Dongwu Gold Group Co., Ltd.
Refiner's Compliance Report

Adhering to high standards of anti-money laundering and cracking down on terrorist financing, "LBMA Responsible Gold Guidance" has established responsible gold guidance for high-quality delivery refiners, and adopted high standards of due diligence to combat systemic or widespread human rights violations, avoid fuelling conflicts, comply with high standards for anti-money laundering and combat terrorist financing.

This report summarizes how Dongwu Gold Group Co., Ltd. complied with the requirements of the "LBMA Responsible Gold Guidance" for the year ended December 31, 2019.

Table 1: Enterprise Information

Company name: Dongwu Gold Group Co., Ltd.

Address: No. 59 Yangtai Road, Chuangtou Gongye Fang, Suzhou Industrial Park, Jiangsu Province, China

Year-end Report: December 31, 2019

Report Date: January 8, 2020

Senior management responsible for this report: Chang Hao (Deputy General Manager)

Contact: Tel: + 86-0512-67163930  E-mail: 904248396qq.com

Company Introduction:

Established in 2012, Dongwu Gold Group Co., Ltd. (hereinafter referred to as Dongwu Gold) is located in Suzhou Industrial Park, Jiangsu Province. The company is a wholly-owned subsidiary of Suzhou Investment Co., Ltd. The company covers an area of about 5,000 square meters and a construction area of about 14,600 square meters with a registered capital of 100 million yuan, and 500 employees. It is an executive director unit of China Gold Association. Dongwu Gold Refinery adopts internationally advanced gold refining technology and equipment, with the characteristics of short production cycle, flexible process, high level of automation, and stable product quality. The annual gold refining capacity is over 50 tons.

The parent company, Suzhou Investment Co., Ltd., is a general member of the Shanghai Gold Exchange, and the wholly-owned subsidiary, Shanghai Dahui Cultural Development Co., Ltd., is a Class B member of the Shanghai Gold Exchange International Board. Dongwu Gold was recognized by the Shanghai Gold Exchange as a Standard Gold Ingot Supplier in March 2017. These primary qualifications give the company advantages in raw material supply, recycling and precious metal production and sales.

Dongwu Gold improves the company's comprehensive management level and operational control capabilities through standardized system construction, produces products that meet and exceed customer requirements, and actively creates a harmonious, safe, and environmentally friendly production and operating environment. In 2015, it passed the GB/T19001-2008/ISO9001:2008 Quality Management System Certification, which is valid until December 17, 2021, and the system covered the production process of gold and silver standard ingots; the design, production and sales of gold and silver products.

With the risk-based thinking, Dongwu Gold has formulated the supply chain due diligence policy and management methods, compiled the "LBMA Management Manual" and "Procedure Documents", which stipulated the procurement control, and demanded the establishment of a scientific supplier evaluation system to standardize and comprehensively evaluate the list.

Table 2: Summary of activities undertaken to demonstrate compliance

Step 1: Establishment of a strong company management system

Statement for compliance:

The company has fully complied with Step 1: Establishment of a strong management system.

Company policy: Dongwu Gold has officially published the "LBMA Supply Chain Due Diligence Policy" and "Supply Chain Due Diligence Management Measures", in line with the Model Policy set forth in Annex II of the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas. The Policy stipulates our responsibilities, with risk-based due diligence, implements transaction monitoring, continuous training, and improves the management model, which enables continuous and effective operation of the management system. The "LBMA Supply Chain Due Diligence Policy" and "Supply Chain Due Diligence Management Measures" have been published on the website of Dongwu Gold. For supply chain or any newly discovered risks, the company's employees and the outside can contact us by telephone + 86-0512-67168171 or complaint mailbox pub@dongwugold.com. In February 2019, the coordinating group responsible for compliance management, risk control and legal affairs was established. The "LBMA Management Manual" and "Procedure Documents" were prepared and published, effective on March 1, 2019.

Internal management structure: In accordance with the "Supply Chain Due Diligence Management Measures", we have established an internal management system and  organizational structure to clarify responsibilities and authorities with internal audit, communication and senior management review. The senior management has a special person in charge of LBMA work, responsible for the approval of high-risk supply chains, approval of the revision of the "Supply Chain Due Diligence Management Measures" and the appointment of the Compliance Director. The Compliance Director is responsible for preparing and updating the “Supply Chain Due Diligence Management Measures”, reviewing the results of due diligence submitted by the Procurement Department, evaluating the effectiveness of risk management strategies, organizing gold supply chain training and reporting high-risk supply chain situations directly to senior management. The Procurement Department is responsible for evaluating the suppliers before signing the contract, monitoring the transactions with qualified suppliers, setting the supplier code, coordinating with the Finance Department to complete the registration of the supplier transportation information, count the transaction weight and regularly and repeatedly evaluate the suppliers after the materials enter the Dongwu Group. The Financial Service Department (Settlement Center) is responsible for the traceability of materials throughout the refining process, identification and storage of materials, and management of current accounts. It also plays an important role in due diligence.

Internal system: In 2019, Dongwu Gold strictly implemented the “Supply Chain Due Diligence Management Measures”, conducted risk-based due diligence on suppliers, monitored all trading activities, and formulated risk assessment process to avoid establishing relationships with high-risk suppliers. The Procurement Department is responsible for conducting additional due diligence evaluations of all suppliers at least once a year. The results and evaluations of all due diligence are reviewed by the Compliance Director and approved by senior management.

Gold supply counterparties: A total of four suppliers had business transactions with Dongwu Gold in 2019. Staff of the Procurement Department informed the other party the supply chain due diligence policy of our company before signing the contract, and required suppliers to make a written commitment, including no serious abuse of human rights and violations, no direct or indirect support for non-state armed groups, no direct or indirect support for public or private security forces, no bribery, fraud and money laundering, and payment of relevant taxes and fees as prescribed. All suppliers signed the contract with us in 2019 have signed the statement, promising to comply with Dongwu Gold’s policy requirements.

Communication mechanism: The Compliance Director develops the training plan every year, which helps relevant personnel of the gold supply chain fully understand the due diligence system. In 2019, training on LBMA Responsible Gold Guidance, company supply chain due diligence management policies and methods, risk assessment, anti-money laundering system, transaction monitoring, appeal mechanism and product standards were organized on March 4, June 15, September 17, and December 17, respectively. The company's employees and the outside can also communicate through hotline and mailboxes.

Step 2: Identification and assessment of risks in the supply chain

Instructions for compliance:

Our company has fully complied with Step 2: Identification and assessment of risks in the supply chain.

Risk identification of gold-containing material suppliers: In the "LBMA Management Manual", Dongwu Gold has clarified the methods of identifying the risks in the supply chain. Before establishing business relationship, the Procurement Department requires the four suppliers to fill out the "Due Diligence Form" to collect supplier information, including company type, registration location, transaction type, relevant beneficiaries, etc. They are required to complete the identity verification of the supplier and the supplier’s beneficiaries, whether the supplier and the beneficiaries are on the government’s published list of money laundering, fraud or terrorists, the verification of the supplier’s business activities and detailed financial information, etc. through the website announced by the Chinese government, which helps us assess the supplier risk. On December 20, 2019, we evaluated the four suppliers again.

For gold mining suppliers, we have obtained gold mining places, gold mining business licenses, business activities, beneficiaries, and financial information. Through the website announced by the Chinese government, we have verified the identity of suppliers and beneficiaries and that the suppliers and beneficiaries are not on the government's list of money laundering, known scammers or terrorists. Make it clear to Dongwu Gold’s anti-money laundering and counter-terrorism financing policies and practices.

For recycled gold suppliers, we have obtained business licenses, beneficiaries, business activities, and financial information. Through the website announced by the Chinese government, we have verified the identity of suppliers and beneficiaries and that the suppliers and beneficiaries are not on the government's list of money laundering, known scammers or terrorists. Make it clear to them Dongwu Gold’s anti-money laundering and counter-terrorism financing policies and practices.

The Procurement Department obtained the information of the suppliers in 2019, and verified the information of each supplier, thus avoiding the risk of money laundering and terrorist financing. As of December 31, 2019, the Procurement Department had completed the risk identification of all the suppliers.

Risk assessment of suppliers of gold-containing materials: Dongwu Gold has clarified the high-risk assessment methods and re-evaluation methods in the "LBMA Management Manual", as well as the high-risk response process.

Before establishing business relationship, the Procurement Department conducts risk assessment of the suppliers. We have defined the standards of the following seven types of high risk:

1) The source, or transit place of mineral gold or recycled gold are high-risk areas affected by conflict or human rights violations.

2) Mineral gold is claimed to originate from a country with limited known reserves, resources or estimated gold production.

3) The recycled gold comes from known high-risk areas with conflicts and human rights violations, or there is reason to suspect transit through this area.

4) The enterprise in the gold supply chain or its known upstream enterprise is located in a country with high risk of money laundering, crime and corruption.

5) The beneficial owners of the enterprises in the gold supply chain or their known upstream companies is politically sensitive.

6) The enterprises in the gold supply chain or their known upstream companies actively participate in high-risk business activities such as weapons, gambling, bookmaking, antiques and artworks, religions and religious leaders.

7) Other high-risk situations determined by the Chinese government.

In case of any of the above risk situations, Dongwu Gold defines the supplier as a high-risk supplier, and will take the following measures:

1) Do not establish business relationship with the supplier.

2) Suspend cooperation with suppliers with whom we have established business relationship, and re-establish cooperation with the suppliers who can meet our requirements for high-risk assessments again within a reasonable time.

3) Suspend cooperation with suppliers with whom we have established business relationship, and terminate cooperation if the supplier fails to meet our high-risk assessment requirements within a reasonable time.

The above content and process are described in detail in the "LBMA Management Manual", and senior management personnel is responsible for approving the high-risk supply chain.

As of December 31, 2019, Dongwu Gold has completed all risk assessments of new and old suppliers, with all gold-containing material suppliers located in China. We have collected relevant qualifications of the suppliers and checked whether the identifiable income owners of the suppliers are on the list of terrorist organizations published on the website of the Ministry of Public Security of the People's Republic of China, and we have improved the identification of supplier interest subject through the National Enterprise Credit Information Publicity System, China Enforcement Information Disclosure Network and China Judgment Network. No medium- or high-risk suppliers were found in 2019.

Risk assessment report for gold-containing materials suppliers: The Compliance Director is responsible for verifying the authenticity, effectiveness and completeness of due diligence and reporting to senior management, who is responsible for the approval of high-risk supply chain and due diligence reports. In case the contract period exceeds one year, it shall be reviewed and approved by senior management personnel. Purchase transactions can only be processed if the risk management strategy is determined to be "normal".

The Compliance Director has reviewed all the due diligence data for 2019, and announced the supplier’s due diligence results at the LBMA internal management review meeting held on December 30, 2019, which was approved by senior management.

Step 3: Design and implementation of management strategies to respond to identified risks

Instructions for compliance:

Our company has fully complied with Step 3: Design and implementation of management strategies to respond to identified risks.

Risk management: Dongwu Gold adopts different risk management strategies based on the results of due diligence. In case the results of due diligence are not completely satisfactory, we will suspend cooperation, adopt an improved strategy, and provide suppliers with goodwill and reasonable suggestions for them to meet our requirements for supply chain risk assessment within a reasonable time. If the results of due diligence show that the supplier may have human rights violations, money laundering, terrorist financing, conflict of contributions, or other risks that may be considered high, we will immediately stop cooperation until there is evidence showing that the supplier meets our risk assessment requirements of the supply chain. For the improved suppliers, the Procurement Department is responsible for supervising the implementation of risk resolution, and repeating the evaluation regularly, and the Compliance Director will review and report to senior management for approval.

Continuous monitoring: At the end of each year, the Procurement Department is responsible for collecting change information for all suppliers, conducting repeated risk assessments, and deciding whether to continue cooperation based on the results of continuous transactions monitoring and risk assessment results.

According to the results of due diligence in 2019, the Compliance Director is responsible for reviewing and senior management responsible for approval, with the management strategy that no supplier required for risk reduction. Two of the suppliers in 2018 had no intention to cooperate after the contract expired, with the evaluation result of "termination of cooperation".

Step 4: Arrangement of an independent third party to conduct due diligence on the supply chain

Instructions for compliance:

Our company has fully complied with Step 4: Arrangement of an independent third party to conduct due diligence on the supply chain.

Dongwu Gold appoint BV certification companies to provide authentication services for us. They performed a reasonable assurance engagement in accordance with International Standard in Assurance Engagements ISAE 3000 Assurance Engagements Other than Audits or Reviews of Historical Financial Information (ISAE3000). BV’s assurance report can be found in attached document.

Step 5: Report supply chain due diligence

Instructions for compliance:

Our company has fully complied with Step 5: Supply chain due diligence report.

In accordance with the specific requirements of the "LBMA Responsible Gold Guidance", Dongwu Gold has compiled and reported the 2019 "Refinery Compliance Report" on time. Relevant person who need more information and specific details can contact us by phone or email, or obtain relevant information on the company's website.

Dongwu Gold's overall conclusion

Table 3: Management conclusion:

In general, in 2019, Dongwu Gold improved the RGG supply chain management system, conducted supplier identification and risk assessment, planned risk management strategies and high-risk supply chain response processes, and conducted independent third-party audits of supply chain due diligence. For the year ended December 31, 2019, Dongwu Gold fully complied with the LBMA Responsible Gold Guidance. In the next stage, we will continue our efforts to further improve the management system, strengthen internal monitoring and management, and enhance our management of high risks in the supply chain.

Table 4: Other report comments

For any feedback and suggestion on this report, please contact us by phone + 86-0512-67168171 or email pub@dongwugold.com.