Colombia’s gold is almost exclusively exported to the United States and Switzerland. This gold is mined both legally and illegally, then sold to exporters in Medellin before being sent to North America and Europe.
Colombia exported 310 metric tons of gold between 2010 and 2014. Curiously, this is more than the government’s production figure of 287 metric tons.
Investigative journalism website Ojo Publico traced the precious metal’s route from Canadian-run mines and jungle regions under the control of illegal armed groups, to companies including Republic Metals Corporation from the United States and Swiss group Metalor.
Only 17% of the total amount of gold mined in the country is formally recognized to come from authorized mining zones, directed by companies such as Gran Colombia Gold from Canada or the Colombian Mines Corporation, also from Canada.
In a number of cases, locals and multinational mining companies have clashed because of opposing interests.
On top of financial criminality and social tension, the illicit trade is also linked to environmental devastation. Data from the Ministry of Environment and Sustainable Development show that in 2014, there were 17,000 hectares of deforestation and at least 19 rivers were contaminated.
Colombia’s gold rush
The other 83% of Colombian gold is mined under informal conditions without license, often by artisan miners, and reportedly constitutes more than 50 metric tons mined per year.
These illegal groups in some cases forcefully appropriate entire mining operations or provide the machinery necessary to extract the gold from the ground.
In 2014, the police force seized 739 kilos of gold with a value of more than $26 million that would have financed organized crime, according to Colprensa, Colombia’s news agency.
Some of the main non-authorized areas of production controlled by armed groups are in the provinces of Antioquia, Choco, the Amazon and Caqueta.
Following its extraction, 93% of the gold is then transported from these areas and other parts of the country, to Medellin, Colombia’s second largest city, where a number of traders buy the gold and export the precious metal to customers abroad.
Where Colombia’s gold is extracted
Out of the ten principle Colombian exporters of gold, nine are based in Medellin, which is geographically very close to the centres of Colombian gold production. The remaining Giraldo & Duque is based in the southern city of Cali. In the past five years, these groups exported 92% of the gold that left Colombia.
Among the top three of these exporters, Goldex SA is the most significant to have been investigated by Colombian authorities for being involved in one of the largest money-laundering networks in the country.
The president of Goldex is currently in jail awaiting trial for money laundering and terrorism charges after authorities found out that the company was allegedly laundering money for paramilitary groups including the Urabeños.
One of Goldex’s foreign clients Metalor, claimed to have stopped doing business with the company upon hearing the money laundering allegations in September 2013, but records show that they continued to receive deliveries until June 2014.
At the time of the investigation, Colombian police said that six other suspicious companies were being investigated for money laundering.
This year, the disgraced company resumed business with Metalor, sending it almost a ton of gold.
In July, Colombia’s president Juan Manuel Santos declared a war on the illicit trade that is reportedly worth $2.5 billion a year.
Who is trading the gold
Republic Metals Corporation from the United States and Swiss group Metalor are two of the main buyers of Colombian gold, receiving 40% and 23% respectively of the total amount exported. Both groups belong to the London Bullion Market Association (LBMA), the established wholesale market that sets the international price of gold.
Where the gold is exported to
Metalor, also a certified member of the Responsible Jewellery Council, is suspected to have been involved in a variety of illegal gold dealing across South America. Records show that Metalor bought US$521 million between 2009 and 2013 from gold trading company ASPeru who have been linked to illegal mining in Peru.
OjoPublico reported that Metalor has imported hundreds of metric tonnes of illegal gold from exporting firms linked to money laundering.
Republic Metals Corporation, one of Metalor’s competitors, has also been tied to allegations of purchasing contraband gold. As a former client of Goldex, reports say that RMC closed all accounts with Goldex in 2013 after suspicions were raised.
Colombian gold importers
Julia Principe, top Peruvian money laundering prosecutor, and Gustavo Romero, the head of Peru’s tax authority, confirmed that RMC and Metalor are under investigation by prosecutors and police for money laundering cases linked to illegal mining in Peru.
Between them, both Metalor and Republic Metals Corporation to date have financed the gold rush by purchasing 196.5 metric tonnes of gold from Colombia
On July 31, the government said that they will take action to fight the criminal groups that hide behind mining who commit all sorts of “destruction to the environment, to public order, and finance groups outside of the law.”
Among a variety of measures to stop the illegal trade, the government said that police will be allowed to destroy illicit machinery, higher penalties will be incurred and traffic control will be improved.