Gold Smuggling – Stricter Regulation, Technology Solutions, and LBMA-Certified Refinery
I recently came across an insightful article on The Africa Report discussing Ghana’s pressing issue of being tagged as a gold smuggling hub. The booming illegal small-scale mining trade poses significant threats to national security and fuels illicit flows of funds, endangering global peace and security.
According to ‘The State of the Illicit Economy’ report presented at the AfCFTA Business Forum, the annual exports from Africa’s extractive industries contribute to a staggering $31 billion to $98 billion in illicit gold smuggling flows. This dirty money serves as a lifeline for malevolent actors, ranging from armed groups to terrorist organizations and even rogue states, posing serious threats to peace and security worldwide. The root causes identified in the report include political interference, conflicts, and lax border controls.
To tackle gold smuggling they claim, Ghana must take immediate action by implementing stricter regulations, leveraging technology solutions, and collaborating with international partners.
Ghana, like many of its neighbours, has a small-scale gold mining sector governed by lax regulations, allowing undocumented individuals to own stakes in local mines or engage in illegal gold purchasing and smuggling activities without proper identification. Strengthening the regulatory framework will ensure transparency, accountability, and effective law enforcement within the mining sector.
Deploying advanced technologies like blockchain and data analytics can track the origin of gold, making it harder for gold smugglers to operate undetected (but will it though?).
With local gold consolidators and money changing hands in cash locally even in RMB its unlikely that any technology like blockchain will make the slightest bit of difference at the small-scale miner level so I wish them all the best of luck deploying that in country for the greater good.
The overall impact of deploying this type of technology where it’s not viable only forces to gold smuggling down the value chain, meaning the small scale miners get less income as the payables will be much less. So is the industry merely pushing the problem further downstream?
Exporting gold out of Ghana
In October 2021 the Ghana government formed a committee to try to stop the gold smuggling that was costing the country over $9b which had gone unallocated in exports to Switzerland and the UAE. The committee formed by the Ministry of Lands and Natural Resources, the ministry responsible for the mining sector, includes Mr. George Mireku Duker, a Deputy Minister of the Ministry in charge of Mines, as the Chairperson.
Has the Gold smuggling stopped since the committee for formed?
Remember the recent Gold Mafia story by Al Jazeera? Well, the Authorities in South Africa The Financial Intelligence Unit (FIU) in South Africa cleared Uebert Angel of all charges shown on the report, I bet some “Appreciation” was shown there!
But what about the fact that Alistair Mathias was heard saying in the video that he used to smuggle between $40 million to $60 million worth of gold out of Ghana every month? What did the anti Gold smuggling committee in Ghana do about that?
Why are people smuggling Gold and not selling it locally in Ghana?
Here are the basic Requirements for Gold Export in Ghana:
Any company or enterprise which intends to deal in exportation of exportable goods or items in Ghana must:
Be registered with the Registrar-General’s Department.
Be registered with the Ghana Export Promotion Council and obtain a number.
Get a Taxpayer Identification Number (TIN) from the Ghana Revenue Authority or a GhanaCard PIN.
Procedure for Traditional Export
- Obtain a Bank of Ghana Exchange Control Form A2 from your bankers.
- Complete the Customs Declaration Form electronically and submit to Customs via the Integrated Customs Management System (ICUMS).
- Attach all relevant documents; Certificates, Permits etc.
- When the declaration is validated by Customs, present goods to Customs at the Export seat to the Exit Port or Station for Customs Inspection or Examination.
- If Customs is satisfied with the examination, the goods are then released for export.
Procedure for Non – Traditional Export
- Submit Customs Declaration electronically.
- Attach all relevant documents; Certificates, Permits etc.
- When the declaration is duly validated by Customs, present goods to Customs at the Export seat to the Port of Exit or Station for Customs Inspection or Examination.
- If Customs is satisfied with the examination, the goods are then released for export.
Relevant Certificates / Permits for Export
Mineral Ore: Minerals Commission Permit
What is the Ghana Gold Tax for Exports?
Gold exporters in Ghana are required to pay a three per cent withholding tax to the Ghana Revenue Authority (GRA); 0.5 per cent to the Minerals Commission for the Small-Scale Mining Sustainability Fund and a 0.118 per cent tax to the Precious Minerals Marketing Company.
Selling Gold locally in Ghana
Many of the small-scale miners sell their gold dore to consolidators or direct in Accra whilst others choose to work with traders who will handle the exports for them. Ghana has done a good job on the payment side for gold as it now requires proof of funds for gold being exported before being approved, this has impacted the local hawala trade which has clearly moved to another jurisdiction in Africa (it’s been around for thousands of years so why stop now).
Then in November 2022 Ghana ordered all large-scale miners to sell 20% of refined gold to central bank to look at using gold reserves to buy key products like oil due to a weakening in the USD to Cedi trade.
Is the LBMA merely paying lip service to Ghana?
We recently learnt that Ghana is soon to have its own LBMA-certified gold refinery, as reported by MyJoyOnline. This development is a significant step toward enhancing Ghana’s gold industry but is it a realistic hope or merely a dream?
Mr. George Mireku Duker met with LBMA CEO Ruth Cromwell during the OECD Forum and he claimed ““I am very glad to indicate that, LBMA is ready to assist Ghana establish a new Refinery for the Artisanal Small-Scale Mining (ASM) sector. Further, LBMA has reiterated to support Ghana to have a clear roadmap in getting a certified refinery”
Where the LBMA statement on their website said the following: The latter topic was front and centre at the Forum, with LBMA co-hosting two sessions related to our ASM Initiative – one on how intermediate refiners could support direct sourcing of ASM material by GDL refiners; and another on how co-existence between ASM and LSM actors could improve traceability and legal market access for artisanal gold.
One take is the LBMA are looking to find ways to protect their Swiss Jewel in the Crown Refineries Gold supplies and look to bypass Dubai where so far it has not given any GLD status despite many being clearly able to meet the requirements listed below! Is the LBMA biased towards Swiss Refineries? I’ll leave you to decide for yourselves.
Back November 2022, Ghanaian Government official to partner Rand Refinery to obtain LBMA certificate, the same Rand Refinery that set up in Singapore and closed down not longer after and the same Rand Refinery that lost 87,000oz due to a software problem back in 2014! Then more recently the rebuttal to accusation with their headline response “Rand Refinery disputes accuracy of Zimbabwe gold taskforce report” taking a leaf from Ari Gold from from Entourage “Deny till you Die!“
According to The Africa Report: Standards laid down by the London Bullion Market Association (LBMA), the global authority for precious metals, are insufficient to prevent gold refineries from hiding the existence of human rights and environmental issues at African suppliers, new research says.
Swissaid said: After having collected publicly available data, the authors contacted each of the refineries – five of which are located in Switzerland – as well as 32 mining companies, one by one, to confront them with the information. While most refineries refused to disclose the names of their suppliers, the mining companies were far more willing to be transparent.
Again I question why the security companies and airlines can’t be the ones being transparent here?
Can a Ghana Gold Refinery make LBMA Good Delivery status?
Here is the list of the requirements to become a GLD Good Delivery Gold Refinery:
The London Bullion Market Association (LBMA) certification ensures adherence to high standards of ethical sourcing and responsible gold production. The establishment of an LBMA-certified refinery will provide Ghana with a reputable platform to refine and export gold, promoting transparency and trust in the supply chain.
Here are the requirements as per the LBMA website:
To be accredited to the Good Delivery List, refiners must undergo stringent checks. LBMA is unlikely to regard your application for listing favourably unless you have:
- Been in existence for at least five years and been refining the metal for which you are applying for Good Delivery status for not less than three years.
- An established annual refining production (which need not be in the form of standard bars) of not less than 10 tonnes for gold, or not less than 50 tonnes for silver.
- A tangible net worth of not less than the equivalent of £15 million.
- Ownership, financial standing and reputation that would satisfy the Due Diligence tests practised in the Loco London Market.
- The applicant must implement LBMA’s Responsible Sourcing Programme and pass an independent audit prior to submitting their application for Good Delivery Listing.
Read the GLD Application Procedure here.
I guess we will have to first wait for them to build the refinery and then be up and running for 3 years with a consistent vole right of the bat! So I for one will not be holding my breath.
The industry should look to support Ghana’s efforts to stop the gold smuggling by advocating for stricter regulations, embracing technology solutions, and promoting the establishment of LBMA-certified refineries. Collaboration, awareness, and responsible practices are key to eradicating gold smuggling and safeguarding national security and global stability.
Together, we can combat gold smuggling, foster a sustainable and responsible mining industry, and contribute to a more secure and ethical global gold trade but do not under any circumstance think this will be done overnight, the system is rigged to fail and will take a lot of hard work by people that care.
