Dubai’s Problematic Gold Trade - Dubai’s Role in Facilitating Corruption and Global Illicit Financial Flows - Carnegie Endowment for International Peace
dubai’s problematic gold trade - dubai’s role in facilitating corruption and global illicit financial flows
dubai’s problematic gold trade - dubai’s role in facilitating corruption and global illicit financial flows
Carnegie endowment for international peace carnegie endowment for international peace support carnegie follow carnegie sign up for carnegie email email address submit thank you check your email for details on your request twitter facebook youtube instagram rss podcasts linkedin email search search in just washington all centers search global resources global centers beijing home Zhong Wen issues Zhu Ti programs Xiang Mu experts Zhuan Jia events Hui Yi publications Chu Ban Wu shortcuts about us employment opportunities staff advisory council for media carnegie-tsinghua young ambassadors program about tsinghua university podcasts beirut home `rby issues `rby regions lmnTq experts lbHthwn events l'nshT@ publications lmnshwrt shortcuts about us employment opportunities staff advisory council sada diwan capacity building x-border local research network for media brussels home issues regions experts events publications publikationen auf deutsch publications en francais shortcuts judy dempsey's strategic europe for media about us employment opportunities staff moscow home glavnaia stranitsa programs programmy issues temy experts eksperty events sobytiia publications publikatsii projects proekty shortcuts for media about us employment opportunities staff new delhi home issues regions experts events publications shortcuts about us support carnegie india employment opportunities staff feedback and media enquiries washington home issues regions publications experts events programs projects shortcuts about us support annual report employment opportunities diversity and inclusion junior fellows program staff board of trustees conference center for media for government for academics diwan sada strategic europe china financial markets the world unpacked languages english experts publications events russkii eksperty publikatsii sobytiia Zhong Wen Zhuan Jia Chu Ban Wu Hui Yi francais experts publications deutsch experten publikationen `rby lbHthwn lmnshwrt l'nshT@ about the global think tank support carnegie connect with us research latest analysis publications popular projects blogs sada strategic europe diwan china financial markets experts a b c d e f g h i j k l m n o p q r s t u v w y z global directory programs programs projects events topics regions and countries issues return to dubai's role in facilitating corruption and global illicit financial flows dubai's problematic gold trade shawn blore marcena hunter among the world's major gold trading hubs dubai is a relatively new player yet it is savvy enough to pursue previously untapped markets and ambitious enough to frequently cut corners to bring gold to the market published july 07 2020 resources print page sign up for a weekly newsletter from the carnegie endowment for international peace if you enjoyed reading this subscribe for more email address submit thank you check your email for details on your request table of contents introduction jodi vittori the political economy of dubai kristian coates ulrichsen dubai free trade or free-for-all lakshmi kumar dubai's problematic gold trade shawn blore marcena hunter dubai's vulnerability to illicit financial flows peter kirechu the illicit allure of dubai's luxury real estate market peter kirechu jodi vittori how emirati law enforcement allows kleptocrats and organized crime to thrive karen greenaway the uae's kafala system harmless or human trafficking mustafa qadri the kabul to dubai pipeline lessons learned from the kabul bank scandal brian george challenges and recommendations jodi vittori matthew t page appendix uae free zones abbreviations about the authors table of contents among the world's major gold trading hubs dubai is a relatively new player yet it is savvy enough to pursue previously untapped markets and ambitious enough to frequently cut corners to bring gold to the market the uae's share of world gold trade in 2018 is evidence of just how successful this strategy has become 1 as late as 1996 the uae did not even appear among the world's top one hundred gold-importing countries two decades later the uae ranked among the top four above hong kong and the united states see table 2 of the eleven gold refineries in the uae the majority are located in dubai this accords with the dubai multi commodities centre's dmcc own statistics which show that dubai is responsible for about 80 percent of the total uae gold imports and exports measured either by volume or value 2 table 2 top gold-importing countries in 2018 by weight rank reporting entity weight kilograms trade value unit value per gram 1 switzerland 2 248 611 63 321 203 855 28.16 2 china 1 121 317 45 805 882 835 40.85 3 india 945 060 31 756 390 865 33.60 4 united arab emirates 923 247 27 672 052 091 29.97 5 china hong kong sar 665 575 23 627 497 773 35.50 6 united kingdom 629 049 25 564 378 411 40.64 7 singapore 338 389 13 514 112 543 39.94 8 turkey 299 556 11 300 396 230 37.72 9 usa 232 441 9 641 469 104 41.48 10 italy 158 703 4 056 681 077 25.56 source un comtrade database accessed april 17 2020 https comtrade.un.org data data reflects the gold classified under hs commodity code 7108 laundering artisanal gold what is most problematic about the uae's strategy is where it gets its gold other major gold hubs source the bulk of their gold from relatively few countries typically either other gold hubs or other major gold-producing nations according to un comtrade data for example in 2016 the united kingdom uk imported about 1 208 tons of gold from just six countries listed in descending order switzerland canada south africa hong kong australia and the united states by contrast in 2016 the uae imported gold from more than one hundred countries mainly located in africa south america or south asia less likely to be engaged in traditional large-scale gold mining many of these countries are better known for artisanal and small-scale gold mining asgm characterized by low capital inputs the use of traditional technologies heavy demand for labor and poor or absent government regulation asgm is nonetheless an important source of income for the rural communities shawn blore shawn blore previously a journalist is now an independent consultant specializing in the areas of natural resources supply chains smuggling and clandestine financial flows yet in some parts of the world--notably the democratic republic of congo sudan and venezuela--asgm gold is sometimes taxed by or otherwise used to benefit illegal armed groups conducting insurgencies or is implicated in gross human rights violations for this reason asgm gold is sometimes characterized as a conflict mineral even in countries that are not afflicted by civil conflict or atrocities asgm is often impacted by weak or nonexistent government oversight illegal exportation and smuggling for these reasons gold is subject to many different--and often overlapping--sourcing chain of custody and due diligence standards 3 the specific elements of these standards vary but all of them require that--at a minimum--those countries sourcing asgm gold be able to determine whether the gold originated in a conflict-affected or high-risk country or is otherwise associated with gross human rights violations some tighter standards add additional criteria such as the absence of child labor holding of a legitimate mining title and proof of legal export given the difficulties in assuring the clean origins of asgm gold reputable refiners tend to avoid it altogether asgm artisanal and small-scale gold mining gold hand carried into dubai is almost always sold in the emirate's gold souk rather than by major refineries in practice dubai follows few if any of these standards asgm gold hand carried into dubai is almost always sold in the emirate's gold souk--a compact area of a few city blocks where hundreds of small dealers compete to buy and sell gold in all its myriad forms--rather than by major refineries officially the dmcc requires gold dealers operating in the emirate to have a written due diligence policy that aligns with standards of the organisation for economic co-operation and development oecd but there is little or no enforcement of this requirement 4 dealers buying gold to sell in the souk require only a single document--a uae customs form--that proves the gold was legally declared to customs officials upon arrival at an emirati airport the form does not require information about the gold's origin 5 these dealers therefore accept gold originating from any country regardless of the production circumstances no questions asked 6 they habitually record their purchases of asgm gold as scrap a practice that even some refineries have exhibited 7 this accounting sleight of hand completed souk dealers can then sell this gold to dmcc buyers or uae refineries having sufficiently clouded its origins to satisfy their auditing requirements 8 this lack of due diligence and dubai's efforts to cater to asgm producers helps explain the uae's rapid rise as a major global gold hub far from competing with the traditional gold centers dubai does what other hubs will not--or legally cannot--do it accepts asgm gold from producer countries that--because of oecd and other standards--more respectable hubs avoid an analysis of the uae's imports in 2016 showed that at least 46 percent of its gold supply came from countries that would be red-flagged by the oecd as being conflict-affected or high-risk countries had their country of origin been recorded rather than the country through which the gold transited for example gold from the democratic republic of congo drc and south sudan are both commonly trafficked through uganda thus disguising its origins and resulting in it being considered ugandan gold from a regulatory standpoint the process of reselling asgm gold freely exported from red-flagged sources to dubai jewelers and refiners via the emirate's bustling souk essentially launders illicit asgm gold into a refined product that is acceptable to the world's most reputable gold hubs as shown in table 3 switzerland and india imported a total of more than 200 tons or just over 8 billion in uae gold dore in 2016 table 3 gold exported by the uae in 2016 by weight rank reporting entity weight kilograms trade value unit value per gram 1 switzerland 148 423 5 922 940 937 39.91 2 india 59 548 2 136 789 719 35.88 3 turkey 42 952 1 444 004 799 33.62 4 bangladesh 42 808 306 054 164 7.15 5 morocco 39 714 1 089 176 0.03 source un comtrade database accessed april 17 2020 https comtrade.un.org data data reflects the gold classified under hs commodity code 7108 a second and comparably large portion of uae gold is exported as jewelry often to developed countries where conflict minerals laws should be more rigorously enforced as shown in table 4 the uae exported just over 323 tons of gold jewelry worth some 11.5 billion in 2016 most of this jewelry went to iraq and india but almost 500 million worth of jewelry made its way to the united states and a total of nearly 700 million worth made its way to italy the uk and germany--countries with legislation regulating the import of gold from conflict-affected countries table 4 gold jewelry exported by the uae in 2016 by weight rank destination weight kilograms trade value unit value per gram of total weight 1 iraq 79 459 2 600 224 360 32.72 25 2 india 53 292 1 600 353 586 30.03 16 3 iran 19 815 594 195 871 29.99 6 6 italy 13 136 354 293 022 26.97 4 11 usa 8 553 468 594 559 54.79 3 17 switzerland 4 648 530 450 196 114.12 1 19 uk 3 585 211 440 949 58.98 1 20 afghanistan 3 030 100 422 757 33.13 1 24 germany 1 590 52 963 233 33.31 0.5 27 canada 1 478 38 962 628 26.34 0.5 source un comtrade database accessed april 17 2020 https comtrade.un.org data data reflects gold jewelry classified under hs commodity code 711319 in summary the uae imported over 971 tons of gold worth some 32 billion in 2016 and nearly half of this gold came from red-flagged sources it also exported 846 tons jewelry and gold combined worth 28 billion--much of it to countries that would have been prevented from directly purchasing this problematic gold because of domestic laws for example the united states' dodd-frank act and the eu conflict minerals regulation or other standards for example those set by the oecd and london bullion market association these statistics make clear that dubai is a conducive place for laundering asgm gold the dmcc is it a serious watchdog established in 2002 the dmcc is dubai's quasi-private regulatory body for precious metals and gems a fundamental challenge to the dmcc is its dual role of regulating the sector and promoting and facilitating trade there is an inherent conflict of interest when efforts to increase trade involve relaxing regulation the dmcc established the dubai good delivery dgd standard in 2012 and the dmcc rules for risk based due diligence in the gold and precious metals supply chain in 2016 these actions brought the dmcc's standards closer in line with the core principles of the oecd due diligence guidance for responsible supply chains.
Comments
Post a Comment