132 by Roger Dixon1*, and Robert Schouwstra2 The role of forensic geology in the illicit precious metals trade 1 University of Pretoria, Pretoria, South Africa; Officer for Africa, International Union of Geological Sciences, Initiative on Forensic Geology (IUGS-IFG); *Corresponding author, E-mail: [email protected] 2 Independent Consultant: Mineralogy, Roodepoort; Adj. Prof. JKMRC, UQ; Affiliated Assoc. Prof. Geology Dept, UFS; Adj. Prof, Chem Eng. Dept., UCT, South Africa, E-mail: [email protected] (Received: November 7, 2016; Revised accepted: March 7, 2017) http://dx.doi.org/10.18814/epiiugs/2017/v40i2/017015 The proceeds of the illicit trade in precious metals are leading gold supplier to the USA during 1989 (George, 2007), even used as currency to pay for, for example, other illicit goods though the country had no gold industry, as a scheme for covering up and support terrorism. Precious metals are often mined in narcotics profits. International terrorist groups also regularly use gold less developed countries and exported to and refined in as a bargaining tool. Prior to and during the US attack on Afghani- more industrialised regions. International cooperation, stan, al-Qaeda moved funds out of that country by smuggling gold, sophisticated analytical techniques, combined with repre- diamonds and other precious stones across borders, and then to Dubai, sentative databases make it possible to trace the source of from where the funds were spread across the world, including the USA (Farah, 2002). Due to the general absence of formal banking these stolen precious metals with the aim of obtaining systems in the Middle East, North Africa and Asia, the informal Hawala successful prosecution of the culprits. In this paper the system is often used to refund gold deliveries, where money is trans- problem of illicit trade in precious metal-bearing materi- ferred across large distances by e-mail or telephone calls, and all records als and the effects it has on the countries in which the are destroyed afterward. These and many other routes exist whereby material originates is discussed. Combined with geological illegal funds can be legitimised, using precious metals and precious knowledge of the origin of the material and knowledge of stones, often themselves having been obtained by illegal means. the beneficiation processes utilized, enables determina- The illegal mining of gold in the Democratic Republic of the Congo tion of the provenance of unknown materials and whether (DRC) generates profits, which are reportedly used to buy arms and the suspect material is illicit or not. Recent legislation with fund the civil war (Donovan, 2014). In the DRC, criminals rely on the regard to international trade and the need to ensure the legal- state’s inability to control its territory and borders. It is reported that ity of the material traded is discussed, and some examples around 70 per cent of the gold currently being mined in the DRC has of the effectiveness of the forensic investigation of gold been exported illegally (White, 2005), reaching up to 95 per cent in and platinum-group metal criminal cases are provided. the eastern DRC (BSR, 2010). A large volume of illicitly mined gold is smuggled into Uganda where it is bought by traders who, by com- pleting the requisite customs and export forms, export it legally and in The Problem the process launder it (Bariyo et al., 2013). Although Uganda has rela- tively little domestic gold production, it was still able to export US Illegal trade in stolen precious metals and diamonds is very profit- $60 million in gold in 2002. A large proportion of this gold is known able due to their high values and established identities as global cur- to have reached South Africa (Haken, 2011). The thriving illicit gold rencies. With high poverty levels, especially in the less developed market in South Africa is also a market for illicit gold from other parts countries, which coincidentally have substantial gold reserves, the of Africa, including the so-called “blood gold”, mined in war-torn theft and illegal mining of gold is rife. For the platinum group metals, regions in order to fund paramilitary activities (Bariyo et al., 2013). In which have fewer sources and a more complex beneficiation process, 2012, the Rand Refinery, the largest gold refiner in the world, processed theft is mainly of intermediate products in the beneficiation chain, over 440 tons of gold, almost twice the legal production recorded for from smelters and refineries. The ultimate beneficiaries of this illegal South Africa. The balance of the gold refined was mainly from South trade are often well-organised syndicates also involved in a variety of American and African sources, and submitted by a variety of parties other illegal activities, such as drug and firearm trafficking, with (Rand Refinery, 2012). wide-reaching contacts. These organisations present a global threat, The illicit gold trade is worth more than US $2.3 billion annually. and could best be monitored and opposed on an international level. Major producers of illicit gold are Peru (40% of its gold production Established money laundering systems using gold have been found in 2012 was illegal), Russia, Mali, Brazil, Uzbekistan, Papua New in many European countries, such as Switzerland and Italy, and from Guinea and Argentina. The rise in the price of gold has spurred on the there across the world, including the USA, and South and Central illicit trade, as policing the artisanal producers is often impossible or America (UNICRI Report, 2016). Reportedly, Uruguay became the very difficult (Haken, 2011). Most of the profits go to the middlemen, June 2017 133 who in many cases are syndicates, and the country of origin benefits little from this illegal trade. As a result of the extent of the illicit min- ing in Peru, and its damage to the economy, illegal mining has been criminalised and the Peruvian government is making a major effort to curb these activities, after years of inaction (Andean Air Mail and Peruvian Times, 2012). Compared to gold, world-wide platinum production is relatively small. Platinum supply in 2015 was just less than 200 tonnes (around 6 percent of the total gold production). The complexity of platinum group metal processing and refining means that illegal mining is almost unheard of in the platinum industry. The theft of products is however a much more serious problem. In 2006, the Institute of Secu- rity Studies estimated that US$ 37 million of platinum group metals were stolen and exported from South Africa in one year through the activities of one syndicate, whereas in 2008 the estimated annual value of stolen material worldwide was 150 million Euros (CIP Proj- ect Report, 2008). Mining companies have put extensive security pro- cedures and systems in place to protect the refineries where the high- grade materials are produced. However, this has forced product theft upstream, with smelter products being especially at risk, although the last few years have also seen an increase in theft from concentrators. The large loss of income to the mining industry as a result of illegal mining, as well as the theft and illicit trade in precious metals, simulta- neously results in a loss of national income to the state from revenue, as well as a loss of available jobs to mineworkers as a result of increased Figure 1. Illegal miner underground, with a mortar and pestle in production costs. The domino effect of job losses leading to a variety which concentrate is crushed together with mercury to amalgamate of economic and social problems can have crippling effects on entire the gold particles. The photograph was retrieved from a camera belonging to an illegal miner (Photo: Willem Els). communities due to the extremely high rates of unemployment. In South Africa, one worker is estimated to support an average of about 10 people who are dependent on this income (Stoddard, 2013). This successfully. On the opposite end of the spectrum, it is a relatively problem has echoes in a number of other countries (Haken, 2011). simple process to implement for “coltan”, or columbite – tantalite The circulation of illicit gold and platinum group metals is con- (e.g. Savu-Krohn et al., 2011; Gäbler et al., 2011), much of which trolled by large criminal syndicates, which are heavily involved in other derives from the war-torn areas of Africa (Lublinski et al., 2010). criminal activities within South Africa (Coetzee and Horn, 2007). Ship- Similarly, due to its nature, it is possible to fingerprint precious met- ments of precious metals from other countries can readily be assimi- als. Fast identification of illicit precious metals using certified and lated into the illicit gold circuit, and illicit precious metals from South internationally accepted methods utilising universal databases, and Africa are also shipped to refineries in Europe. identification of the original producers, would promote worldwide In South Africa there exists a legal requirement to relate recovered cooperation and trust. It should ultimately be possible to prevent ille- stolen precious metals (i.e. natural (alluvial, etc.), stolen from mine, gally obtained precious metals from re-entering the legal economic smelter or illegally processed in a backyard) to source, and also to systems, and therefore drastically reducing the profits to the smugglers. identify the process by which it was beneficiated in order to confirm or refute its origin (Precious Metals Act, 2005; Smith, 2008) (Figure 1). Section 1502 of America’s Dodd-Frank Wall Street Reform and Legal and Forensic Requirements Consumer Protection Act requires companies listed on the US Exchanges dealing with the 3T's (tin, tungsten and tantalum), gold and also gem- Smith (2008) looked at international legislation regarding precious stones, to submit an annual report describing their measures to ensure metal mining and trade, and showed that there was no consistency in their material is “conflict-free” (Dodd-Frank, 2010).