Gold Smuggling Network Funding Conflicts in DRC
International regulations have failed to prevent the delivery of illegally mined gold from conflict-ridden Central African countries into the global supply chain.
Gold is being traded to facilitate illegal financial flows for individuals and firms operating in eastern Democratic Republic of Congo.
While the tin, tantalum and tungsten (3Ts) mined in eastern DRC are subjected to due diligence, which includes tracing and auditing of the supply chain from the mining site onward, gold is not covered. Some 322 mining sites of 3Ts were covered by December 2015, up from 260 in 2014.
A group of experts appointed by the United Nations Security Council to investigate illegal mining of gold in the DRC believe that the gold that finds its way into Dubai is either smuggled through Kampala and Bujumbura or is undeclared when transiting through Rwanda.
“Gold from non-validated mining sites, and therefore possibly benefiting armed groups, is laundered into the legitimate supply chain and, subsequently, into the international market,” said the group of experts in a report to the UN Security Council.
The experts said exporters based in DRC regularly buy gold without knowing its actual origin and some exporters under-declare the volumes.
Investigations focusing on gold, which provides financial support to armed groups also found that some soldiers in the government’s Armed Forces of Democratic Republic of Congo (FARDC) were involved in illegal exploitation of natural resources, especially through taxation of miners.
“Given that gold is the most lucrative of the natural resources for exploitation by armed groups and some FARDC soldiers, this is a cause for concern,” says the experts’ report.
They said a secure traceability or chain of custody system from the point of production to the point of export is urgently needed to prevent the leakage of gold that is not conflict-free into the legitimate supply chain.
According to DRC government statistics, artisanal and small-scale mines (ASMs) produced 548.43 kilogrammes of gold officially in 2015. Armed groups either control non-validated mines or levy taxes on miners.
ASM activities are widespread in Ituri, North Kivu and South Kivu Provinces as most of the sites operate without government approval. The gold is traded and exported illegally, depriving the DRC of significant tax revenue.
Exporters take advantage of weaknesses in governance in DRC to aggregate gold from multiple sites some of which are not validated, and massively under declare exports to national and provincial authorities.
The group of experts co-ordinator Gaston Gramajo said under- declaration involves falsification of official the DRC and regional documents for export of gold.
“This allows them to pay no taxes or only a fraction of what would otherwise be payable, thus generating considerable profits at the expense of the government and upstream mining communities,” he said.
Two gold brokers in Kampala told the Group that they facilitated gold sales between Butembo-based gold smugglers and consignees in Kampala.
Mr Gramajo said the group sent official letters to Uganda requesting export statistics along with measures taken to implement the Security Council’s decision to sanction Kampala-based gold trading firms.
Five dredge owners operating on Lubero River in North Kivu Province told the UN experts that members of rebel Democratic Forces for Liberation of Rwanda (FDLR) levied a monthly tax of 5 grammes of gold, valued about $205.
In South Kivu, FARDC control parts of the gold trade in Misisi area. Soldiers operating a barrier between mining and processing areas collect about $0.52 from each digger entering the mine.
The extractives sector in eastern DRC faces problem of lack of information from member states of the International Conference on Great Lakes Region who do not share import and export data to stop smuggling.
The group obtained documents showing an individual declared to Rwanda Customs authorities exports of 79kg of gold and 61kg in January and February respectively from DRC.
The report said both shipments were in transit and in November 2015, another company declared export from Democratic Republic of Congo of 270kg of gold to Rwanda.
“This is more than total volume of gold officially exported from South Kivu by all exporters in 2014 and 2015 combined. On DRC side, official government statistics show no declarations that month,” the report added.
Mining authorities in Bukavu and Uvira in DRC told the experts that gold from South Kivu continued to be smuggled to Bujumbura for export, which is consistent with the group’s findings in previous reports.
The Ministry of Mines of Burundi in March this year, informed the group that five gold exporters had been operating in the country since the beginning of 2015, exporting a total of 411 kg of gold. Two mineral traders in Bujumbura, a civil society organisation and two gold brokers in Bukavu told the group that the firm buys the commodity from traders based in the DRC.
“The same sources told the group that, contrary to former practice, Bukavu smugglers were coming less often to Bujumbura to avoid suspicion. They transfer the gold at or near the border with Burundi,” said the experts.
The group notes the large discrepancy between official gold export statistics of DRC, Burundi, and Uganda with the actual amounts that were imported into Dubai from the three countries.