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India is one of the largest gold smuggling hubs, and UAE plays big intermediary: Report

Over a quarter of India’s approximate 1,000 tonne gold imports is not accounted for, says a new report by Canada-based NGO IMPACT.

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New Delhi: India is one of the largest gold smuggling hubs in the world, and UAE is its primary source of smuggled bullion, said a new report by an international NGO.

India imports approximately 1,000 tonnes of gold every year, a quarter more than the official figures. Gold tied to “conflict, human rights abuses, and corruption in Africa and South America” enters India, is transformed into goods and then transported to international markets, said the report by Canada-based IMPACT.

Formerly known as Partnership Africa Canada, IMPACT is a non-governmental organisation which “has been transforming how natural resources are managed in areas where security and human rights are at risk for over 30 years”.

In its report, IMPACT said one third of global gold passes through India, the heart of the world’s gold manufacturing.

“Actors across India’s gold industry are failing to do proper checks on where gold comes from to ensure it’s not financing conflict and human rights violations,” IMPACT’s executive director Joanne Lebert said in a statement Wednesday.

“With its role as a leading global gold manufacturing centre, India must take action to address the weaknesses in its gold supply chain.”

The report recognises that the UAE is India’s largest source of smuggled gold.

It said the UAE plays the role of an intermediary, importing gold doré without proper due diligence. The gold is then refined and exported to India, says the report, adding that this “warrants closer examination”.

According to the report, gold makes its way indirectly to India from Mwanza in Tanzania and Uganda via India-based gold dealers operating in East Africa who export gold to Dubai, which eventually finds its way to India.

In 2014, the Bhimji family was identified by the UN Group of Experts as one of three key exporters of gold from Uganda. While Sameer Bhimji visits India regularly, there is no information that suggests he does direct business with the country. However, a Mumbai-based gold smuggler confirms Sameer’s involvement in illicit trade to India, according to the report.

Bhimji’s house was raided by the Ugandan Revenue authority in 2016 impounding 51.3kg of gold, valued at $2 million USD.

Sameer Bhimji finds himself on the Enforcement Directorate list of both Uganda and India. He is also known to have relations with ‘Bullion King’ of India, Prithviraj Kothari, and his nephew, Raju, for illicit gold trade.

The report presented three factors that are assisting and aggravating gold smuggling in India.

Also read: Gold hallmarking mandatory in India from 1 January, jewellers fear ‘GST-type’ slowdown

Tax breaks

The Government of India ordered tax breaks in 2013 for gold doré (unrefined gold) to boost India’s refinery sector. Taking advantage of this change, traders cover up the origin of gold doré by falsifying documentation, resulting in a rise in its imports from 23 tonnes in 2012 to over 229 tonnes in 2015, the report said.

Falsified paperwork 

The report says gold is either smuggled into India surreptitiously, “with tons of refined bullion evading the authorities”, or it simply enters with the help of “falsified paperwork”.

The source of spikes in gold doré imports can be traced to countries that “lack strong internal controls or are linked to supply chains with weak evidence of due diligence”, noted the IMPACT report.

The report cited data to say India has declared more gold imports from other countries than they are capable of producing. For instance, 100.63 tonnes of gold doré was imported to India from the Dominican Republic between 2014 and 2017, an amount that cannot be accounted for by the exporting country.

Complicit allies

“Refined gold is being smuggled into India primarily from the United Arab Emirates, while key traders and refiners in Africa’s Great Lakes region with links to India have been identified as being part of the illicit gold trade,” said the IMPACT report.

What can be done?

The report makes two recommendations to address the issue of gold smuggling in India: the harmonisation of taxes, followed by an enhanced regulatory system at the border to filter falsified documentation.

IMPACT also pushed for India’s gold industry to follow due diligence and discourage incentives for gold smuggling. Its report said, “Gold traders, refiners, and jewellers have a responsibility to understand, mitigate, and publically report on any risks in their supply chain—all the way back to the mine site.”

In her statement, Lebert said, “India is at the heart of a web of the illicit trade of gold, with threads spanning the globe and almost certainly financing conflict and corruption. Authorities must take action to remove incentives for gold smuggling and ensure the gold industry implements due diligence.

“Until then, anyone buying India’s gold jewellery should be asking questions about where that gold comes from to have confidence in their supply chain,” added Lebert.

Also read: NBFC crisis turns bonanza for gold loan financiers Manappuram, Muthoot


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