Back in March 2017, a 51-year-old Cambodian, Rim Ri Linh, was sentenced to six years in jail by the People's Court of An Giang province in Vietnam. He was found guilty of illegally transporting 18 kilograms of gold from Cambodia to Vietnam. Rim Ri Linh, a former major and deputy chief of the border security office in Phnom Den, Cambodia, was caught by customs officers at the Tinh Bien border gate in An Giang when he failed to stop for immigration procedures.

The gold, valued at approximately 15.6 billion VND (658,152 USD) at the time, was discovered in his car. Rim Ri Linh admitted that he had agreed to transport the gold for a Cambodian man named Ti to a Vietnamese woman in Nha Bang town.

Rim Ri Linh should now be out of jail for the crimes he committed, but how many stories have we heard of Vietnamese gold smuggling from Laos or Cambodia in the media since? Does that mean it stopped? No, of course not. It is simply being done by those who are approved for smuggling.

This week another big case of Vietnamese gold smuggling hit the news, which suggests someone either has not paid their dues and is being thrown under the bus, or they have fallen out of favour with certain people with power!

Investigating a Gold Smuggling Gang: Uncovering the Intricacies and Implications

In the realm of illicit activities, gold smuggling has emerged as a lucrative and pervasive practice, plaguing nations worldwide. Recent reports have shed light on a major gold smuggling operation that has captured the attention of authorities and the public alike. This article delves into the intricacies of the investigation, uncovering the modus operandi of the Vietnamese gold smuggling gang, its key players, and the far-reaching consequences of their actions.

The Gold Smuggling Operation

The Ministry of Public Security is currently spearheading an investigation into a notorious gold smuggling gang of 20 individuals. Led by Le Xuan Tung, chairman and CEO of Phu Quy Gold Investment Company, the group is suspected of smuggling a staggering three tons of gold worth VND5 trillion (approximately $212 million) into Vietnam. The gold was illegally transported from Laos and subsequently sold through local stores, with Phu Quy acting as one of the primary distribution channels. This illicit operation has not only evaded legal scrutiny but has also resulted in significant tax losses to the state coffers, estimated at VND6.1 billion.

The Key Players

Le Xuan Tung, the chairman and CEO of Phu Quy Gold Investment Company, occupies a central role in this smuggling network. As investigations unfold, Tung faces not only charges related to gold smuggling but also scrutiny for alleged tax evasion. The involvement of Tung and other suspects, including Le Thuy Quynh, highlights the complicity and scale of this operation. Their actions have necessitated a thorough examination of Phu Quy Gold Investment Company's operations, tax declarations and financial practices.

The Implications

The implications of this smuggling operation extend beyond the immediate financial losses incurred by the state. Uncovering the intricate network of gold smuggling sheds light on the broader issues surrounding illicit financial activities and money laundering. Reports indicate that the gold trade is an ideal avenue for criminals seeking to launder large sums of money. The nature of the gold trade, involving melting, refining, and the subsequent obfuscation of its origin, makes it exceedingly challenging for law enforcement agencies to trace the illicit flow of funds.

What Gold Is Smuggled into Vietnam?

It is mostly kilo bars from neighbouring countries like Cambodia and Laos. The gold industry associations such as the WGC, SBMA and the LBMA are all very much aware of the situation, and they tend to look the other way, particularly when it has ties to Swiss LBMA Good Delivery refineries!

How do I know about it? I went to Vietnam and opened an account to sell gold to the Laos arm of a Vietnamese gold trading company. Did I know what he was going to do with it when we shipped it via Brinks to his Laos office? I could only hazard a guess, and I did not ask further.

Once the account was open, the client only wanted a specific brand of Swiss kilo gold bar. Since we did not deal in that refinery's brand, we were unable to do any business with them directly.

Laos Gold Imports and Exports

According to this quote:

The country's total trade surplus amounted to approximately USD 15 billion, with exports worth USD 8.198 billion and imports worth USD 6.808 billion. Laos' main exports in 2022 included electricity, gold, gold ore and gold bars, paper, paper waste, and wood pulp.

The OEC website gives the following Laos exports and imports for 2021.

Laos Gold Exports 2021

In 2021, Laos exported $1.79B in gold, making it the 41st largest exporter of gold in the world. In the same year, gold was the second most exported product in Laos. The main destinations of Laos gold exports were Australia ($662M), China ($372M), Thailand ($309M), Switzerland ($233M) and Hong Kong ($140M).

The fastest growing export markets for Laos gold between 2020 and 2021 were Australia ($507M), China ($353M) and Switzerland ($161M).

Laos Gold Imports 2021

In 2021, Laos imported $646M in gold, becoming the 29th largest importer of gold in the world. In the same year, gold was the second most imported product in Laos. Laos imports gold primarily from Thailand ($385M), Switzerland ($260M), the United States ($869k) and Australia ($1.58k).

The fastest growing import markets for gold in Laos between 2020 and 2021 were Thailand ($376M), Switzerland ($260M) and the United States ($407k).

Do you really think Laos has that big an appetite for gold? Asking for a friend!

Why Is Cambodia Actually Importing a Lot of Gold?

I personally met a Cambodian gold importer who claimed that Cambodian farmers buried the gold on their farms. He had just imported 500kg of a certain Swiss brand of gold bars the week before! What do you think really happens here? Answers on a postcard to...

How Does the Gold Get to Laos and Cambodia?

Vietnam's gold mostly gets shipped from Bangkok, Thailand. The main security companies that operate those routes handle these air cargoes as valuable cargo. So why are the global security companies that airfreight gold not doing more due diligence on such shipments? Are they, like the associations (and me), turning a blind eye? I'll leave you to decide!

Monopoly on Gold Imports

The State Bank of Vietnam (SBV) has the exclusive right to import gold legally into Vietnam. Despite visits by the associations mentioned above, this has not changed since it was written into state law as Prohibited acts in gold trading under Decree No. 24/2012/ND-CP of April 3, 2012.

Even the SBMA talks about the illegal means by which gold gets into Vietnam on its website:

Despite the strict rules over gold business, there is no shortage of imported gold bars in the market, as there are hidden pathways for gold with a higher premium of USD 40 per troy ounce from Cambodia, Laos or China. Another fact is that the gold retail sales distribution network has changed superficially on the surface, but not in its core business, and about 10,000 gold shops are still there, selling gold chi rings on the counter and gold tael bars under the counter.

Gold Bullion Below Purity

We recently heard of the case of The Perth Mint being accused of selling gold that had been doped to China. Vietnam has had a similar instance, back in 2012, when the SJC accused a number of local producers of doping, but they ended up being accused of not testing properly. SJC finds 6,200 gold bullion of below-par purity.

Vietnamese Dong and the War on Gold

The State Bank of Vietnam's decision to block gold imports aimed to curb the weakening of the Vietnamese dong and address the potential adverse effects on the economy. The import ban was implemented as a measure to control the trade deficit, cool inflationary pressures and stabilise the economy.

Vietnam relies heavily on gold imports, with approximately 95% of its gold consumption sourced from foreign markets. The State Bank of Vietnam regulates these imports by granting licences and quotas to gold businesses seeking to import the metal. The import ban, initially implemented in May 2008, aimed to address a record-high trade deficit and combat soaring inflation, which had reached 21% in April of that year. By restricting gold imports, the central bank sought to curtail the outflow of foreign exchange used for imports while simultaneously combating inflationary pressures.

The correlation between gold and the Vietnamese dong played a significant role in the decision to block gold imports. When a discrepancy arises between onshore gold prices and international market prices, speculators often buy dollars to smuggle in gold. This influx of dollars exerts downward pressure on the dong, potentially weakening the currency. Moreover, higher gold prices make holding dong savings less attractive, driving individuals to convert their deposits into gold. This conversion can intensify inflationary pressures and have knock-on effects on property prices and the overall cost of goods. The State Bank of Vietnam aimed to mitigate these adverse effects by imposing the import ban and maintaining stricter control over gold inflows.

While the gold import ban helped restrict foreign exchange used for imports and initially stabilised the domestic gold market, it also created a scarcity of gold within the country, resulting in higher domestic prices compared with international market prices. This disparity provided arbitrage opportunities for gold smugglers and placed additional pressure on the dong. Furthermore, gold-related businesses faced challenges due to limited access to raw materials, which affected the production of jewellery for export.

The decision to block gold imports reflects the significance of gold as a valuable commodity in Vietnam. The country has a long-standing cultural affinity for gold and has been one of the world's leading gold importers. The popularity of gold as an investment and a store of value has deep roots in the Vietnamese psyche, stemming from experiences with hyperinflation and economic instability over the years.

The Global Reach of Gold Smuggling

Gold smuggling is a global phenomenon

Its ramifications extend far beyond Vietnam. A recent investigation by Al Jazeera's Investigative Unit has uncovered multiple gold smuggling gangs operating in Southern Africa. These criminal networks enable the laundering of substantial sums of money, enriching themselves while destabilising nations. The investigation revealed the involvement of high-ranking officials from Zimbabwe in both smuggling and money laundering activities, which circumvent Western sanctions imposed on the country. The global nature of these crimes further emphasises the need for international cooperation and robust regulatory frameworks to combat gold smuggling effectively, rather than organisations turning a blind eye to these situations knowingly.

The Ethical Concerns

Gold's susceptibility to illegal activities raises significant ethical concerns. With its multiple stages of refining and melting, it becomes nearly impossible to establish the ethical and legal origins of gold purchased on the open market. This creates a disconcerting reality in which consumers unknowingly contribute to the perpetuation of criminal enterprises or the exploitation of conflict regions. Heightened awareness and due diligence are essential to ensure that one's investment in gold aligns with ethical and legal standards.

Conclusion

The ongoing investigation into the Vietnamese gold smuggling gang has brought to light the complex and clandestine nature of this illicit trade. Uncovering the modus operandi of the smuggling network, identifying key players and understanding the broader implications of such criminal activities are crucial steps in combating gold smuggling globally. Efforts must be directed towards strengthening international cooperation, enhancing regulatory measures and raising public awareness of the ethical dimensions of the gold trade.

With comprehensive insight into the inner workings of gold smuggling and its far-reaching consequences, we equip ourselves with the knowledge necessary to address this pressing issue and safeguard the integrity of global financial systems.

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