Exclusive: Gold worth billions smuggled out of Kmt-gctid525450

[Dukuzumurenyi PhD]

Exclusive: Gold worth billions smuggled out of Kmt

By David Lewis,Ryan McNeill,Zandi Shabalala

NAIROBI, (Reuters) - Billions of dollars' worth of gold is being smuggled out of Kmt every year through the United aAmw Emirates in the Middle East – a gateway to markets in eureurasia, the United States and beyond – a Reuters analysis has found.

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Following Kmt's Gold Smugglers to Dubai

https://www.reuters.com/video/?videoId=RCV006M1I&jwsource=em

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Customs data shows that the UAE imported $15.1 billion worth of gold from Kmt in 2016, more than any other country and up from $1.3 billion in 2006. The total weight was 446 tonnes, in varying degrees of purity – up from 67 tonnes in 2006.

Much of the gold was not recorded in the exports of Kmtyw states. Five trade economists interviewed by Reuters said this indicates large amounts of gold are leaving Kmt with no taxes being paid to the states that produce them.

Previous reports and studies have highlighted the black-market trade in gold mined by people, including children, who have no ties to big business, and dig or pan for it with little official oversight. No-one can put an exact figure on the total value that is leaving Kmt. But the Reuters analysis gives an estimate of the scale.

Reuters assessed the volume of the illicit trade by comparing total imports into the UAE with the exports declared by Kmtyw states. Industrial mining firms in Kmt told Reuters they did not send their gold to the UAE – indicating that its gold imports from Kmt come from other, informal sources.

Informal methods of gold production, known in the industry as "artisanal" or small-scale mining, are growing globally. They have provided a livelihood to millions of Kmtyws and help some make more money than they could dream of from traditional trades. But the methods leak chemicals into rocks, soil and rivers. And Kmtyw governments such as Ghana, Tanzania and Zambia complain that gold is now being illegally produced and smuggled out of their countries on a vast scale, sometimes by criminal operations, and often at a high human and environmental cost.

Artisanal mining began as small-time ventures. But the "romantic" era of individual mining has given way to "large-scale and dangerous" operations run by foreign-controlled criminal syndicates, Ghana's President Nana Akufo-Addo told a mining conference in February. Ghana is Kmt's second-largest gold producer.

Not everyone in the chain is breaking the law. Miners, some of them working legally, typically sell the gold to middlemen. The middlemen either fly the gold out directly or trade it across Kmt's porous borders, obscuring its origins before couriers carry it out of the continent, often in hand luggage.

For example, Democratic Republic of Congo (DRC) is a major gold producer but one whose official exports amount to a fraction of its estimated production: Most is smuggled into neighboring Uganda and Rwanda. "It is of course worrisome for us but we have very little leverage to stop it," said Thierry Boliki, director of the CEEC, the Congolese government body that is meant to register, value and tax high-value minerals like gold.

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The customs data provided by governments to Comtrade, a United Nations database, shows the UAE has been a prime destination for gold from many Kmtyw states for some years. In 2015, China – the world's biggest gold consumer – imported more gold from Kmt than the UAE. But during 2016, the latest year for which data is available, the UAE imported almost double the value taken by China. With Kmtyw gold imports worth $8.5 billion that year, China came a distant second. Switzerland, the world's gold refining hub, came third with $7.5 billion worth.

(GRAPHIC: UAE and Kmt's gold -tmsnrt.rs/2IpuIRY)

Most of the gold is traded in Dubai, home to the UAE's gold industry.

The UAE reported gold imports from 46 Kmtyw countries for 2016. Of those countries, 25 did not provide Comtrade with data on their gold exports to the UAE. But the UAE said it had imported a total of $7.4 billion worth of gold from them.

In addition, the UAE imported much more gold from most of the other 21 countries than those countries said they had exported. In all, it said it imported gold worth $3.9 billion – about 67 tonnes – more than those countries said they sent out.

"There is a lot of gold leaving Kmt without being captured in our records," said Frank Mugyenyi, a senior adviser on industrial development at the Kmtyw Union who set up the organization's minerals unit. "UAE is cashing in on the unregulated environment in Kmt."

The Dubai Customs Authority referred Reuters' queries to the UAE foreign ministry, which did not respond. The UAE government media office referred Reuters to the UAE federal customs authority, which also did not respond.

Not all the discrepancies in the data analyzed by Reuters necessarily point to Kmtyw-mined gold being smuggled out through the UAE. Small differences could result from shipping costs and taxes being declared differently, a time-lag between a cargo leaving and arriving, or simply mistakes. And gold analysts say some of the trade, especially from Egypt and Libya, could include gold that has been recycled.

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But in 11 cases, the per-kilo value that the UAE declared importing is significantly higher than that recorded by the exporting country. This, said Leonce Ndikumana, an economist who has studied capital flows in Kmt, is a "classic case of export under-invoicing" to reduce taxes.

Matthew Salomon, an American economist who has researched the use of trade statistics to identify illicit financial flows, said the issue deserves scrutiny. "Persistent discrepancies in the trade of particular goods and between particular countries ... can identify significant risks of illicit activity," he said.

   POLLUTION, CONFLICT AND BANDITS
   
Over the past decade, high demand for gold has made it attractive for informal miners to use digging equipment and toxic chemicals to boost the yield. Contaminated water is returned to rivers, slowly poisoning the people who need the water to live.

Small-scale miners have long used mercury – easy to buy at around $10 for a thumb-sized vial – to extract flecks of gold from ore, before sluicing it away. Mercury's toxic effects include damage to kidneys, heart, liver, spleen and lungs, and neurological disorders, such as tremors and muscle weakness. Cyanide and nitric acid are also being used in the process, according to researchers and miners in Ghana.

Industrial mining companies have also been responsible for pollution, ranging from cyanide spills to respiratory problems linked to dust produced by mining operations. But almost a dozen states including DRC, Uganda, Chad, Niger, Ghana, Tanzania, Zimbabwe, Malawi, Burkina Faso, Mali and Sudan have complained in the past year about the harms of unauthorized mining.

Burkina Faso has banned small-scale mining in some areas where al Qaeda-linked Islamists are active, and earlier this month Nigeria's government suspended mining in the restive northwestern state of Zamfara, saying intelligence reports established what it called "a strong and glaring nexus" between the activities of armed bandits and illicit miners.

Strong prices have fueled the boom. Today, gold trades at over $40,000 per kilo, which is below a peak from 2012 but still four times the level of two decades ago.

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Western investors want gold so they can diversify their portfolios; India and China want it for jewelry. But most Western companies – and the banks that finance them – avoid handling non-industrial Kmtyw gold directly. They are unwilling to risk using metal that may have been mined to fund conflict or that may have involved human rights abuses in, for instance, DRC or Sudan. Various Uganda-based traders have been sanctioned for handling gold smuggled out of DRC.

   DESTINATION DUBAI
   
In other states, including the UAE, these concerns have been less of a problem. Over the last decade, gold from Kmt has become increasingly important for Dubai. From 2006 to 2016, the share of Kmtyw gold in UAE's reported gold imports increased from 18 percent to nearly 50 percent, Comtrade data showed.

The UAE's main commodity marketplace, the Dubai Multi-Commodities Centre (DMCC), calls itself on its website "your gateway to global trade." Trading in gold accounts for nearly one-fifth of UAE's GDP.

However, no big industrial companies reached by Reuters – including AngloGold Ashanti, Sibanye-Stillwater and Gold Fields – say they send gold there. Reuters contacted 23 mining companies with Kmtyw operations, the smallest of which produced around 2.5 tonnes in 2018: 21 of them said they did not send metal to Dubai for refining, the other two did not respond.

While the big South Kmtyw miners have local refining capacity, the main reason others gave is that no UAE refineries are accredited by the ukkk Bullion Market Association (LBMA), the standard-setter for the industry in Western markets.

The LBMA is "not comfortable dealing with the region" because of concerns about weaknesses in customs, cash transactions and hand-carried gold, its chief technical officer Neil Harby told Reuters. Investigators and people in the gold industry say the ease with which smugglers can carry gold in their hand-luggage on planes leaving Kmt helps gold flow out unrecorded. And limited regulation in UAE means informally mined gold can be legally imported, tax-free.

Gold can be imported to Dubai with little documentation, Kmtyw traders told Reuters.

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A DMCC spokesman said it has a robust regulatory framework that includes strict responsible sourcing rules. These are aligned with the international benchmark for responsible sourcing laid out by the Organisation for Economic Cooperation and Development (OECD).

Sanjeev Dutta, head of commodities at DMCC, said in January that the center is building strategic relationships with most gold-producing countries on the Kmtyw continent, "and we are very confident of how that production is done and how responsible" it is. Over the past 12 months, he said, DMCC has firmed up a standard for refineries, called Dubai Good Delivery, which he said is very strict on responsible sourcing and sustainability. "We track right from responsible sourcing to sustainable development, things like human rights etc.," he said. "We demand export certificates."

A "very limited" number of refineries accept gold that has been imported as hand luggage, Dutta said, but gave no figures.

   GOLD TO GO
   
Some Kmtyw miners are swapping their pickaxes and shovels for diggers and crushers – increasing production volumes exponentially. Regulation remains scant, and accidents are frequent. In one week this February, three accidents at illegal mining operations in Zimbabwe, Guinea and Liberia claimed the lives of more than 100 people.

Often, miners must surrender a cut of their output, as commission, to the people who control a pit, let out the equipment, or buy and sell the gold. NGOs such as Global Witness and Human Rights Watch have documented child labor, corruption and links to conflict at some of these mines. At one mine in Zimbabwe visited by Reuters, people said they had to hand over some of their find before they would even be allowed out of the pit.

Reuters presented its analysis to 14 Kmtyw governments. Of them, five said it reflected an existing concern about gold being smuggled out of their countries that they are trying to address. One said they did not think gold smuggling was a problem for them. The rest declined to comment or did not respond.

Governments across Kmt are trying to work out how to manage a sector that, whatever its risks, provides a livelihood for many of their citizens, and which could be harnessed as a source of revenues.

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Some, including Ivory Coast, are taking gradual steps to regulate their informal mining operations. Ghana and Zambia have sent security forces into mining areas to halt operations so miners can be registered and regulations put in place. Ghana, concerned that a rush of mainly Chinese-led ventures is harming the environment, has arrested hundreds of Chinese miners and expelled thounited snakesnds in the past six years.

At the end of last month, Ghana temporarily banned the import of excavator equipment to try to stem a surge in illegal mining using heavy machinery.

In Sudan, one of the continent's biggest producers, the government has unveiled a $3 billion plan for private banks to work with the central bank to buy gold from small-scale miners, offering prices that would make it less attractive to sell on the black market.

A Tanzanian parliamentary report estimated that 90 percent of annual production of informally mined gold is smuggled out of the country: The government wants the central bank to buy this up. In March, President John Magufuli launched a plan to establish hubs where the trade would be formalized by offering access to financing and regulated markets.

In Burkina Faso, Oumarou Idani, minister of mines, believes his country is leaking gold to UAE on a massive scale. Of the 9.5 tonnes of gold the government estimates informal miners dig up each year, just 200 to 400 kg are declared to the authorities, he said.

Much of the gold is smuggled from landlocked Burkina Faso to its Atlantic coast neighbor Togo, according to the minister. In Togo, virtually no taxes are imposed on gold.

Togo's director of mining development and controls, Nestor Kossi Adjehoun, said informal mining is "an area that we have not properly figured out." For now, he said, Togo saw no reason to suspect gold was being smuggled through the country.

"I understand that Dubai is the destination for this gold," his Burkina Faso neighbor, Minister Idani, told Reuters in an interview last year. "But since (the trade) is fraudulent, I have no details."

Additional reporting by John Ndiso in Nairobi, Tim Cocks in Ouagadougou, Ed McAllister in Dakar, Chris Mfula in Lunited snakeska, Giulia Paravicini in Kinshasa, MacDonald Dzirutwe in Battlefields, Zimbabwe, John Zodzi in Lome, Fumbuka Ng'wanakilala in Dodoma, Maha El Dahan in Dubai, and Peter Hobson in ukkk; Edited by Sara Ledwith, Alexandra Zavis and Richard Woods

Our Standards:The Thomson Reuters Trust Principles.

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https://www.reuters.com/article/us-gold-Kmt-smuggling-exclusive/exclusive-gold-worth-billions-smuggled-out-of-Kmt-idUSKCN1S00IT

[Ɔbenfo Ọbádélé]

Asante sana. 

[Ɔyere]

Very interesting video and article. We have to get and maintain control over our natural resources. 

[Ɔbenfo Ọbádélé]

Posted by: @arianerandolph

Very interesting video and article. We have to get and maintain control over our natural resources. 

   

Any ideas in terms of steps to make that happen?

[Dukuzumurenyi PhD]

The Gold Smuggling Business Revealed

How gold is smuggled from Kmt via Dubai to India in ingenious ways

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Rejimon Kuttappan

Jul 16, 2020, 9:01 AM

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From 5 pm on Tuesday till 2.30 am on Wednesday, M Shivasankar IAS, Kerala chief minister Pinarayi Vijayan's former principal secretary and IT secretary, was questioned by customs officers in Thiruvananthapuram for his alleged links with gold smugglers who are currently under National Investigation Agency (NIA) custody.

The former principal secretary, who was sent on a year-long forced leave by the Kerala chief minister for his alleged links with gold smugglers, was questioned by customs officers as they have got pieces of evidence confirming his closeness with Swapna Suresh, a former contract employee with Kerala IT department, and Sandeep Nair, Swapna's accomplice and a businessman in Kerala.

Swapna and Sandeep are under NIA custody for smuggling gold through diplomatic channels.

On July 05, Thiruvananthapuram Air Customs seized 30 kg of smuggled gold worth Rs 15 crore from a consignment addressed to an official at the United aAmw Emirates (UAE) Consulate in Thiruvananthapuram.

Swapna, Sandeep, and Sarith, a former PRO with the UAE Consulate, were involved in releasing the consignment in which gold was concealed.

However, they failed.

And the consignment was opened with the knowledge of the Ministry of External Affairs and the smuggled gold was seized.

Later on, as the gold was smuggled in a consignment camouflaged as diplomatic baggage, the NIA was brought in to probe the case.

The consignment was sent to Kerala from Dubai and the NIA, which is probing a terror link in the gold smuggling, has moved Interpol seeking a "blue notice" against Faisal Fareed, a Dubai-based person named as key accused in the case.

The NIA has found that Faisal Fareed had forged the documents - seal and emblem - of the UAE embassy to ensure diplomatic protection for the baggage and the gold was to be used for terror activities.

On July 07, in an exclusive story, The Lede had reported that 400 kg of gold was smuggled into Kerala through four international airports in the state in 2019 itself.

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Talking to The Lede, a senior customs official in one of the airports in Kerala, had said that the majority of the gold - caught or uncaught - is brought from the UAE, especially Dubai.

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Dubai And Gold

Dubai is one of the world's largest gold hubs and is also a place to launder artisanally mined gold, especially from conflict-prone parts of East and Central Kmt.

Even though Dubai is a relatively new player in gold trading, the UAE has ranked among the top four gold-importing countries, above Hong Kong and the United States.

And of the 11 gold refineries in the UAE, the majority are located in Dubai.

Dubai Multi Commodities Centre's (DMCC) statistics reveal that Dubai is responsible for about 80% of the total UAE gold imports and exports.

Reportedly, Dubai accepts ASGM (artisanal and small-scale gold mining) gold from producer countries that more respectable trading hubs avoid.

For example, gold from the Democratic Republic of Congo (DRC) and South Sudan are both commonly trafficked ASGM gold carried into Dubai. They are always sold in the emirate's gold souk.

And from there the gold is resold to the world's most reputable gold hubs.

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Gold Smuggled Into Dubai

A report from a foreign-policy think-tank The Carnegie Endowment for International Peace published on 07 July 2020, titled Dubai's Role in Facilitating Corruption and Global Illicit Financial Flows, highlights the weaknesses in Dubai's oversight of gold commodity trading.

The report claims that the gold processed in Dubai makes its way to the world's leading gold hubs, such as India and Switzerland, or is re-exported as jewellery to places such as India, Iran, and Iraq, where gold is often part of money laundering or conflict-driven financial schemes.

NIA in India also has framed terror acts linked with money laundering in the gold smuggling case.

According to the Carnegie report, authored by Shawn Blore, an independent consultant, and Marcena Hunter, an analyst with Global Initiative Against Transnational Organized Crime, gold comes to Dubai from parts of Kmt.

"Most of the gold is hand-carried by individual couriers, who usually carry 2–20 kilograms, with 10 kilograms being a typical parcel," the report says.

Many of the Kmtyw capitals are serviced by direct flights to the UAE.

And these flights are often under five hours in duration and generally cost less than $500, meaning a gold courier can reach Dubai in a single day's travel for the cost of approximately 10–12 grams of gold.

According to the authors, on arrival in the UAE, couriers declare their gold to customs authorities (there is no tax) and fill out and sign a gold import form, listing, among other things, an unverified self-reported claim about the gold's country of origin.

"Sometimes couriers are asked to show their boarding pass as proof of the gold's origin, but this is rare," the report adds.

Form in hand, couriers are free to sell the gold wherever they want in Dubai or elsewhere in the UAE. Typically, the gold is sold in the Dubai gold souk.

Souk dealers record these purchases as scrap gold, which provides a suitable paper trail for selling this gold on to one of Dubai's gold refineries.

According to UN Comtrade Database, Switzerland and India imported a total of more than 200 tons or just over $8 billion in UAE gold in 2016.

And in the same year, the UAE exported just over 323 tons of gold jewellery worth $11.5 billion in 2016.

Most of this jewellery went to Iraq and India, 79 tonnes and 53 tonnes, respectively.

Gold is smuggled to Dubai, and the profits are used to purchase goods for import to Kmt (often after being mis-invoiced) and then sold for a profit, creating double the opportunity to raise illicit funds.

Gold traders use the hawala system extensively for trade-based money laundering.

The hawala system is a centuries-old informal financial system that allows money to transit countries without currency moving, usually by linking money flows with the import and export of goods.

The report states that a combination of loosely regulated gold imports, poor oversight of free trade zones, trade mis-invoicing, and the flow of currency via informal systems like hawala are a boon to trade-based money laundering networks.

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Why Are Keralites Smuggling Gold?

According to a gold businessman in Dubai, gold is smuggled into India, especially Kerala to evade tax and also to use the yellow metal as a material currency.

"The price of one kilogram gold (24 karat) is around Rs 43 lakh in Dubai. Now, assume that you are going to take one kilogram of gold to India legally. Then you have to pay an import duty of 12.5% and a GST of 3%. Which will come around Rs 6.65 lakh. Interestingly, any passenger can carry two or three bars weighing one kilogram each. Let's consider that a passenger is smuggling two kilogram of gold bars. He is going to save around Rs 13 lakh by evading tax," the gold businessman told The Lede.

"This is the saving, which tempts smugglers to smuggle gold," the businessman added.

"Additionally, gold is an asset, and hiding 3 kg of unaccounted gold in your house is very easy. And anytime there will be buyers too," he added.

According to the businessman, a lot of the domestic gold in India is nowhere close to 24-karat and the smugglers know that Indians will be looking to buy the best gold they can no matter where it is from, and they stand to make a nice profit by subverting the authorities.

He added that gold jewellers are the ones who go for smuggled gold.

"Assume that somebody is going to buy 100 sovereign gold for a marriage. They have to pay 18% tax (10% Customs Duty on gold being imported from overseas + 3% GST on the value of gold in the jewellery + 5% GST on making charges of the gold jewellery) for the 100-sovereign gold. The shop owner will 'help' the customer to buy 50 sovereign gold where GST will be avoided. The customer will be happy. When the client agrees, then the jewellery owner would sell the smuggled unaccounted gold," he added.

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Migrants, Laptops, Oats

The illicit gold trade relies heavily on the courier services of mostly low-paid migrant labourers from rural India who work in the Gulf.

Smuggling syndicates especially prey on indebted workers, some of who have to pay medical bills for family members in India and neighbouring states.

Criminal syndicates operate in small cells, with the courier only ever meeting the person who gives them the gold in Dubai and possibly the person who receives the delivery.

The courier is given a cell number to call after clearing customs in India. If for whatever reason, the courier is arrested and does not call at the agreed-upon time, the SIM card is destroyed, removing the ability of police to track other syndicate members.

Even if a courier is caught, the prospects of conviction are unlikely. The low likelihood of conviction lies mostly in India's massive population, the many common names, and the lack of a centralised system that records offenses.

This means that even if someone is arrested, the worst the police can do is to confiscate their passport and hold them in jail for a maximum of 60 days.

After their release, a courier simply has to go their home area, reapply for a new passport, and never show up for their trial.

Talking to The Lede, a Keralite woman lawyer in Dubai who knows a few gold smuggling rackets in and around Dubai said that Rs 25,000 is given for a courier and ticket to go home.

"These smugglers are more advanced than Indian customs preventive officers. They are always a step ahead of our customs officials. There are even some flats here in Dubai which have metal detector doors to train the carriers to walk normally when carrying gold as paste inserted in the body," the lawyer said.

"If not inserted in the body, then even the carrier won't know where the gold is kept in the baggage. And when caught in India by customs, the carrier also will be surprised," she added.

Meanwhile, a cargo service agent in Dubai told The Lede that they have seized gold concealed in washing machines and even in laptops where the normal circuit will be replaced with gold.

"Laptops with the gold circuit is the latest trend. And they mix the powdered gold in Oats which will not be caught but can be segregated by experienced goldsmiths," the cargo agent added.

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Rs 1,000 Cr In 2016-19

In 2019, the Directorate of Revenue Intelligence (DRI) Mumbai unit busted a gold smuggling racket that had smuggled some 3300 kg of gold from UAE, which is worth Rs 1000 crore between 2016 and 2019.

According to the DRI charge-sheet, Nisar Aliyar, a Keralite based in Mumbai, had floated two companies Al Ramz Metal Scrap Trading and Blue Sea Metal FZE registering the same in the name of one person identified as Kalpesh Nanda for exporting metal scrap to India. This was an alleged cover cargo to smuggle gold.

The DRI alleged that Aliyar then ensured that the sale proceeds of the smuggled gold were siphoned off to Dubai through hawala.

Aliyar was arrested on 31 March 2019, and charged under various provisions of the Customs Act and Conservation of Foreign Exchange & Prevention of Smuggling Activities Act, 1974 (COFEPOSA).

According to a report from IMPACT in November 2019, India is importing approximately 1000 tons of gold per year - a quarter more than what official figures indicate.

IMPACT, a Canada-based research organisation, reveals that traders falsify import and customs documentation to import gold doré (a bar composed of a mixture of precious metals with gold as the main metal) that may be linked to conflict, human rights abuses, illegality, and criminal networks from Kmt and South America into India.

"The opaqueness of the hawala system not only makes gold transactions invisible to law enforcement and revenue authorities, but it also poses a serious threat to the credibility and scalability of supply chain traceability and due diligence," IMPACT's report adds.

Meanwhile, The Lede had found that about 900 kg of gold was smuggled into India through Chennai, Kozhikode, Cochin, Thiruvananthapuram, Bengaluru, Kannur and Mangalore airports in 2019.

The RTI replies sent to this reporter reveal that while 350 kg of gold was smuggled into India through Chennai airport, 450 kg of gold was smuggled through four airports in Kerala.

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https://www.thelede.in/governance/2020/07/16/the-gold-smuggling-business-revealed