‘Blood gold’ in your jewelry is poisoning workers and the rainforest. Here’s how to stop it.

Doris Fonegra displays a rock containing particles of gold extracted from Las Brisas, an independent gold mine in Segovia, Colombia, on May 8, 2017.
Doris Fonegra displays a rock containing particles of gold extracted from Las Brisas, an independent gold mine in Segovia, Colombia, on May 8, 2017.

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Illegal gold molded into our wedding rings, dangling around our necks and hidden in our smartphones is polluting the rainforest with toxic chemicals and exploiting workers in Latin America.

Gold miners have stripped roughly 415,000 acres of South American tropical forest, an area twice as big as New York City, according to researchers at the University of Puerto Rico — and the rate of deforestation is only getting worse.

In Colombia, teenagers swim in mercury-filled pools of water as they use powerful hoses to suck up gold, an investigation by Massachusetts-based nonprofit Verité found.

Pope Francis brought his moral authority to the crisis on Friday when he visited Peru’s epicenter of illegal gold mining, Madre de Dios.

“I want everyone to hear God’s cry: ‘Where are your sister and brother slaves?’” the pope said of the human trafficking that supplies miners and sex workers for the industry. “There is so much complicity. And it’s a question for everyone.”

Solutions won’t be easy — but they exist.

There are ways of mining gold without mercury, without massive deforestation, without child slavery,” said Douglas Farah, a national security consultant who has studied illegal gold mining.

To stop the unrelenting environmental and human devastation, an array of competing interests will have to collaborate to extract gold in a more humane way, according to workers’ rights advocates, environmentalists and industry experts. In the mix of this crisis are large multinational companies that use gold in their products, American consumers, U.S. and foreign law enforcement agencies, non-governmental organizations, precious-metals refineries and the miners themselves.

Complicating matters further: Violent Latin American drug traffickers who have infiltrated the industry seeking to launder money.

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Illegal gold mining in southwestern Colombia has turned this stretch of river into a muddy pit. Colombia’s police are scrambling to stop the illicit industry that authorities say is funneling money into the pockets of criminal gangs. Juan Manuel Barrero Bueno Special to the Miami Herald

The kind of sweeping change needed to clean up the gold industry has happened before, experts say — take “blood diamonds.”

Today, no company wants to buy or sell diamonds that contribute to violent conflict. That’s because consumers, advocacy groups and world governments woke up to the havoc caused by their extraction — and pressured big companies not to trade them anymore.

It worked. Since 2003, more than 75 countries, including the United States, have signed onto a United Nations-backed accord called the Kimberley Process that certifies diamonds as “conflict-free,” meaning rebel groups do not profit from their sale.

The campaign “brought the issue to people’s attention in ways that people like myself never thought possible,” Farah said. “I think the same thing is entirely possible with gold” — if consumers demand greater transparency.

In from the cold

Without more stringent precautions, American consumers should be aware “there is a strong likelihood that a percentage of gold in their jewelry or electronics comes from illegal gold mines,” said Quinn Kepes, program director for Verité, which investigates abuses in the international gold industry.

The implications are huge: Nearly three-quarters of gold imports into the United States come from Latin America.

In southeastern Peru’s vulnerable Madre de Dios region, illegal miners have invaded pristine Amazonian rainforests and turned them into “toxic deserts” where wildlife cannot thrive, said Luis Fernandez, a tropical ecologist at Wake Forest University’s Center for Amazonian Scientific Innovation.

Machines chew up the forest, digging 30 feet down into the soil and then sifting for gold. The mining work leaves behind massive piles of dirt and rocks that clog up riverbeds. The waterways are poisoned by mercury used to separate gold from rock.

“It completely destroys the area,” said Fernandez. “You don’t expect these areas to reforest in hundreds of years. There’s no more soil. You’re basically doing strip mining on a massive scale.”

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A rock ball containing crude gold will be melted to extract the precious metal at a gold-buying store in Segovia, a mining town in the Antioquia department in Colombia, on May 8, 2017. PEDRO PORTAL

In Madre de Dios, where Fernandez’s center runs a research laboratory, aerial imagery shows hundreds of thousands of acres have been deforested.

Much of the damage is happening in national parks and ecological preserves.

“It would be the equivalent of having thousands of acres of illegal strip mines in Yellowstone National Park — and the government not being able to stop it,” Fernandez said.

He and a team of researchers are leading efforts to study how to reforest such a devastated ecosystem, including using charcoal-enriched soil to grow vegetation again and testing a mix of 40 native plant species for their viability.

“How do you reforest something like that?” Fernandez said. “We have to figure how to do this efficiently and cost effectively.”

One of the most horrific byproducts of illegal mining: widespread mercury poisoning.

A 2013 study estimated gold miners polluted rivers and lakes in the entire Amazon region with more than 30 tons of mercury per year.

The problem has been getting worse: New research indicates that in Madre de Dios alone, 90 tons are released into the environment annually, according to the Artisanal Gold Council, a Vancouver-based organization that advocates for improving the conditions and practices of artisanal miners.

Small-scale miners have used mercury for centuries. They mix rocks containing gold with the toxic chemical to form an amalgam. Then they heat the mixture, burning the mercury away — sending it into their own lungs and the environment — and leaving behind gold.

Pits left by miners fill with mercury-contaminated water — and local people sometimes use those pits to farm fish, Fernandez said. His research shows that across Madre de Dios — where there are tens of thousands of small-scale miners — three in four people suffer from dangerous levels of mercury. Indigenous tribes are particularly vulnerable, he said.

Prolonged exposure to the chemical can harm nervous, immune and digestive systems, and lead to respiratory and kidney failure and even death.

Many miners are only vaguely aware of the health risks posed by mercury, just like tobacco smokers of previous generations, said Kevin Telmer, executive director of the Artisanal Gold Council.

Telmer said convincing miners to stop using mercury is not as daunting as it might seem.

While mercury is fast, cheap and yields gold immediately, some of the precious metal is lost in the process.

“You’ve got to give them a solution,” he said.

A big incentive: mining without mercury makes miners more money because more gold is recovered, according to Telmer. Large-scale industrial mines have long stopped using mercury because it is inefficient.

“We typically get a 30 percent lift in their recovery,” he said. “If it’s going to induce a pay cut, they’re not going to be interested.”

The Artisanal Gold Council has launched three pilot mining projects, including one in Peru, to showcase mercury-free methods of extracting gold.

These include basic gravity techniques such as panning, shaking tables and centrifuges.

Both Peru and Colombia have signed the U.N. Minamata Convention, which is intended to phase out the use of mercury in traditional gold mining.

Telmer said governments could also help by abandoning ineffective drug-war tactics that include airborne rainforest raids.

“They blow up some [illegal] dredges this week and then next week the dredges are back in there,” Telmer said.

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Carlos Durango, who works in the Las Brisas mine in the Colombian town of Segovia, discusses the difficulties facing independent miners. PEDRO PORTAL

An alternative is to provide resources to artisans.

One organization doing that is the Global Environmental Facility, which is funded by the United Nations, development banks and international non-governmental organizations. The group is providing $45 million in financing to help artisanal gold miners eliminate the use of mercury in Peru, Colombia and six other countries.

“The only way to fix this problem is to bring [small miners] into the formal sector,” Telmer said, “and that includes formal financing.”

Drug trade

Even as they fend off harsh tactics from South American law enforcement, artisanal miners are vulnerable to extortion and outright takeover by drug cartels, who see the gold trade as a way to launder drug profits. In effect, the miners are squeezed between the government and the cartels.

This is where U.S. law enforcement can play a critical role — by aggressively attacking the cartels’ use of gold to launder drug profits, according to Lou Bock, a retired agent with the Department of Homeland Security.

For decades, however, the United States has taken a haphazard approach to regulating the gold market.

Criminals manipulating gold knew no one was “looking at them,” Bock said.

Consider the Financial Crimes Enforcement Network, a U.S. Treasury Department agency responsible for enforcing anti-money-laundering laws. FinCEN has imposed only one civil sanction against a U.S. precious-metals company — a $200,000 fine in 2015 against a Los Angeles dealer that failed to set up an anti-money-laundering program.

John Cassara, a retired U.S. Treasury agent who worked at FinCEN, said his bosses forbade him from going after the industry following the 9/11 attacks. Instead, top officials wanted to focus on traditional targets like money laundering through banks.

“I was literally given a gag order,” Cassara said.

A FinCEN spokesman did not respond to requests for comment.

But there are signs the U.S. government is getting more aggressive.

Last year, federal prosecutors in Miami uncovered a staggering $3.6 billion money-laundering scheme by employees of a major South Florida precious-metals company, Doral-based NTR Metals. The three NTR traders pleaded guilty to buying dirty gold from narco-traffickers and other criminals in Latin America.

“We’re now putting pressure on the money-laundering end of it,” said John Tobon, deputy special agent in charge of Homeland Security Investigations in South Florida, which worked with the FBI on the NTR case. “The criminal organizations have been able to infiltrate the [precious-metals] industry to a level we were not familiar with.”

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Police officers stand watch in southwestern Colombia after authorities destroyed backhoes involved in illegal gold mining operations. Juan Manuel Barrero Bueno Special to the Miami Herald

A reflection of this shift in emphasis: Almost a year ago, the U.S. Attorney’s Office in Miami renamed its narcotics division, indicating a sharper focus on money laundering. It’s now the International Narcotics and Money Laundering Section.

Peter Quinter, a former U.S. Customs attorney now in private practice representing Miami gold dealers, said his clients are eager to assist federal authorities.

“There has definitely been increased scrutiny” since the NTR case, including more gold seizures and stricter examination of Customs forms, Quinter said.

But the fallout extends far beyond Customs searches, all the way to the banks that prop up the international precious-metals market.

“A major aspect of this racket is the banks,” said Charles Intriago, a money-laundering expert and former federal prosecutor in Miami. “Where are they when these multibillion-dollar gold transactions are conducted? The Justice Department, FBI and IRS should not leave the banks on the sidelines.”

In the meantime, Scotiabank, the Canadian lending institution that services NTR’s parent company, Elemetal, is looking to sell off its gold-lending arm, the world’s oldest, according to the Financial Times.

That is no small matter.

If the banks pull out, the U.S. gold industry would be undermined: Banks provide financing to dealers and refineries for a steady stream of shipments to the United States.

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A group of people, including women and children, search for gold in fine sand in a river called Cianurada — “cyanide-filled river.” The gold-laced water comes from processing at the Gran Colombia Gold Corporation factory in the mining town of Segovia, Colombia. PEDRO PORTAL

Just as banks and the U.S. government are awaking to the threat of money laundering in the gold industry, America’s largest companies are taking a keener interest in the source of their gold.

Elemetal supplied dozens of blue-chip companies, according to corporate disclosure forms, including Tiffany & Co. and Apple. Those companies said they constantly check to make sure they aren’t using “blood gold” in their products.

Tiffany said it bought only domestic “scrap” from Elemetal, rather than mined materials from Latin America. Scrap gold is collected from pawnshops and jewelry stores in the United States.

Apple declined to comment. But a spokesman said last year the company had found “no evidence of illegal gold entering our supply chain.”

Fernandez, the tropical ecologist, said that U.S. companies should buy only gold that is certified as “fair-trade,” meaning the mining process does not damage workers or the environment.

“That could be a game-changer,” he said.

One Colombian nonprofit, the Alliance for Responsible Mining, has already created a fair-trade brand of gold it calls “Fairmined.” The group works with artisanal miners in Latin America, Asia and Africa to make sure they follow environmental and labor laws and don’t use mercury or interact with criminals.

That comes at a price, just as organic foods cost more than processed ones.

Fairmined gold is sold for a premium between $2,200 to $4,000 per kilogram above the market price. Some of that money is shared with the miners. (In January, a kilogram of standard gold cost more than $42,000.)

Despite the premium, the program is finding success: Swiss watchmaker and jeweler Chopard uses Fairmined gold. And when Colombian President Juan Manuel Santos was awarded the Nobel Peace Prize in 2016, the medal was minted from Fairmined Colombian gold.

Last year, Fairmined produced roughly 250 kilograms of gold. In 2018, the Alliance for Responsible Mining hopes to double that.

“What we need is to certify more mines to be able to supply the market,” said Yves Bertran, the group’s executive director. “It’s a slow process but we are really making progress.”

Dirty metal

Cleaning up the gold trade can’t happen without a commitment from U.S. and international refineries that buy precious metal from Latin America and sell it to jewelers, banks and electronics companies.

They need to know their suppliers aren’t criminals.

“Anybody dealing in gold legally has to trace it back to the source and confirm that it’s legitimate,” said David Bolton, a Miami private investigator who has worked for U.S. refineries and Latin American gold exporters.

There are two major sources of gold in Latin America: large mines controlled by multinational conglomerates, and gold brokers known as “aggregators” who buy from artisans.

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A banner advertises a gold-buying store in Segovia, a mining town in Colombia. PEDRO PORTAL

Aggregators offer a riskier business model, experts say, because it’s so difficult to trace the origins of their gold. Some buy gold from mines controlled by criminals — and cover it up by falsifying paperwork and bribing officials, as NTR employees did.

When dealing with aggregators, “it’s impossible to know the original source of the gold,” said Mike Riess, a precious-metals consultant who sits on a U.S. Treasury Department anti-money-laundering advisory board. “It’s more likely at this point that you’re dealing with a criminal organization.”

Despite the risks, many global gold firms seeking to meet endless demand still buy from aggregators instead of large mines. That includes two of the world’s biggest refineries, Switzerland-based Metalor and Japan-based Asahi, which both have operations in the United States.

José Ramon Camino, Metalor’s general counsel, acknowledged in an email that buying from large, regulated mines “reduces the risk.”

“However, in Colombia, the majority of the mining operations are small,” Camino said. “Business can still be done, provided that compliance is not compromised in any way.”

Camino said Metalor compliance officers visit Latin American suppliers to ensure that they have permits, pay taxes and meet regulations.

“If there are doubts that we cannot clarify, we stop the business,” he said.

Asahi declined to answer questions. But spokesman David Dorris said Asahi’s suppliers source “material in a legal and responsible manner.”

Gold companies realize vetting aggregators is no easy task, nor foolproof.

“Even though we carry out exhaustive due diligence and know-your-customer processes, there’s never any guarantee of certainty,” said Pacco Liano, compliance officer for Miami-based Kaloti Metals & Logistics, which buys gold from Latin America and sells it to a refinery in Dubai.

Republic Metals, an Opa-locka-based refinery that is one of North America’s largest, once bought from aggregators, too. But no more.

The firm stopped dealing with aggregators in 2014. It now buys only from big, regulated mines in both Colombia and Peru.

CEO Jason Rubin says large mines owned by publicly traded companies are less vulnerable to criminal infiltration because of greater government scrutiny and internal resources for due diligence.

In fact, executives at Goldex, an aggregator that once supplied Republic, were charged in Colombia in a scheme to launder almost $1 billion through gold exports. The case is ongoing and Goldex denied wrongdoing.

“I don’t want to risk our reputation,” said Rubin, whose father started Republic in 1980 and grew the refinery into a massive operation, where cauldrons pour molten gold in a searing furnace straight out of Tolkien.

But dealing only with large mines cuts out subsistence miners from the global gold economy.

One startup Miami gold company that still uses aggregators believes “fair-mined” branding can help distinguish legitimate artisanal miners from those with ties to criminals.

Alejandro Esponda, vice president of Doral-based Universal Precious Metals, said U.S. companies have a duty to support small miners who labor in remote jungle regions where mining has been practiced for centuries.

“It’s a social enterprise,” he said.

Editor’s note: This story has been updated to include newly released figures for the amount of mercury dumped in Madre de Dios.

Nicholas Nehamas: 305-376-3745, @NickNehamas

Kyra Gurney: 305-376-3205, @KyraGurney