Tags: gold | cocaine | money | launderers

FT: Gold Is the New Cocaine for Money Launderers

FT: Gold Is the New Cocaine for Money Launderers

By    |   Sunday, 12 November 2017 01:11 PM

Gold reportedly will retain its investor allure despite a dramatic fall in demand and a nefarious new use for the precious metal.

“Miami is the leading city for gold imports to the U.S., much of which originate in Latin America. Drug dealers started using gold imports as a way of laundering their proceeds, and then about five years ago came to realize that illegal gold was intrinsically a better business,” the Financial Times reported.

“Unlike cocaine smugglers, gold importers enjoy the presumption of legality. It is not just that the gold imports were financed by people in the narcotics trade, or that they did not declare all their income back home. Much of the gold was produced by exploited workers, and the crude extraction techniques create serious and lasting environmental damage,” the FT’s John Dizard reports.

“There are technical barriers to proving the origin of gold, since it is a relatively easily refined element. Future illegal gold production can be laundered through less closely monitored countries with more understanding licensed refiners. I had assumed that some of the laundering properties of physical gold could be replaced by bitcoin and other cryptocurrencies, but I have had to revise my thinking,” he explained

“While there have been successful prosecutions of criminal transactions involving cryptocurrencies, it is actually much more difficult to exchange large amounts into conventional monetary instruments or even gold. You can always find a way to sell $100m of gold, but how do you get $100m of questionable receipts from bitcoin into a bank account or currency?  Cryptocurrencies will probably not prevail as money laundering mechanisms.”

To be sure,  global demand for gold fell 14 percent in the first half of this year due mainly to a sharp decline in purchases by exchange traded funds, the World Gold Council said in a recent report.

Central bank buying also fell slightly in the first half but purchases of bars, coins and jewelry grew thanks to strong demand in India and Turkey, the industry-funded WGC said in its latest Gold Demand Trends report.

Gold-backed ETFs saw record inflows last year to match a 30 percent rise in gold prices between January and June, Reuters reported.

But with prices rising only around 8 percent in the same period this year, funds added only 56 tonnes in the second quarter, down 76 percent from last year, bringing first half inflows to 167.9 tonnes.

“This year demand is a little more balanced,” said Alistair Hewitt, the WGC’s head of market intelligence. “While we saw huge inflows into ETFs last year, the physical markets of jewelry, bars and coins slumped to multi-year lows.”

Total global demand for gold amounted to 2,004 tonnes in January-June, down from 2,318.7 tonnes in the same period last year. For the second quarter alone, demand was 953 tonnes, the lowest quarterly total in two years.

Jewelry purchases rose 8 percent over April-June helped by a rebound in buying in India ahead of a new sales tax and in Turkey thanks to a more stable economy, but first half buying remained below 1,000 tonnes for only the fourth time since 2000.

Purchases of gold bars and coins were up 13 percent in the second quarter and 11 percent in the first half as Chinese, Indian and Turkish demand increased.

Central banks bought 94.5 tonnes of gold in the second quarter as Turkey joined Russia and Kazakhstan in expanding its reserves, but first half purchases were down 3 percent at 176.7 tonnes.

Hewitt said he expected central banks to buy 350-450 tonnes of gold over the full year and for total annual demand to be around 4,200-4,300 tonnes. That would be slightly below last year’s 4,337.5 tonnes, the highest annual level since 2013.

Meanwhile, Illegal miners in South Africa are swallowing unrefined gold and platinum in condoms as a new tactic to avoid arrest for smuggling that is costing the industry $1.5 billion a year, the police recently told parliament.

Illegal mining has plagued South Africa’s mining sector for decades, and extends from small time pilfering to global organized crime networks, Reuters reported.

The crime costs the industry and government an estimated 20 billion rand ($1.5 billion) a year in lost sales, taxes and royalties, the Chamber of Mines, an industry body, says.

“They are ingesting the amalgam concealed in condoms and this is done for two principle reasons. One is to be able to bypass mine security and the other is also to prevent being robbed by opposing groups,” Brigadier Ebrahim Kadwa, a commander in South Africa’s Hawks organized crime unit, said, showing parliament slides of gold-filled condoms in miners’ x-rays.

Potentially toxic clumps of mercury and gold concentrate can be refined to extract gold once passed through the body.

Illegal mining in South Africa involves a complex criminal web that extends from desperate unemployed workers, many from neighboring countries, to gun-toting gang bosses and front companies exporting refined products to global markets.

“The threat posed by illicit mining and related crimes continues to proliferate across the country,” Kadwa said, adding that the majority of incidents were in gold mines owned by Harmony Gold and Sibanye.

However, hundreds of incidents occurred throughout the country and targeted other minerals such as diamonds and chrome.

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Gold reportedly will retain its investor allure despite a dramatic fall in demand and a nefarious new use for the precious metal.
gold, cocaine, money, launderers
Sunday, 12 November 2017 01:11 PM
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