Gold-based money laundering rife in FTZs in Latin America and the Caribbean says OECD report

Free trade zones (FTZs) across Latin America and the Caribbean are vulnerable to illicit trade, according to a detailed and comprehensive new OECD report, Free trade zones and illicit gold flows in Latin America and the Caribbean.

It focuses on the extensive use of gold-based money laundering (GBML) and gold laundering and says that Colón, the world’s second-largest FTZ located in Panama, has a long history as a hub for gold-related illicit trade and trade-based money laundering,

Gold and jewellery

The Colón FTZ has been the location of several gold-related cases over the years, involving not only gold bars but also, and sometimes predominantly, gold in the form of jewellery, the report says.

The authors examine the vulnerabilities of Panama’s FTZs to two gold related criminal activities: gold laundering, in which the gold’s origin is deliberately obscured, and GBML, in which gold is used as a mechanism for laundering the proceeds of predicate crimes.

International operations

The report says GBML operations have linked Colón with Colombia in particular while there are also considerable gold flows between Panama and Miami as well as other destinations.

There have also been indications of gold being smuggled from Venezuela into the Dominican Republic, though it is not clear that such gold enters Dominican commerce. Gold laundering and GBML are known to take place in the Dominican Republic, largely through networks of pawnbrokers.

Modus operandi

According to a well-placed industry source, there are essentially three ways to move gold of questionable origin in Colombia the report says. These typologies may apply in other places too.

The first way is to collect gold from a range of sources without sufficient due diligence, melt it, and export it to a foreign FTZ where few questions will be asked.

The second is to purchase pre-laundered gold and operate through a FTZ, although the source reckoned this is now more difficult as there are “a lot of filters.” The last is to dispense with laundering the gold and operate entirely outside the formal market.

Report scope

The authors examine the risks and vulnerabilities linked to financial crimes in gold trade through FTZs, focusing in particular on Colombia, Panama and the Dominican Republic, although they say that other FTZs in the region, including in island jurisdictions, also carry potential risks for gold laundering and GBML.

The report concludes that FTZs are vulnerable to illicit trade. Despite many governments and zone operators taking steps to mitigate these vulnerabilities, they remain especially acute in trading operations of specific goods, including high-risk gold originating in Latin America and the Caribbean that is often laundered within the region before advancing to destination markets.

The OECD report, Free trade zones and illicit gold flows in Latin America and the Caribbean, can be read or downloaded from here.

Categories: Trade Based Financial crimes News

Tags: , , , , , ,

%d bloggers like this: