An investigation in Ecuador has revealed how the country has become a major transit hub for illegal Peruvian gold exported to the United States, an evolution directly linked to Peru's attempts to crack down on gold trafficking.
Case files obtained by El Comercio have exposed the inner workings of the alleged illegal gold trafficking network exposed last month after a series of raids and arrests linked to two gold exporters, Clearprocess and Spartan.
According to El Comercio, prosecutors allege the two companies employed emissaries to strike deals with Peruvian gold smugglers on the border between the two countries. The companies then exported the gold. Prosecutors allege the precious metal's illegal and foreign origins were concealed using falsified documents and identities stolen from legally registered Ecuadorians, El Comercio reported.
After 2013, the two companies grew rapidly to become Ecuador's principal gold exporters, according to a statement issued by the government, which named their main customers as the US-based companies Republic Metals Corporation (RMC), Kaloti Metals and Logistics (KML), and Mvp Imports.
Police arrested seven executives from Clearprocess and Spartan in the June raids, and they have since been charged with money laundering, El Comercio reported.
InSight Crime Analysis
The emergence of Ecuador as a transit point for Peruvian gold is a direct consequence of Peru's attempts to introduce traceability into its supply chain and prevent illegal gold from being laundered into the legal supply.
Until 2012, there was little oversight of gold exports in Peru, but new legislation and a shift in security priorities to focus on illegal mining led to high profile seizures and investigations, and by 2014 half of all Peru's gold exporters had fallen under suspicion.
In 2015, Peruvian investigators told InSight Crime this had resulted in a shift in trafficking patterns, with illegal gold increasingly smuggled across the border into Bolivia then exported with false paperwork identifying its origins as Bolivian.
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This pattern now appears to be repeating itself in Ecuador, with both countries showing the telltale discrepancy between gold mined in the country and gold exported -- in Ecuador's case a $949 million gap in the period 2012-2014, according to government figures.
While the export patterns in the regional gold trade are changing, the same names continue to surface as the international buyers of this allegedly illegal gold.
RMC, for example has been embroiled in several illegal mining scandals in Colombia. The owners of one of its former suppliers, Goldex, are currently on trial for money laundering, while another, Giraldo y Duque is under investigation. As a result, the company has scaled back its operations in Colombia and now only buys from one mining company with a legal title.
KML, meanwhile, has been named as the intended recipient of allegedly illegal gold seized in Peru and has had ties to several exporters suspected of money laundering and linked to alleged organized crime kingpins. InSight Crime's reporting of these connections has led to threats of legal action from Kaloti.
RMC Responds: Following publication of this article, RMC contacted InSight Crime to request a clarification on the company's current gold buying policy, which was developed in response to the scandals in Colombia and growing concerns over gold trafficking and money laundering in the Americas. Jason Rubin, RMC's CEO, said:
"RMC has ceased doing business with any aggregators as part of its continuing efforts to prevent gold operations from being used for money laundering. RMC only deals with single source mining entities. RMC made this decision to address some of the problems you discuss in the Article, including exporters attempting to conceal the illegal and foreign origins of gold using falsified documents. RMC recognizes the challenges facing the gold industry and, as a responsible refinery, is attempting to lead by example when it comes to thwarting illegal gold trafficking networks."