India is one of the main gold capitals of the world, with almost a third of all of the world’s gold passing through its borders.1
Goldsmiths across the country stand ready to buy gold from traders and turn it into bullion or jewellery. They ask few, if any, questions about the gold’s origins or whether it’s been legally imported into the country. When paperwork does accompany the gold, many turn a blind eye to potentially questionable information in the documents.
India is at the heart of a web of the illicit trade of gold, with threads spanning the globe.
The illicit trade of gold is a significant problem worldwide, with increasing awareness by stakeholders of its scope. This research seeks to further our understanding of the role that trading hubs play in the illicit gold trade. Specifically, this report examines the role of India as a trading hub and its role for illicitly importing refined gold bullion and doré.
The incentives for gold smuggling—and its impact on national economies of resource-rich countries—have been well documented.
A 2017 report by IMPACT spotlighted how Mali’s low taxes promoted illicit trade, with traders in neighbouring countries smuggling gold over the border to get a tax break when exporting to trading hubs like the United Arab Emirates (UAE).2
Other research by IMPACT has found that the illegal export of gold from the Great Lakes region of Africa to the UAE grew from some five tons per year in 2007 to more than 22 tons per year by 2012. This illicit trade represented over $1 billion USD in value and at least $20 million USD in lost tax revenue to governments in the Great Lakes region per year.3
As an alternative to paper currency, gold is often favoured for money laundering and illicit trade. It is a high-value, easy-to-transport mineral, making it vulnerable to smuggling and an ideal target for armed groups. The illicit gold trade has been tied to armed groups in countries like the Democratic Republic of Congo, Mali, Venezuela, Colombia and more who use the proceeds from gold to fund their activities.4
Artisanal and small-scale mining (ASM) remains largely informal and common. Over 20 percent of the world’s gold is produced by artisanal miners and their informality and in many cases, illegality, make them vulnerable to corruption and violence.5 While traceability and due diligence efforts have been widely introduced, IMPACT, along with other civil society groups including Human Rights Watch, Amnesty International, and the Enough Project, has highlighted the lack of comprehensive and rigorous implementation by the private sector along the full gold supply chain.6 This makes it possible for gold mined in conflict-affected and high-risk areas to enter the international markets.
While the trade of illicit gold into the UAE has been well documented, less attention has been paid to what happens to that gold once it leaves the Gulf state. Trade statistics indicate that a significant portion of gold leaving Dubai makes its way to India, the biggest jewellery manufacturing centre in the world.
Little is known however, about the role that India plays in facilitating the illicit trade of gold.
This report examines the links between India and the gold trade in South America, as well as African sources, such as Ghana and Tanzania, that supply Indian refineries.
The research seeks to better understand the policy vulnerabilities and drivers that make India such an attractive destination for illicit gold. In particular, the report examines Prime Minister Modi’s “Made in India” policy that boosted the domestic gold refinery sector but led to sourcing artisanal gold of questionable provenance.
The report also examines popular routes for the illicit trade, including the role of Dubai as an intermediary between illicit or conflict gold that is sourced in the Great Lakes region and exported to India.
By separating the two streams—doré and refined bullion—we’re able to examine the vulnerabilities and contextual nuances of these respective supply chains. Both routes expose key challenges to India’s official procedures and underscore the lack of proper due diligence by both domestic refiners and designated importers.
