Nearly 11 tonnes of Colombian gold exports to the US were misinvoiced between 2010 and 2018, new research suggests, prompting warnings that illicit metals trading is proving even more lucrative than cocaine to South America’s criminal gangs.
According to a study by Global Financial Integrity (GFI), a US-based think tank that tracks the illicit movement of goods and funds, there is a vast difference between the value of gold exports declared by Colombian traders and the equivalent import figures in the US.
The accumulated value gap over that eight-year period, both from over and under-invoicing gold trades, is estimated at around US$2.7bn. The value gaps for trade with India and Switzerland are also each over US$1bn.
With Colombia’s mining association estimating that 70% of gold exports derive from illegal activities, GFI reiterates warnings from US State Department officials that illicit gold trading can now provide criminal groups with higher and easier returns than trafficking cocaine.
“There are certain qualities inherent to gold that make it vulnerable to illegal extraction, trafficking and laundering,” GFI says in the report, which was co-authored with Colombia’s Alliance for Responsible Mining and Bogotá-based think tank Cedetrabajo.
“Not only tremendously valuable, it is also portable and largely untraceable. Unlike narcotics, gold is not inherently illegal, and differentiating between legally and illegally sourced gold can be difficult.”
With gold also easier to move across international borders than cash, the report says it is proving an attractive option “for Colombian criminal groups looking to maximise financial gains, shift profits from one jurisdiction to another, and minimise the risks of being caught”.
Not only is illegal or informal mining problematic in terms of contributing to deforestation, but it is also plagued by interference from organised criminals. In 2013 more than half of Colombia’s illegal mining activity was believed to be taking place in areas controlled by neo-paramilitary criminal groups, GFI says.
As well as their role in selling gold extracted illicitly, these groups often extort local artisanal operators and own heavy machinery being used. The report estimates criminal groups earn around US$2.4bn a year from illegal gold mining.
Though most illegally mined gold departs Colombia through smuggling, for example by small aircraft, boat, or carried on the person of an international traveller, the report says official trade channels are used in around a fifth of cases.
This typically involves large exporting firms setting up dozens of fake companies, registered with different chambers of commerce across Colombia, GFI says. It points out that the country’s authorities have levelled charges against several large firms for facilitating fraudulent exports.
For example, in a 2019 case against gold trader CIJ Gutiérrez, the Colombian Attorney General’s Office alleged that as much as US$650mn was laundered through a network of fictitious companies.
In Colombia, gold mining directly accounts for around 2% of GDP and 1.5% of employment nationally. However, its complexity as an industry has made it vulnerable to criminal activity and created barriers to becoming more formalised.
The country’s mining sector is populated by large numbers of smaller, artisanal operations, and so for buyers, it can be difficult to trace whether gold originates from legal or illegal sources.
The Alliance for Responsible Mining explains that there is a distinction between illegal mining, where extraction is not permitted at all by the relevant authorities, and criminal mining, which is used to finance criminal activity directly.
There are also informal producers, it says, which operate within the law but may not meet requirements around sustainability or safety.
Currently, informal miners are often forced to sell gold below market value – with local intermediaries, or compraventas, paying “barely 40% of the international standard” – in environments susceptible to asset laundering.