Smuggled gold trade thrives in the UAE

A new scandal, revealed by international media, highlighted the severity of the smuggled gold trade in the UAE economy and European efforts to reduce the risks to the global economy.

Switzerland called on its gold refineries to tighten its control over imports from the UAE for fear of damaging its reputation from trading in illegal bullion.

Bloomberg Agency reported that the State Secretariat for Economic Affairs in Switzerland said in a letter on October 11, 2021, that refineries must be keen to take sufficient steps to determine the true country of origin of all gold coming from the Emirates.

The letter pointed to the large volume of imports from the UAE, which is expected to represent 10% of Switzerland’s total imports in 2021.

For his part, Erwin Bollinger, head of the bilateral economic relations department, also told Al-Masafi that the Swiss President, Guy Parmelin, will visit the UAE later this month.

This comes after fears of Dubai’s role in the illegal bullion trade have grown in recent years, after reports emerged that regulatory loopholes were enabling war-related gold and money laundering to get there and trade in it.

Data from the United Nations indicates that Dubai represents the destination of 95% of the gold coming from East and Central Africa. This region is considered a high-risk area for the presence of armed groups.

This raises concerns that this gold could make its way to Western markets, perhaps via Switzerland, the world’s gold refining centre. Some refineries, such as Metalor Technologies SA, do not accept gold from Dubai due to the difficulty of determining its source.

The London Bullion Market Association threatened last year to blacklist countries that do not meet its standards for responsible sourcing, a move targeting Dubai, according to a person familiar with the matter.

The gold that is smuggled from conflict areas globally is called “blood gold”, and reports indicate that the UAE has become a centre for this type of gold.

“If Dubai wants to increase its client numbers globally, it needs to reform its audit policies,” Sasha Lesnev, deputy director of policy at the NGO The Sentry, which released a report on conflict gold and Dubai in November, told Middle East Eye. The gold trade, otherwise, it risks losing a lot of customers, and the gold trade is a big part of the economy.”

According to Dubai Customs, gold has become so important to Dubai’s economy that it has become the most valuable element in the emirate’s foreign trade, ahead of mobile phones, jewellery, petroleum products, and diamonds.

Gold is the UAE’s largest export after oil, as it exported $17.7 billion of it in 2019. The importance of gold only increased after Dubai’s oil reserves dwindled and the UAE sought to diversify its economic sources.

An investigation by The Sentry has previously concluded that 95% of the gold officially exported from Central and East Africa, most of which is mined from Sudan, South Sudan, the Central African Republic and the Democratic Republic of the Congo, ultimately goes to Dubai.

An international investigation had previously condemned the UAE for smuggling gold to finance disputes between countries to serve its ambitions to gain influence and expansion.

An investigation by the Fair Observer newspaper said that the UAE was involved in several incidents of gold smuggling to finance conflicts between countries in Asia and Africa.

The investigation stated that the UAE is one of the world’s leading trading centres for gold smuggling. In 2019, it ranked in the top five places for importing and exporting yellow metal globally.