Introduction

The report exposes systemic issues within the International Tin Supply Chain Initiative (ITSCI), which was created to ensure conflict-free mineral sourcing from the Democratic Republic of Congo (DRC). However, it reveals the scheme’s failure to prevent conflict minerals from entering international markets. The report highlights militia involvement, human rights abuses, and child labour in the mineral trade, posing significant risks for companies reliant on these minerals.

Laundering of minerals from unvalidated mines in DRC: a systemic problem

Minerals from non-validated mines were laundered through ITSCI in key mining regions like Nzibira, Lubuhu, and Chaminunu. These minerals, often from militia-controlled mines, were falsely tagged as conflict-free and entered international supply chains. ITSCI’s oversight was ineffective, enabling illegal minerals to circulate globally. The involvement of armed groups in these mines continues to perpetuate conflict and human exploitation.

ITSCI’s role in Rwanda

ITSCI was also involved in laundering minerals smuggled from DRC to Rwanda. The Rwandan government’s export data significantly exceeded its domestic mineral production, indicating large-scale smuggling. ITSCI’s governance and lack of transparency facilitated the legitimisation of these minerals, raising concerns about the effectiveness of the due diligence system in the region.

Tainted minerals entering international supply chains

Conflict minerals from DRC were found in international supply chains, reaching smelters and companies in Asia and Europe. Notably, brands such as Apple, Intel, Samsung, and Tesla rely on ITSCI-certified minerals, despite the scheme’s flaws. These corporations have been warned about the high risks but have taken limited action to address the problem, exposing themselves to regulatory and reputational risks.

Governance issues and conflict of interest

The report highlights significant governance failures within ITSCI, including a conflict of interest due to its funding structure. ITSCI is primarily funded by levies from exporters, which creates incentives to overlook risks in the mineral supply chain. For companies depending on this certification, there is a heightened need for scrutiny of third-party risk and reliance on compromised traceability schemes.

Legal and regulatory risk

With recommendations for stricter enforcement of due diligence laws like the US Dodd-Frank Act (Section 1502) and the EU Minerals Regulation, companies may face increasing legal scrutiny. These regulations require better oversight of conflict mineral sourcing, meaning companies linked to tainted supply chains could incur financial and regulatory penalties.

Potential shifts in market demand

The discovery of widespread smuggling and mineral laundering could shift market demand towards ethically sourced minerals. Companies offering verifiable conflict-free minerals may see increased demand, while those tied to illicit supply chains could face market downturns. Investment firms should monitor these trends closely for potential risks and opportunities.

Recommendations

Key recommendations from the report include:

• Reforming ITSCI’s governance to eliminate conflicts of interest.
• Conducting independent audits of ITSCI’s traceability systems.
• Improving coordination between governments and artisanal miners to support responsible supply chains.
• Strengthening government efforts to disarm armed groups and penalise military personnel involved in illegal mining activities.
• Stricter enforcement of due diligence laws by companies involved in the mineral trade.

These recommendations aim to improve transparency, prevent conflict minerals from entering international markets, and enhance the economic development of affected regions in DRC and Rwanda.