Mali: West Africa’s hub for illegal gold trade with Dubai

2022-03-11

All that glitters in West Africa’s gold trade is not pure. Discrepancies in the metal’s production and trade statistics between Mali and Dubai in the United Arab Emirates (UAE) expose a massive illegal trade, particularly in the artisanal mining sector. This not only results in billions of dollars of lost revenue to affected countries in West Africa but also fuels conflict through the illegal financing of violent extremism.

Climbing global gold prices have attracted significant interest in gold extraction in the Sahel and West Africa from domestic and international investors, especially in domestic and rural-based small-scale mining. Mali is Africa’s third biggest exporter of gold, and a third of its total production is estimated to come from artisanal mining. In 2016, the country exported 67 tonnes of gold valued at US$2.2 billion. Of that, 46.9 tonnes were mined by industrial producers, with the remaining 20.1 tonnes extracted through artisanal means.

But in that year the UAE imported US$1.52 billion in gold from Mali, while Bamako recorded only US$216 million in exports. Likewise, in 2014, Mali declared a gold production of 45.8 tonnes against the UAE’s import from Mali of 59.9 tonnes. Mali applies export taxes to only the first 50 kg of gold exported per month. This makes it a magnet for the illegal gold trade in a region that lacks a regional tax coordination framework. This provides an incentive for West African gold smugglers to sell their gold in Mali for a large tax break.

After 2006, global gold prices climbed to an all-time high due to successive economic and financial crises

It’s estimated that 80% of the artisanal gold present in Mali’s supply chain is produced in Senegal. Porous borders, geographical proximity, transboundary ethnic affinity, safer routes through illegal entry points and Mali’s long-lasting internal instability facilitate this illicit trade. Research shows that Malian Bambara buyers belong to the ‘same ethnic group as the Malinke who manage and run the artisanal operation in Senegal.’ Although Senegalese customs authorities require gold traders to provide a gold purity analysis certified by an official document, most Senegalese traders rely on informal transactions and rarely produce such a document. Mali is also used as a gateway to UAE gold markets by its neighbours and beyond. Countries such as Libya and Venezuela recently used Mali as a platform to export their gold illegally to Dubai. In 2020, gold trafficking to Mali apparently brought in about US$1 billion to the government of Nicolás Maduro in Venezuela.

Armed groups and terrorists within Africa are also increasingly using the illegal gold trade with Dubai to finance their violent activities, as confirmed by ENACT’s anonymous expert on African gold. In recent months, two terrorist groups engaged in a fierce battle to control gold mining sites in Mali’s Gourma region. Swiss company Valcambi sourced significant quantities of gold from Kaloti, a Dubai firm that specialises in gold melting, which was likely linked to armed groups in Darfur, Sudan, in 2012.

Gold illegally traded between Mali and Dubai is hand-carried by couriers who transport an average of 10 kg per trip. Flights between Mali and Dubai cost around US$500, the equivalent of approximately 10 g to 12 g of gold, making a single trip very profitable. Some traffickers ship up to 40 kg of gold to Dubai every week. This is facilitated by corrupt airport staff, such as customs officers, and police authorities in Bamako who reportedly accept bribes from smugglers.

Mali’s tax incentives remain attractive for neighbouring smugglers

In the UAE, loopholes in legislation, weak import procedures and questionable practices by UAE-based buyers and the Dubai Multi Commodities Centre (DMCC) facilitate the illegal gold trade. For instance, ‘passengers arriving in the UAE are exempted from any customs declarations related to gold carried in hand luggage’. Consequently, foreign smugglers coming from Mali to sell their gold in Dubai’s Gold Souk only need to present their buyers with the UAE customs form obtained on their arrival at the airport, which only proves that ‘the gold was legally declared to customs officials.’ This way, smugglers can easily overcome the DMCC’s due diligence system.

There are also problems with how the DMCC traces the origin and supply chain of gold brought into the country. UAE customs do not require any information about the gold’s origin. So, most of the illegally traded gold is sold in the Dubai Gold Souk and then traded onward to refineries and jewellers. The identity of foreign firms purchasing gold from refineries based in Dubai is also unknown.

Moreover, auditing of the DMCC by Ernst & Young has been reported as weak. Ernst & Young has been accused of ‘unlawful, unprofessional and unethical’ conduct over its relationship with the DMCC. It is believed to have helped an Emirati gold refiner rewrite its compliance report for the DMCC in order to modify the audit findings.

Some traffickers ship up to 40 kg of gold to Dubai every week

Finally, many artisanal miners in West Africa do not have the means to finance their gold extracting activities. They contract loans from Emiratis to start their mining activity, and the only way to pay these loans back is through exporting their gold to the UAE. Although this does not necessarily entail illegality, it is likely that most of this gold is exported through illicit channels.

Mali and the UAE must urgently strengthen their domestic responses (both strategies and procedures), as well as bilateral and regional cooperation, to tackle the practices and trade discrepancies that enable the illegal gold trade between their countries. Dubai’s airport authorities need to closely control and monitor the hand-carried gold arriving from Mali and Africa. They must ensure that travellers provide genuine certificates authenticating the country of origin and tax receipts in the country of export.

Mali’s tax incentives remain attractive for neighbouring smugglers. It is important for West African states to harmonise their tax policies and regulations on gold, starting with better coordination among countries in the Economic Community of West African States. This would mean smugglers have fewer commercial route opportunities.

Finally, the key global issue of traceability must be dealt with. Because of the informal nature of the artisanal mining sector in West Africa, traceability at the source remains difficult. One way to do this is to identify all actors in the trading chain. Because most illegally traded gold from Mali is sold in the Dubai Gold Souk and then traded onward to refiners and jewellers worldwide, it is critical that international buyers’ identities be revealed. International political and economic partners must exert pressure on authorities in the UAE to be more transparent in this regard.

Abdelkader Abderrahmane, Senior Researcher, ENACT West Africa Regional Organised Crime Observatory, ISS Regional Office for West Africa, the Sahel and the Lake Chad Basin

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