21 Nov 2023

Cross-border smuggling / Fools for gold grifters in Kenya

Alongside smuggling, gold scamming is a prolific illicit market in Kenya, and halting it needs both government and civil society action.

On a Mombasa runway in 2018, two Kenyans disembarked from a chartered aircraft bound for Istanbul to deal with local customs authorities. One was a smuggler; the other a logistics coordinator who later became a Global Initiative Against Transnational Organized Crime (GI-TOC) source. The pair had made a deal with an Israeli businessman, who was on the same flight, to buy the 500 kgs of illegal gold smuggled aboard for his consortium.

While the Kenyans were speaking to customs, the businessman offered the pilot US$50 000 to take off without them but with the stashed gold. The pilot turned down the offer and alerted the Kenyan travellers, the source said – and the smuggler promptly cancelled the deal.

Each party had planned to double-cross the other. Where the Israelis were trying to procure without paying, the smugglers were planning to take payment without delivering.

This is one of many examples of smuggling and scamming in Kenya’s gold industry that GI-TOC’s source knew about during his years in aviation logistics and dealings in the gold-trading underworld. Lured by the prospect of attaining the mineral cheaply, traders overlook red flags in deals that sound (and often are) too good to be true – known as ‘gold fever’.

The GI-TOC source says scams involving gold are an illicit market to rival actual smuggling. Given the shadowy nature of the illicit trade and little available information, this is impossible to verify. However, it is no secret that gold scamming is pervasive in the country.

The Goldenberg scandal of the 1990s was an early documented occurrence of systemic malfeasance related to gold in Kenya. It entailed the fraudulent ‘export’ of mostly non-existent minerals in exchange for large government subsidies and cost the country roughly 10% of its gross domestic product. Kamlesh Pattni, the reported scam’s alleged architect, recently resurfaced in Zimbabwe, where he is once again allegedly tied to the illicit gold trade.

Lured by the prospect of attaining the mineral cheaply, traders overlook red flags in deals that sound too good to be true

Gold scams do not require movement of the commodity and are distinct from gold smuggling – both in the nature of the crime and the structure of the relationships between those involved. Where smuggling requires trust and long-term relationships between buyers and suppliers, scamming requires trust to be established and later broken.

The typical gold scamming criminal network is a loose conglomeration of actors, with a central core of one or a few people. They operate in tandem on an ad hoc basis rather than a centralised structure based on the longevity of relationships and supply chains.

Often these scammers are involved in business of some kind, or are involved in politics, as evidenced by two recent arrests. Businessman Edwin Ochieng Oduk was arrested after allegedly receiving a payment of close to US$50 000 from a foreign national for non-existent gold. In October, three scammers with purported links to a Kenyan senator were apprehended attempting to defraud a South African of almost US$35 000.

Scammers continually identify new targets under the presumption that demand for African gold remains high and potential buyers have low regard for adherence to local regulations and international good practice.

Believability is afforded by the prolific presence of gold flowing from the Great Lakes region through Kenya. Where the Democratic Republic of the Congo is a notorious source of conflict gold, Kenya (Nairobi specifically) is a noteworthy transit point for smuggled gold. Its reputation as a gold hub attracts a multitude of traders, licit and illicit alike, and creates fertile ground for scammers claiming the ability to facilitate supply.

The typical gold scamming criminal network is a loose conglomeration of actors, with a central core of one or a few people

Con artists go to great lengths to demonstrate possession of genuine gold, including assaying the commodity in the presence of potential buyers to gain their trust. These ‘sellers’ later employ various techniques to lend credibility to their excuse for non-delivery. These include arranging to have the gold ‘seized’ by corrupt authorities and leaking false information to get journalists to report on these bogus seizures. In other instances, the genuine metal is swapped for counterfeit material. In most cases, however, the gold never existed.

Potential victims include parties looking for legitimate business deals as well as those not averse to procuring smuggled gold. In latter cases, there is less chance of aggrieved parties reporting the scam given their willing involvement. Scammers identify victims who are not perceived as dangerous, in order to mitigate the possibility of extrajudicial reprisal.

State officials’ involvement can also lure potential victims. This occurred in one of Kenya’s largest scams, reportedly involving a Kenyan senator and a businessperson-turned-politician who allegedly defrauded an Emirati company, Z Livia FZC, of US$2 million. The money was reportedly paid in instalments between 2018 and 2019 for 4.6 tonnes of non-existent Congolese gold.

This prompted a meeting between the Emir of the United Arab Emirates and the Kenyan government, after which the latter reportedly agreed to arrest the politicians involved. However, no publicly available evidence exists that these arrests occurred, and both politicians have since become elected members of Kenya’s parliament.

This is not the only diplomatic spat caused by gold in the country, and will probably not be the last, given the state’s failure to clamp down on the practice and investigate and prosecute elites implicated in both scams and smuggling. Emboldened by a culture of impunity, gold grifters will continue to ply their trade unimpeded.

The independence of investigative units and judicial officials is important to ensure timeous processing of offenders

Disrupting gold scamming syndicates requires understanding the nature and dynamics of these syndicates rather than seeing them as gold smugglers. That high-level operators in government are often involved means that state accountability is important in countering these networks.

Kenya’s recent experience illustrates that investigations and legal processes are scuppered or fail to begin due to a lack of political will. The independence of investigative units and judicial officials is important to ensure timeous processing of offenders and that cases are seen through to their conclusion.

Given the limitations of state oversight, the role of civil society and institutions tasked with oversight of government are well-placed to advocate for greater political will to address this sort of crime.

Michael McLaggan, Analyst, East and Southern Africa Observatory, GI-TOC


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