What draws the gold mafia to ‘Dubai, Dubai, Dubai’?
‘Merchanting’: The code word for the gold mafia’s plunder
Swiss gold or smuggled Zimbabwean gold? No one knows
A complex gold smuggling and trading system means there is no clean gold, an Al Jazeera investigation shows. Here’s why.
6 Apr 2023
To many people around the world, Switzerland is synonymous with the Alps, fine chocolates and designer watches.
To those in the bling business, the European nation has another identity: it is the world’s largest exporter of gold. In 2021, Switzerland sold nearly $87bn of the precious metal, almost as much as the next three biggest exporters – the United Arab Emirates (UAE), the United Kingdom and the United States – combined.
Switzerland imports almost all of that gold from other nations, refined and branded, and then exports it around the world where jewellery and other accessories made from the precious metal adorn the necks, arms and ankles of millions of people.
And it’s the same with the UAE and the UK. The top three gold exporters do not figure in the world’s top gold producers. They do not mine much, if any, of the metal. Yet they are the biggest hubs of the industry.
That trade model is at the heart of a mechanism smugglers and money launderers use to wash dirty cash and sell gold from dubious sources, Gold Mafia, a four-part investigation by Al Jazeera’s Investigative Unit (I-Unit), reveals.
Undercover reporters infiltrated some of Southern Africa’s biggest gold-smuggling and money-laundering gangs. The investigation showcases how it is next to impossible to determine the true origins of gold bought by regular customers, whether in New York and London or New Delhi and Karachi.
That quality is precisely what makes the metal a priceless asset for criminals.
The ‘Swiss gold’ stamp
Al Jazeera’s undercover reporters, pretending to be Chinese criminals, were offered a range of options to launder more than $100m of dirty cash by multiple smuggling gangs using Zimbabwean gold.
The precious metal is Zimbabwe’s biggest export but the taint of Western sanctions against government officials over human rights violations makes it difficult for the country to sell gold internationally.
Enter the smugglers, who ferry Zimbabwean gold abroad, and return with the unaccounted wealth of launderers – ostensibly the proceeds from the sale of the gold. In reality, the earnings from the sale of the gold are wired to the bank accounts of the launderers, who now have seemingly legitimate money.
Kamlesh Pattni and Ewan Macmillan, who run two major rival gold-smuggling gangs out of Zimbabwe, both made clear to Al Jazeera reporters that they – and others in their field – had one preferred destination for the gold their couriers carry out of the Southern African nation: Dubai.
“It all comes out of Dubai. It’s all Dubai, Dubai, Dubai, Dubai,” Macmillan said.
Pattni and Alistair Mathias, Macmillan’s business partner, independently advised Al Jazeera reporters to set up front companies in Dubai. Once the gold from Zimbabwe arrives in the Emirati city, they said, it is melted in refineries there and rebranded as Dubai gold. Dubai is the UAE’s gold hub.
But the process of hiding the origins of the gold does not always end there, said experts. In recent years, the United Nations and other global bodies and nonprofits have raised questions about the due diligence practices employed in Dubai’s gold industry. So another layer of disguise around the original source of the gold helps.
“The Dubai gold would for instance be exported either to London or to Switzerland because you want the stamp ‘Swiss Gold’ on it,” anti-corruption and money laundering expert Mark Pieth told Al Jazeera. “Then, of course, every bank in the world will buy it.” Pieth is a former president of the Basel Institute on Governance.
The UAE exports the biggest chunk – 23 percent – of its gold to Switzerland, where smugglers like Mathias also have companies.
‘Practically brand new gold’
As a partner at global accounting firm Ernst & Young 10 years ago, Amjad Rihan was responsible for auditing Dubai-based Kaloti – at the time one of the largest gold refineries in the world.
He found that some of that gold had come from Darfur, which has witnessed the worst horrors of Sudan’s civil war. “That’s the very gold we were auditing,” Rihan told Al Jazeera.
Rihan subsequently won a court case in the UK against Ernst & Young, which judges ruled had forced him out of the company because it did not want to address the red flags he raised about Kaloti.
In 2015, the Dubai Multi Commodities Centre (DMCC), the city’s main licensing authority for commodities trade, acted against Kaloti, removing the company from Dubai’s list of approved gold refiners.
In 2020, UN experts reported that gold from another conflict zone, the Democratic Republic of the Congo (DRC), also ended up in the UAE. In Dubai, the refining process removes traces of its origins, making it more attractive to other gold hubs around the world.
“Gold that comes to refiners, once it’s refined, it’s practically brand new gold,” Rihan said.
That makes the origins of the gold untraceable and perfect for criminals wanting to hide the source of their wealth. A 2020 report by Global Witness showed that the world’s largest gold refinery, Switzerland’s Valcambi, had previously bought gold from Kaloti that almost certainly originated in Sudan.
Al Jazeera’s investigation showed how smuggling gangs help criminals turn dirty cash into seemingly legitimate money by selling Zimbabwean gold. But sometimes, said experts, gold is also valuable in itself, in what Pattni described as an “investment”.
“[The value of] gold may go up and down, but it’s always at the top of our list of items that we want and that goes back as far as we can find records,” former US Federal Bureau of Investigation (FBI) investigator and anti-corruption expert Karen Greenaway explained to Al Jazeera.
Meanwhile, gold-smuggling gangs also use Switzerland as a safe haven for their ill-gotten wealth, the investigation showed.
Zimbabwean millionaire Simon Rudland owns one of Southern Africa’s biggest cigarette companies, Gold Leaf Tobacco. South African authorities have accused him of skirting taxes by selling cigarettes on the black market. Rudland also smuggles Zimbabwean gold to Dubai through a team of couriers.
Al Jazeera’s investigation revealed how Mohamed Khan, a South African money launderer, funnels millions of dollars of Rudland’s money abroad as payments for nonexistent imports using fake invoices and shell companies run by Rudland’s business partners.
Among those front companies is Velmont Valley, which received nearly $16m in a Swiss bank account from Gold Leaf Tobacco in May 2017, according to documents accessed by Al Jazeera.
Why this matters
Because gold gets refined over and over again and moves all around the world, it is hard to be certain if gold bought on the open market is ethically and legally clean, said experts – and that its money trail is free of laundering and crime.
A watch might have been made with pieces of gold from a conflict region, or a bar of gold was melted with parts of smuggled gold.
The never-ending loop of melting, selling, buying and melting again obfuscates any trace of the gold’s origin, making it particularly difficult for law enforcement agencies to build evidence against suspected smugglers.
Nonprofits, such as Global Witness and Corruption Watch, and organisations, such as the International Monetary Fund (PDF) and the OECD, have called for increased scrutiny of gold, like the Kimberley Process for the diamond industry. The Kimberley Process has tried to prevent the sale of blood diamonds, plundered from conflict zones. But so far, there is no similar regulation in the gold industry.
“When you talk about gold, some people actually think that ‘oh, this doesn’t affect us, this is just for the rich people or for a small segment of society that care about gold’,” Rihan, the former Ernst & Young partner said. “But the reality is, gold enters our lives and we interact with gold all the time, pretty much on a daily basis, because even the phones and the laptops that we use, they use gold.” Many everyday electronic devices use small quantities of gold in their circuit boards.
“We all have a responsibility to ensure that we receive clean gold and we also have the right as people to know that the gold we use is clean.”
DMCC, the Dubai commodities licensing authority, told Al Jazeera that it is not a regulator but provides companies with the necessary licenses to operate within the Dubai Free Zone using a “clear, comprehensive and robust compliance process”. It also emphasised that it was not given an opportunity to provide evidence or make representations during the court action in London between Amjad Rihan and Ernst & Young. It denied allegations made against it in those proceedings, and strenuously denied being involved in money laundering or criminal activity of any kind.
Kamlesh Pattni denied involvement in any form of money or gold laundering and told us that his activities in the UAE were entirely lawful. Alistair Mathias said that he had never laundered money or gold or traded illegal gold and that he had never had any working relationship with Ewan Macmillan, who did not respond to Al Jazeera’s request for comment.
Simon Rudland said that the allegations against him formed part of a smear campaign by an unidentified third party. He denied any involvement in the sale of illicit cigarettes, in gold or other smuggling and in sanctions busting. He accepted that he had had dealings with Mohamed Khan, who he agreed “appeared” to be a money launderer, but he denied that any form of money laundering had been undertaken for him.
Gold Leaf Tobacco denied any involvement in money laundering or the trade in illegal gold. It said no “untaxed” or “illegal” cigarettes could be “attributed” to Gold Leaf. It said Gold Leaf’s limited transactions with Mohamed Khan had always been lawful and proper – though it accepted that Khan was a money launderer.
Mohamed Khan told us that all allegations against him were false and were based on speculation, conjecture and manufactured and doctored evidence. He confirmed that Gold Leaf was a client of his businesses but he denied having any involvement in money laundering or other criminal activity.
Ernst & Young said that it was the work of its staff that identified and reported irregularities, resulting in sanctions and changes to the sourcing of precious metals and the regulation of refiners in Dubai.
Kaloti denied all wrongdoing, including in relation to those matters that arose in the course of the Ernst & Young audit.
Other entities mentioned in this article did not respond to Al Jazeera’s request for comment.