programs

How to Manage Due Diligence & Sanctions in Responsible Sourcing Programs

It’s time to start working toward the conflict minerals reporting deadline — and this year, sanctions are playing a role in due diligence activities.

Sourcing issues can stem from organizations located outside the Democratic Republic of the Congo and its adjoining countries when denied parties lists are factored in. Soon after U.S. filers completed their annual disclosures for the 2017 reporting year, two smelters — one in Russia and one in the Czech Republic — were hit with Office of Foreign Assets Control (OFAC) sanctions. This caused the smelters to be removed from validated sourcing lists.

As a result, companies needed to assess for risk. It was an ongoing issue throughout 2018, and it has the potential to impact this year’s reporting.

These smelters in Russia and the Czech Republic have already been heavily affected by the sanctions, as gold is traded through banks, with metal traders operating underneath them. Because banks operate in U.S. jurisdictions, they were in scope of sanctions, causing these smelters to go out of business.

If a supplier declares one of these sanctioned smelters on their CMRT, it means:

  • They are using old data, and have not updated their CMRT disclosure, or
  • They are using up materials purchased prior to the sanctions.  

Although most companies interpret the risk as low due to the lack of direct business interest in these smelters, an increasing number of companies are choosing to conduct extended due diligence through the supply chain to evaluate the continued use of such sources. The goal of conducting this due diligence is to provide evidence that a company has no direct business interest in sources under sanctions. The direct benefit and business impact is the ability to provide this information to customers and support their understanding of the use of such sources.  

As organizations evaluate their due diligence measures, they may benefit from considering what risks lie ahead. Responsible minerals programs are expanding, and the focus on other conflict-affected and high-risk areas is increasing. As companies determine how to adapt their responsible minerals programs, they should consider:

  • Could other upstream sources around the globe fall under the purview of denied parties lists?
  • What are their customers’ expectations, and how should they address their responsible sourcing concerns?
  • How might continued scrutiny of additional metals and sources impact their ability to both procure material and report on material sources of origin?
  • Does the use of denied parties, even if their organization has no direct business interest, align with their program expectations and ethical standards?

Companies that wish to conduct extended due diligence may want to survey suppliers with a specific request surrounding sanctioned sources.

Assent can help support due diligence efforts and supply chain data management. To learn more, contact