Illegal proceeds are turned into gold in order to evade detection and allow for money laundering practices in the UAE.
Rabat – Years of investigations have revealed the intricate money laundering network that turns Moroccan hash into gold in Dubai. Revelations into the dealings of Kaloti Jewellery International Group in Dubai have unearthed Moroccan examples of a global problem. Earnings from the sale of Moroccan cannabis in Europe move through shadowy networks as gold bullion, destined for Dubai.
Money laundering is the process of turning “dirty money” gained through illegal activities and corruption into legitimate earnings by concealing its origin. For international drug dealers, this process is essential to turn ill-gotten gains into legitimate funds. They can use laundered funds to buy property, invest, or gain interest in savings accounts.
The practice is a significant global issue. Estimates show that every year between $800 billion and $2 trillion is laundered through the global banking system. Roughly 2% to 5% of global GDP goes through money laundering every year, to the benefit of organized crime networks, corrupt individuals, and human traffickers.
For large-scale Moroccan drug dealers, laundering cash is an important part of the process. For each kilogram of cannabis they sell, they get stacks of small denomination bills in return. Selling Morocco’s popular cannabis products in Europe means having to deal with significant volumes of small denominational euro bills. Spending this cash on large purchases such as cars or real estate would attract suspicion.
These organized crime networks have increasingly depended on regions that do not stringently enforce money laundering precautions. In the last decade, Dubai has emerged as a prime location for shady money to transform into legitimate funds.
The Kaloti case
Investigations into Dubai-based gold refiner Kaloti unearthed reports of tonnes of Moroccan gold coated in silver to evade the country’s gold export limits. Corporate accounting firm Ernst & Young (EY) found four tonnes of what appeared to be silver at the Kaloti company in Dubai. Osama Kaloti, son of the company’s founder, assured EY inspectors that this was in fact gold.
Once it arrived in Dubai, customs officials had treated it as a legitimate gold shipment, meant for the Kaloti company. Kaloti assured EY inspectors that this was a normal practice aimed at circumventing Morocco’s gold export limits.
Yet Moroccan hash also turns into gold for money laundering in Europe itself. Some gold retailers on the continent are perfectly happy to turn bundles of small currency into solid gold, for a good commission. And so Moroccan hash becomes gold, in order to move across borders without questions. Once in Dubai, loose anti-laundering laws mean the owner of the gold can sell it freely and stash the proceeds in a bank account.
The findings at the Kaloti company suggest wide-spread money laundering in the United Arab Emirates. When EY reported its findings to the Dubai authorities, they changed local reporting rules in order to hide the dealings instead of addressing the problem.
“Money laundering is giving oxygen to organised crime,” Former Mexican President Enrique Pena Nieto said in 2012. Without the ability to “wash” their cash of its sins, organized crime affiliates could not continue to use their proceeds in long-term investments like real estate.
Large international banks such as HSBC, Deutsche Bank, JPMorgan Chase, and many others have engaged in the practice, according to ICIJ investigations.
Countries like the UAE continue to play a role in legitimizing conflict minerals and help “clean” the proceeds of human trafficking, organized crime, and the international drug trade. When it comes to Moroccan hash, the solution could be to simply legalize one of Morocco’s top cash crops. In the absence of government action, Moroccan hash will continue to transform into gold for criminals.