Plot to smuggle $5bn gold thwarted

Money-laundering gang planned to hide 1,000kg cargo in ship.

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ABU DHABI // State Security officials have smashed a money-laundering operation by a gang who planned to smuggle nearly 100 tonnes of gold worth US$5 billion (Dh18.4bn) into the country.

The 94,410kg of gold was to be smuggled in oil tankers from an unnamed African country to a neighbouring country, where two members of the gang would receive it and arrange for it to be transported to the UAE.

The gold was to be deposited in banks and converted to cash, which would be transferred to several foreign countries.

Ministry of Interior inspectors uncovered the smuggling plot and rounded up members of the network, according to the state news agency, Wam.

Police arrested one member of the gang trying to enter the country at the Ghuwaifat checkpoint on the Saudi border carrying 10 million Saudi riyals (Dh9.8 million) hidden in a lorry.

No further details of the plot were disclosed, including the whereabouts of the gold or how many people were under arrest.

Gold has become a favoured means for money laundering because it is harder to trace amid tighter restrictions imposed on money flows after 9/11, said Mustafa Al Ani, director of defence and security studies at the Gulf Research Centre in Geneva.

The UAE, said to have been a transit point for funds used in the 2001 attacks, has introduced tougher rules such as requiring banks to screen customers and report suspicious transactions.

"After 9/11, the restrictions were meant for terrorism money, but basically hit criminal money very hard as well," Mr Al Ani said. "So there was a major shift. The value of gold is well known. You can sell it outside the control of any government at a discounted price. And it is very difficult to trace."

Whereas "dirty money" might be sold at half its original price, "dirty gold" loses only 10 to 15 per cent of its value because it can be easily melted and turned into jewellery. For that reason, Mr Al Ani found it strange that the smugglers intended to bank the gold.

"To deposit it in a bank, you need all the certification," he said.

Indeed, a plot involving such a large amount of gold would be nearly impossible to pull off, experts said yesterday.

"I cannot really comprehend what they would have done with it, especially in Dubai," said Gerhard Schubert, head of precious metals at Emirates NBD. "The Dubai Multi Commodities Centre Authority and the whole gold trade has become so alert and so successful in stopping this kind of smuggling."

Mr Schubert said no bank or gold trader would buy gold without proof of the source of origin. Anyone trying to sell gold would be questioned by a Criminal Investigation Department officer. "I think someone made a huge planning mistake," he said.

An attempt to smuggle 100 tonnes of gold was "extraordinary", said Tim Parkman, managing director of Lessons Learned, which provides training in anti-money laundering, counter-terrorist financing and workplace ethics. "I'm just shocked anything of that amount would be held in one place," he said.

Mr Al Ani speculated the gold might have come from wealthy sources in Egypt, Libya, Syria or Tunisia, seeking to move their assets to safety.

"During this time of political instability, this is the best time to smuggle money," he said.

Such a massive amount might have come from a government source, perhaps one facing international sanctions, said Justin Crump, chief executive of the UK security consultancy Sibylline, though he said it was difficult to know for sure.

"This is a pretty big deal. It suggests to me that this must be state-sponsored, based on a very casual look," he said.

Under federal laws passed in 2002 and 2004, all banks, financial firms, insurers, auditors and the capital market must follow international best practice by conducting due diligence with customers, keeping accurate and detailed records, reporting suspicious transactions and training employees in these areas.

Informal money-transfer services called hawaladars, common in the UAE, have been required to register with the Government since 2003. So far, 558 have applied and 308 have been processed.

Nevertheless, according to Global Financial Integrity, a research and advocacy group in Washington, $296 billion (Dh1.08 trillion) in illicit funds passed through the UAE between 2000 and 2009, based on discrepancies in its balance of payments and between its sources and uses of funds.

Local economists say the study fails to account for sovereign wealth funds, which were not mentioned in the report.