Colombia’s new proposal for fighting the organized crime elements that are behind illegal mining in Colombia is fraught with peril. According to the Attorney General of Colombia, Néstor Humberto Martínez, to combat this scourge, Colombia’s Banco de la República should have a monopoly on the purchase and sale of gold.
In a document sent to the Minister of Finance, Alberto Carrasquilla, Martinez expressed the need for the Colombian central bank to once again enjoy a monopoly on the purchase and sale of gold in order to prevent the precious metal from being traded on the black market.
“As I have stated publicly, current circumstances make it necessary to adopt decisions that prevent the growth of this illicit industry, which, in our understanding, necessarily involves the need to reestablish the monopoly on the purchase of gold in this country by the Bank of the Republic,” said the nation’s top prosecutor.
However, liberal economist Luis Guillermo Vélez told the PanAm Post that the proposal to return to this monopoly is a very bad idea.
“Each purchase of gold expands the money supply, while each sale contracts it. Monetary policy would have to accommodate the gold market. It would be difficult to control inflation, because the Banco de la República would lose autonomy to perform OMA [open market operations] and manage the repo rate based on the inflation target.” He added that it would also be difficult to intervene in the foreign exchange market.
Martinez stated that for four years, the prosecutor’s office has been working on this issue and has prosecuted four international gold traders and more than 50 domestic suppliers who have allegedly laundered assets worth a total of USD $3.4 billion.
This type of practice, according to Martínez, produces effects ranging from environmental degradation to the financing of illegal groups through front companies seeking to take advantage of commercial activity for the benefit of organized crime, and in order to engage in extensive money laundering activities. This is why he has asked the Colombian government to prevent the generation of illicit income on the part of private individuals involved in lucrative illegal mining.
The lawyer Mario Daza suggested to the PanAm Post that the proposal of the prosecutor is biased against gold. He notes that there are many precious stones, such as emeralds, that involve similar concerns. Yet, the state only wants to criminalize and monopolize the gold industry, making the proposal completely unfocused.
Currently, the Colombian Criminal Code, in Article 338, establishes that those who unlawfully exploit a mineral deposit are subject to prison terms of between 32 and 144 months, and a fine of between 133.33 and 50,000 monthly minimum wages.
“The penal code deals with criminal penalties for mining. Anyone who does not have the authorization to exploit the mining or petroleum sites should be punished. Although it should not be like that in a liberal society. However, this should be the criminal law in force, and not a law against gold. Because gold is a tool for the exchange of goods and services, therefore, the problem would not be gold but the people who traffic in something that is forbidden, that is, the problem is prohibition, not legality,” said Daza.
Recent cases of money laundering with gold
The Colombian prosecutor spoke of two cases in which it was possible to capture the people involved and later prosecute them.
The first is an investigation that revealed the modus operandi used by an international marketer that was called Metales Hermanos and at the same time evidenced the existence of a group of fictitious suppliers of gold, through which they carried out operations of sale and export of tons of gold.
The second case involved the international company CIJ Gutiérrez, which linked several of its suppliers. After a ten year investigation of its commercial operation, the Prosecutor’s Office was able to establish that in that time period the firm made fictitious purchases of gold and reported transactions with non-existent companies, as well as deceased persons. With these activities they were able to launder nearly USD $700 million.