Colombian agency calls for compulsory reporting of gold trade

The Colombian government’s Financial Intelligence Unit (UIAF) is asking that all gold buyers, refineries, exporters and importers are legally required to report all their transactions

The Colombian government’s Financial Intelligence Unit (UIAF) is asking that all gold buyers, refineries, exporters and importers are legally required to report all their transactions.

The measure is required to assist the agency’s detection of money laundering by drug traffickers and terrorists, it said.

The request comes as senior officials warn that the surging price of gold is making trade in the metal an attractive option for large-scale money-laundering operations.

Foreign mining companies are flooding into gold-rich areas where artesan miners have mined for generations and where newer, illegal mining operations are popping up overnight.

The surge in the number of rogue mining outfits is alarming the Colombian government because armed groups, including guerilla rebel groups such as the Farc – the Revolutionary Armed Forces of Colombia – are taking control of links in gold production chains.

“At this moment, the financing behind terrorist groups is 50% mining and 50% narco-trafficking,” General Javier Fernández Leal, commander of intelligence and counter-intelligence for the armed forces’ central command, said.

FARC is both extorting a percentage of profits from miners and transporters of gold and playing a greater role in commerce involving gold, Fernández said.

“Through gold, money launderers are bringing in illicit dollars via licit means,” said a former bank official responsible for money laundering prevention, who spoke on condition of anonymity. The government estimates that $8 billion are laundered annually in Colombia.

“At any point in the business chain [for gold], you can launder money,” Juan Pablo Rodríguez, of management consultancy RICS Management and an anti-money-laundering adviser, said.

Government statistics show a puzzling picture of a country that exports more gold than it produces.

In 2006, gold exports, at just over 17 tonnes, exceeded production by 1.4 tonnes. Figures on production are unreliable because not all gold extracted from illegal mines is reported. None the less, in 2010, exports jumped to 62.8 tonnes, exceeding production by just over 9 tonnes. Imports came in at less than a tenth of a tonne.

Some official district sources have no record of any gold production. The town of Alto Baudó in the Pacific state of Chocó reported no gold production until the last trimester of 2009, according to statistics from the state mining agency. In 2010, Alto Baudó reported producing more than 800kg of gold.

Meanwhile, Colombia’s judicial customs police said its officers have been alerted to unusual gold exports from Chile that make a stopover in a refinery in Colombia.

At this point, police believe, the gold is debased for fraudulent resale. A first shipment for export is prepared by coating stones or metals with gold to give it the appearance of pure gold. Those who import it to the USA or Europe “pay as though it’s real gold, because what’s behind the payment are drugs,” Colonel Miguel Nieto, a force subdirector, said.

“It’s a carousel. They can re-sell the same tonne - three, five, ten times,” said a UIAF official. “This involves a lot, a lot of money.”

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