Switzerland is the biggest exporter of gold globally, followed closely by the United Arab Emirates, the United Kingdom and the United States. Switzerland imports refined and branded gold from other countries before exporting it to other nations where jewelry and other accessories are made.
The precious metal’s trade model is, however, easily infiltrated by money launderers and smugglers who use it to sell gold from suspicious sources and launder funds. This was clearly seen in the recent investigation done by Al Jazeera’s I-Unit dubbed the Gold Mafia, which aired in four parts.
The investigative unit had undercover journalists pretend to be Chinese criminals interested in laundering more than $100 million of dirty funds using gold from Zimbabwe. While gold is the biggest export of Zimbabwe, the country can’t sell the precious metal globally because of Western sanctions imposed over violations of human rights.
Ewan Macmillan and Kamlesh Pattni were two smuggling kingpins approached by the reporters who admitted to ferrying gold abroad. Both revealed that they sent their couriers with gold to Dubai, with Macmillan’s business partner Alistair Mathias advising the “criminals” to establish front companies in the U.A.E.
They explained the smuggling process, noting that once the gold reached Dubai, it was melted and rebranded as Dubai Gold. This current model makes it particularly hard for law enforcement agencies to gather evidence against smugglers. Amjad Rihan, a partner at Ernst Young, notes that the origins of refined gold are virtually untraceable, which is perfect for smugglers.
Experts also found that the process of hiding the precious metal’s origins means that Dubai gold would sometimes be exported to Switzerland or England. Mark Pieth, an anticorruption and money laundering expert, explained that gold with the Swiss Gold stamp could be easily bought by banks globally.
Currently, the United Arab Emirates exports about 23% of its gold to Switzerland.
The Aljazeera investigation also showed how South African money launderer Mohamed Khan moved millions of dollars as payments for absent imports using shell companies and fake invoices. One of the companies used, Velmont Valley, received almost $16 million in a Swiss bank account from Gold Leaf Tobacco in May 2017. Gold Leaf Tobacco is a cigarette manufacturing firm owned by Simon Rudland, a Zimbabwean millionaire. Rudland has, in the past, been accused of evading taxes by selling cigarettes on the illicit market.
Gangs involved in gold smuggling in Switzerland also use Switzerland as a safe haven.
This situation likely poses a threat to legitimate players in the gold industry such as Newmont Corporation (NYSE: NEM) (TSX: NGT) and a concrete plan needs to be designed to weed out bad actors from this industry.
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