Al Bastakiya, Dubai, United Arab Emirates. Credit: Wikipedia
In the moon-like landscape of northern
Sudan, informal gold miners toil with spades and pickaxes to extract
their prize from shallow pits that pockmark the terrain.
Mining ore in the sweltering heat of the Nubian desert is the first
stage of an illicit network that has exploded in the past 18 months
following a pandemic-induced spike in the gold price. African
governments desperate to recoup lost revenue are looking to Dubai to
help stop the trade.
Interviews with government officials across Africa reveal smuggling
operations that span at least nine countries and involve tons of gold
spirited over borders. That’s a cause for international concern because
the funds from contraband minerals dealing in Africa fuel conflict,
finance criminal and terrorist networks, undermine democracy and
facilitate money laundering, according to the Organisation for Economic
Cooperation and Development.
While it’s impossible to say precisely how much is lost to smugglers
each year, United Nations trade data for 2020 show a discrepancy of at
least $4 billion between the United Arab Emirates’ declared gold
imports from Africa and what African countries say they exported to the
The UN and NGOs have long questioned the apparent role of one of the
Emirates — Dubai — in facilitating the trade by closing its eyes to
imports from dubious sources. The UAE strenuously denies any involvement
in illegal practices. But as global scrutiny over corporate governance
intensifies, the extent of the smuggling now under way poses
increasingly uncomfortable questions for Dubai and its reputation as a
gold trading hub.
Allegations that it’s not doing enough to stamp out questionable
flows of the precious metal have led to public slanging matches with
London, home to the world’s largest gold market, and with Switzerland,
the top refiner. Deputy U.S. Treasury Secretary Wally Adeyemo discussed
concerns about gold smuggling with Emirati officials during a visit to
Dubai and Abu Dhabi in mid-November, according to two people with direct
knowledge of the matter who asked not to be identified because they’re
not permitted to speak publicly about it.
That same week, the head of Dubai’s commodities exchange, Ahmed bin Sulayem, answered the accusations head on.
“I want to address the elephant in the room: namely, the consistent
and unsubstantiated attacks launched on Dubai by other trading centers
and institutions,” he said at a conference in the Emirates. They are, he
African governments are adding to the pressure. Besides Sudan,
authorities in Nigeria, the Democratic Republic of Congo, Zimbabwe,
Mali, Ghana, Burkina Faso, Central African Republic and Niger complain
that tons of gold leaks across their borders each year, and they allege
most of it heads to Dubai.
“It’s a huge loss,” Nigerian Mines Minister Olamilekan Adegbite said
in an interview in his office in Abuja, the capital, where glass
cabinets display rock samples that illustrate the nation’s mining
potential, so far largely untapped.
The bulk of Africa’s illegally mined gold is channeled to Dubai
through refineries in countries like Uganda and Rwanda, or is flown
there directly in hand luggage, often with false papers, according to
government and industry officials, UN experts and civil rights groups.
Once there, it can be further melted down to obscure the source before
being turned into jewelry, electronics or gold bars, they say.Play Video
“Most European countries will ask you for your certificates of export
from the country of origin,” said Adegbite. “If you do not have that,
the gold is confiscated and returned back to source.”
On paper, the UAE requires the same. “But, you see,” Adegbite added, “in Dubai they look the other way.”
The UAE’s foreign trade ministry declined to answer questions on
gold from Africa. Bin Sulayem said in an interview that a global ban on
gold hand-carried on airlines — a traditional means of smuggling — would
fix the problem. “We have a better track record than any of the major
cities,” he said. “The main complaint we’re getting is ‘you’re too
Gold smuggling is an age-old practice, but it became all the more
rewarding as the price of bullion soared to a record $2,075 an ounce in
August 2020. The illicit trade has since taken off like never before in
Africa and authorities there have made scant headway in reining it in,
an analysis of publicly available data from governments and other
Sudan’s Finance Ministry, for example, estimates that 80% of gold
production goes unregistered. Rwanda is set to ship $732 million worth
of the metal this year, more than two-and-a-half times the value of its
2019 exports, according to International Monetary Fund figures. That’s
despite Rwanda barely mining any gold of its own, prompting accusations
from the government in neighboring Congo that the precious
metal originates from its territory.
Rwanda is working to become a regional mineral processing hub, which
accounts for its increased exports, Rwanda Mines, Petroleum and Gas
Board said in a statement. It has invested in new facilities which
“source raw materials from local and regional operators in compliance
with legal and regulatory requirements,” the board said.
Reports from the UN and other sources point to 95% of production from
east and central Africa ending up in Dubai. That’s a potential problem
because much of the region is designated by the OECD as a conflict or
high-risk area, meaning companies are required to show that imported
gold is responsibly sourced. The European Union brought
in legislation this year aligning it with U.S. efforts to stem the
trade. However, enforcement is notoriously difficult.
Uganda, one of Africa’s main refiners of informal, or artisanal gold,
more than doubled its exports this financial year to some $2.25
billion, central bank statistics show. Again, the UAE was by far the top
destination, according to UN trade data. The UN has accused Uganda and
Rwanda of trading in gold smuggled from neighboring eastern Congo, a
region mired in conflict.
In an unprecedented move, the London Bullion Market Association,
which regulates the world’s biggest gold market, last year threatened to
bar its accredited refineries from sourcing metal from countries that
didn’t meet its responsible sourcing standards. While it didn’t name any
state, Bin Sulayem issued a rebuke on behalf of Dubai, accusing the
association of trying to undermine the UAE’s gold market.
The UAE signed up to LBMA’s recommendations and “has long been
cooperative with all international regulations and best practices
including anti-money laundering efforts and unethical sourcing of
gold,” minister of state for foreign trade, Thani Al Zeyoudi, said in a
statement to Bloomberg News. “The UAE is committed to embedding
the very highest international gold standards.”
More than 12 months later, the LBMA has yet to follow through on its
threat. Sakhila Mirza, its general counsel, said the association is
still assessing what the UAE has done to combat smuggling. The LMBA does
see the need for urgency, but has to act within the rules, and
“disengaging is the last step,” Mirza said in an interview.
Dubai’s long association with the gold trade is evident in its main
market in the oldest part of the city, where scores of shops with
elaborate window displays of glittering necklaces, bodices and
sunglasses line a pedestrian walkway. Trading operations are conducted
in an adjacent rabbit-warren of a building, where men run between small
offices, some with reinforced security doors.
“We welcome the world, we welcome anyone who wants to do trade”
Several traders who spoke on condition of anonymity because they
feared repercussions said they risked having their supply cut off by
Emirati refineries if they asked too many questions about where it came
from. Still, controls have been tightened to tackle money laundering,
with customers who spend more than $15,000 required to submit their
identity documents and source of funds.
During his visit last month, the U.S. Treasury’s Adeyemo noted that
stronger enforcement efforts targeting illicit finance could give the
UAE a competitive advantage in the region, according to the two people
with knowledge of the talks. The Treasury Department declined to comment
through a spokesperson for the Office of Foreign Assets Control, who
asked not to be named due to the sensitive nature of sanctions policy.
Thani Al Zeyoudi told reporters last month that Dubai will introduce a
publicly accessible system for monitoring imports and exports of gold,
and the Dubai Multi Commodities Centre’s “Good Delivery Standard,” will
be rolled out nationwide — if only on a voluntary basis. All gold
refineries in the UAE will be required to conduct audits that prove
bullion deliveries are responsibly sourced, starting in February, the
Economy Ministry said in a statement in December.
“We’re trying to be a real hub when it comes to gold trading,” Thani
Al Zeyoudi said. “So we welcome the world, we welcome anyone who wants
to do trade and we want to make sure that we adhere to the international
standards through the delivery standards.”
In October, Switzerland’s State Secretariat for Economic
Affairs instructed Swiss refineries to take steps to identify the true
country of origin for all gold emanating from the UAE, saying that was
necessary to ensure they weren’t being sent illicit supplies. Bin
Sulayem again took to LinkedIn to say the Emirates enforced the OECD’s
guidelines on sourcing minerals and accused the Swiss authorities of
Michael Bartlett-Vanderpuye, the chairman of M&C Group Global,
which mines and sources gold from Ghana that’s mainly sold to clients in
the UAE, described the clashes with London and Switzerland as “an
international gold power play” with each center protecting its turf.
“I always found it very difficult to believe that people are actually
able to bring gold to the UAE without the documentation,” he said.
“When I look at the system at the airport, I find it near to
Swiss refiner Metalor Technologies SA remains skeptical.
“We don’t think everything coming from Dubai is illegal, but we have
doubts about the legitimacy of some of the integrity of the supply
chain,” Jose Camino, Metalor’s group general counsel, said in an
interview. “We are happy to pass it by.”
Dubai’s supporters claim African customs data aren’t reliable and
even the UN can’t accurately measure illicit trade flows. Behind closed
doors, UAE officials point the finger at their counterparts in Africa
and forgers who obscure the gold’s origins by issuing documents that are
impossible to distinguish from the real thing.
That’s little comfort to the authorities in the Democratic Republic
of Congo, a vast central African country that’s struggling to rebuild
after more than two decades of conflict. It has some of the world’s
richest reserves, including Kibali in the northeast of the country
— Africa’s biggest gold mine — yet, perversely, the DRC is one of the
biggest losers of the illicit gold trade.
An army of small-scale miners operate below the government’s radar,
but data show the informal industry generated just $2.4 million in
official gold exports last year. Statistics from the UN and IMF suggest
the fruits of their labor slipped across the border instead: Uganda and
Rwanda shipped bullion worth $1.8 billion and $648 million respectively
in 2020, despite having little gold of their own.
“It’s ours,” Congolese Finance Minister Nicolas Kazadi said in an
interview at his office in the capital, Kinshasa. “It’s gold from
Under U.S. law, gold from Congo and its neighbors is considered a
“conflict mineral,” meaning companies publicly traded in the U.S. are
required to report to the Securities Exchange Commission if they might
be using gold mined in conflict areas — but there’s no sanction for
doing so. A June report by UN experts found that much of the illegal
gold trade in Congo is overseen by armed groups or soldiers, who traffic
it across the borders or fly it directly to Dubai using forged
documents to obscure its origin.
Sasha Lezhnev, policy consultant for Washington-based anti-corruption
group The Sentry, said that refiners trading in conflict gold aren’t
being held publicly accountable by the UAE. “Dubai is the linchpin for
change in the gold trade in east and central Africa,” he said.
Smuggling is also troubling the government in Nigeria, where most
minerals are extracted by at least 100,000 informal miners whose
operations are difficult to regulate and tax. Formal gold production
totaled just 1,288 kilograms last year, almost all of which went to
Dubai, according to Nigerian government data.
Efforts are being made to formalize the industry. Fatima Shinkafi is
head of the Presidential Artisanal Gold Mining Initiative, which has
registered 10,000 informal miners and is developing a supply chain
whereby their output will be sent to LBMA-certified refineries in
Europe, processed and transferred to the central bank to boost Nigeria’s
Adegbite, the mines minister, wants to work with the UAE to combat
smuggling, and says he even proposed to his government that it split the
proceeds “50-50” with the Emirati authorities of any
undeclared Nigerian gold recovered. The UAE Ministry of Economy and the
Ministry of Foreign Affairs and International Cooperation didn’t respond
to emailed requests for comment on the minister’s proposal.
In Sudan, more than 2 million small-scale miners produce some 80% of
the nation’s gold. They are paid about a quarter less for what they
extract than it would fetch on international markets and are charged a
$64 tax on each ounce of output, which encourages some to bypass
official trading channels.
Some of Sudan’s internal trade happens in a dank six-story building
in downtown Khartoum, the capital, where men melt rough nuggets into
bars and dealers can be seen exiting the premises carrying piles of cash
wrapped in cling film. Illicitly traded gold is flown to Dubai through
the porous international airport or trafficked into neighboring Egypt,
Ethiopia and Chad, according to industry experts.
Political upheaval has frustrated efforts to ensure Sudan’s people
benefit from its mineral endowment. Dictator Omar al-Bashir was toppled
in a popular uprising in 2019, then a transitional government was
overthrown in an Oct. 25 coup as the military reasserted itself.
The security forces have set up road blocks between mining areas and
Khartoum to combat smuggling. But controls remain woefully inadequate,
according to Dafalla Idriss, the deputy chair of a panel in River Nile
state set up to freeze assets plundered by the al-Bashir regime.
“There is corruption inside all government institutions,” he said. “The gold that leaves the country is getting past everyone.”
(By Simon Marks, Michael Kavanagh and Verity Ratcliffe, with
assistance from Ben Bartenstein, William Clowes, Eddie Spence, Leanne de
Bassompierre, Yinka Ibukun, Prinesha Naidoo, Daniel Flatley and Saul