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Misinvoicing amongst TBML typologies used to launder Colombian gold for outlaw militias

By Mark Ford on August 12, 2022

Colombia’s illegally armed groups are using legal gold exports to launder money on an industrial scale and using trade-based money laundering (TBML) techniques such as misinvoicing to export illegally mined gold according to a study of how outlaw militias play a dominant role in the country’s gold trade.

The study published by Colombia Reports, which claims to be an independent news source and not affiliated with any political or social organisation, uses several secondary sources to present a comprehensive picture of how it says more than 70 per cent of the country’s gold is produced by illegal armed groups.

Gold funding

Guerrilla groups like the National Liberation Army (ELN) and outfits formed by dissident members of the Revolutionary Armed Forces of Colombia (FARC), are amongst the organisations involved in illegal gold production and which increasingly rely on gold for their funding.

The study cites evidence amassed by the Organisation of American States Department against Transnational Organised Crime (DTOC) and Global Financial Integrity indicating that illegal armed groups operate gold-based money laundering schemes which, alongside illegal mining, makes criminal activity associated with the precious metal more profitable than drug trafficking.

TBML and legitimisation

The DTOC says that drug trafficking organisations use revenue from cocaine exports to invest in a tangled web of illegal mining activity utilising a network of shell companies and contracts with legal mining companies. They also make use of TBML amongst other laundering typologies.

“Criminal mining networks, unscrupulous companies and illegal miners, among others, launder the proceeds of illegal mining in Colombia through a variety of methods, sometimes abusing the formal financial system, shell companies, TBML [and] fraudulent cash transactions,” according to the DTOC.

The revenue obtained through illegal mining is subsequently invested in real estate or other sectors of the legal economy.

Misinvoicing

In 2019, Colombia reported gold exports of approximately 10 tons over recorded national gold production that year. In previous years, the discrepancy has been even more pronounced.

This suggests the possible large-scale export of illegal gold and the practice of TBML through misinvoicing of Colombia’s gold exports, DTOC concluded.

It also suggests that Colombian criminal organisations will sometimes cooperate with unscrupulous gold exporters in trade misinvoicing activities.

The Colombia Reports study, How Colombia’s gold finances illegal armed groups, can be found here.

The OAS/DTOC report, On the Trail of Illicit Gold Proceeds: Strengthening the Fight Against Illegal Mining Finances: Colombia’s Case, can be found here.