When the Criminal Becomes a Precious metal and Gem Miner

Gold and other precious metals have been and continue to be an integral part of the cultural heritage of many countries in the world, with Ghana not an exception. Literally, everywhere in the Ashanti and Eastern Regions in Ghana is a potential gold mine that contributes immensely to the economy of Ghana and economies of countries. In Ghana, kings and chiefs display their royalty in fine ornaments and jewelries. The precious metal industry has attracted criminals to take their share of these metals and also use to further hide, move and/ or invest their illicit proceeds.


There is no single method of laundering money; it may involve other individuals, businesses and companies. However, one constant remains: The funds need to be washed. Precious gems are often smuggled, stolen and traded in black markets in countries around the world and then used in money laundering schemes.


Similar to the Art and Antique Industry (which I wrote an article on recently), the precious metal industry is a potentially attractive vehicle for money laundering in the world because of product’s intrinsic value, high market demand, liquidity, transferability, easy to transport and traded anonymously. The changeability of precious metals, which can be melted down, thus obliterating refinery marks, can make them virtually untraceable.


The aim of this article is to create the necessary awareness about how criminals are using the industry to launder their ill-gotten funds and the measures that can be put in place to reduce the risk exposure on businesses and the country at large. Some of the ways criminals wash these dirty funds have been elaborated below.


One way criminals use to wash their ill-gotten funds is by using the dirty money to buy gold coins/ dust, diamonds or other gems and reselling these and channeling the proceeds into the financial system as supposedly clean money. This is because the market for gold and other precious metals is cash intensive as cash-for- gold businesses are on the increase in the world and Ghana in particular. Similarly, the criminal can also invest dirty money into their mining business to expand operations. Criminals frequently trade illegal precious metals through illicit shell or front companies using false or incomplete documents.


Mention can also be made of producers of precious metals refraining from declaring the real value of their production to the authorities in order to minimize their tax exposure as another way criminals use to disguise the source of their ill-gotten funds. Some also smuggle these precious metals out of the country to avoid the payment of taxes. The proceeds of the smuggling are laundered in other forms to prevent detection.


Mining of precious metals without the requisite permits and documentation is illegal and any funds/ proceeds generated from such operations become dirty money which the criminal will find ways and means to disguise the source of the funds. This is what we call “galamsey” in the mining industry in Ghana. The galamsey operation is one of the ways criminals are using to wash the dirty money.


Because of the easy in concealing and transporting these previous metals from one country to the other without any detection, the criminals are encouraged to use the industry to further their money laundering activities. This is made easy as the criminal (who has sold illegal drugs) can use the dirty money acquired to purchase gold bars and convert them into various jewelries. The criminal then wears these jewelries and travel to another country to sell them for clean money without any questioning from the immigration officers.


Digital precious metal trading is another way criminals are using to launder their ill-gotten funds. This is the transfer of value online which enable users to secure cash deposits against precious metals held offshore. The trade is not illegal and if well regulated can generate revenues/ incomes for the country. But it is an easier way or avenue to wash the dirty money. I believe we can relate with some companies in Ghana and Africa which operate such business. But the question is, what kind of due diligence and verifications are done? Your guess is good as mine. The anonymity in this practice makes it vulnerable to activities of criminals.


In order to make the industry less attractive to criminals and help protect revenue, players and dealers in precious metals should develop and implement written Anti-Money laundering (AML) program reasonably designed to prevent the dealers from being used to facilitate the money laundering and terrorist financing activities. The program should be done throughout the value chain: from the time the precious metal is first mined, subsequently processed, sold to the customer and eventually recycled or returned to the market for resale. The AML program should be centered on the following measures:


Policies, guidelines and/ or laws need to be developed and implemented. There should be country policies and/ or laws which clearly define all the dealers in the industry so as to ensure that it encompasses a wide range of players and their respective activities. The Minerals Commission of Ghana should collaborate with the Financial Intelligence Centre (FIC) to develop Anti Money Laundering and Combating of Terrorist Financing (AML/ CFT) guideline for the industry. The guideline should at least focus on policies, procedures for the operations of companies/ dealers within the industry and the reporting lines of suspicious activity. How to handle Politically Exposed Persons (PEPs) and their transactions including other high risk customers should be addressed by the guidelines.


The introduction of Know Your Customer (KYC) principles in the precious metal industry should be put in place. The identity, date of birth and source(s) of fund of any dealer and customer should be known and verified. Customer Due Diligence (CDD) should also be carried out in order to determine the risk profile of the dealers and/ or customers with Enhanced Due Diligence (EDD) performed for any high risk countries, customer and/ or dealer identified. In addition to the KYC procedures, names of customers should be run through the sanction lists provided by OFAC, HRM, UN and EU. Transaction documents and records (either electronically or otherwise) should be kept for at least 6 years to aid in any investigations (should it occur). Also the government and industry players can introduce the blockchain technology (which creates a distributed digital ledger), where the precious metals are tracked from the mining sites through to the departmental stores where they are sold.


Training and awareness of the activities of criminals and how the industry can be vulnerable to these activities need to be conducted for all employees (including casual workers) of the company and the public at large.


Dealers (companies) in the industry should appoint key senior management personnel to be in charge of AML/CFT compliance issues. This will enable employees to report suspicious activities a senior person vest with AML/CFT issues for review before reporting to the government authorities (Financial Intelligence Centre (FIC)).


The risks in this industry are not new and remain as prevalent as ever and are likely to exist for the foreseeable future if players in the industry and the public at large do not come on board to implement the above measures to mitigate the risks.


Would you mind doing me a favor? Share this article with someone so that the awareness of money laundering and terrorist financing could be spread to avoid being use as a conduit by criminals.


If you require further information on this article, please contact Richieson @richieson.gyeniboateng@gmail.com



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