Gold bars

Gold bars. Nairobi is now viewed as the epicentre of gold scamming in the world.

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Nairobi and the making of a Sh4.2 trillion gold scam fortress

Nairobi is now viewed as the epicentre of gold scamming in the world. At the centre of the scamming is gold from mainly the Democratic Republic of Congo (DRC), although some of it has been traced to South Sudan and as far as Guinea Bissau, Liberia and Central African Republic.

With one of the world’s largest gold deposits some 4,000 kilometres west in DRC, Kenya’s comparatively developed aviation, technology and commerce industries have provided an irresistible staging ground for illicit told trafficking for business elites in the Middle East, Asia, Europe and the United States.

Nairobi is also home to the world’s thriving fake gold industry, which years-long investigations by Global Initiative Against Transnational Organised Crime (GI-TOC), is as equable as the genuine one, hence the phenomenal rise of “a cadre of grifters… who seek to convince unsuspecting buyers that they have access to a portion of it (gold)”. The still-point of the evolving epicentre is the executive arm of the government, which investigators cast as the swamp that needs to be drained as part of the political and humanitarian strategies to clamp down on the atrocities in eastern DRC, which is credited with almost 30 per cent of the world’s precious mineral production – particularly gold and diamonds.

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The unveiling of the report, titled All that Glitters: Revelation from a Kenyan Gold Smuggler, coincided with the arrest of members of a criminal ring at Garden City on Thika Road, Nairobi, that was on the verge of defrauding a Tunisian businessman of Sh12.8 billion.

Nairobi’s murky gold underworld is estimated to be $28 billion (Sh4.2 trillion), which is Sh520 billion above Kenya’s 2023-2024 national budget of Sh3.68 trillion. “The promise of quick riches is used to lure in unsuspecting marks, often westerners seeking to play out a modern rendition of the Scramble for Africa…”, says the report, published on September 8.

Because illicit mineral business is a poorly policed, many “gold dealers seem to have calculated that there is more profit to be made by using and re-using genuine gold as bait for scams, rather than selling the metal outright. As such, Kenyan gold fraud rings may be better described as specialising in financial rather than resource crime.”

It is a phenomenon the police acknowledge and describe the capital city’s upmarket Kilimani residential area as “Africa’s fortress of gold scams”.  “This is a huge cartel; a huge cartel, and the cartel they like dropping very big names; huge names. A cartel involving Kenyans, Congolese, Liberians, Nigerians, Ghana, and they operate in a very sophisticated manner,” says Director-General of Directorate of Criminal Investigations (DCI) Amin Mohamed Ibrahim.

When The Weely Review sought a comment from the Ministry of Mining, senior officials were reluctant to discuss trends in the industry – especially gold exports. Director of Mines Gregory Kituku instead referred us to the ministry headquarters for data fearing “these can cause me problems”.

While import records in the UAE show tonnes of gold arriving from Kenya annually, there is little evidence of Kenya exporting huge quantities of the mineral because the country has no known deposits of commercial value.

The GI-TOC report says gold smugglers in Nairobi treat third parties – even fellow criminals – as targets of fraud rather than business partners. The unpredictability and underworld nature of the business is further undermined by a serious trust deficit compared to similar crime industries such as drug trafficking and money laundering in East Africa. 

Against this backdrop, the report says that often there is no need to develop the trust trajectory that characterises other illicit economies. Any element of trust is established “solely for the purpose of short-term gain rather than for cultivation of a criminal relationship and/or the building of a wider criminal enterprise.” “Potential buyers of African gold do not typically belong to established criminal groups and are operating in a foreign environment.

They are therefore unlikely to have the option of enforcing deals through violence (a feature of drug trafficking). Likewise, the fact that these deals take place in the margins of the law means that defrauded parties often have no recourse to the legitimate justice sector. Even when gold fraud cases end up in court, there are few consequences for the perpetrators, and similarly little chance of compensation for the victims,” according to GI-TOC findings.

Just like narcotics – which involves the high and mighty in society that give the business financial muscle and ‘mules’ that do the legwork for the drug lords – illicit gold underworld, investigations demonstrate, is a tightly controlled network. In Nairobi, the illicit gold business enjoys the protection of powerful offices in the executive, the judiciary and legislature.

  “The infiltration of customs, police and other local authorities allows fraudsters to extract strings of ‘facilitation’ payments from the victims of scams, until the latter give up in frustration and the process is repeated on new targets,” according to the GI-TOC, a non-governmental, non-profit international organisation headquartered in, Geneva, Switzerland.

“Nonetheless, insurgent groups, pro-government militia and criminal networks have all continued to benefit financially from the smuggling of conflict minerals, particularly gold. According to a German geoscience institute, artisanal miners in Congo produce a staggering 15 to 22 tonnes of gold per year (this equates to between around $940 million and $1.38 billion at current market rates). As of December 2019, only 106 gold mines of approximately 1,500 in the DRC were officially certified as ‘conflict free’”.

It explains why and how countries east of DRC – Burundi, Rwanda and Uganda – are conduits for the bulk of illicit Congolese gold because of both their geographical proximity as well as networks established during their participation in the DRC conflict.

“However, Kenya also plays a major role in the regional illicit gold trade, and Kenyan nationals have routinely been named in UN sanctions reports. On one infamous occasion, the smuggling of Congolese gold through Kenya caused a diplomatic incident. In 2011, then-DRC President Joseph Kabila personally came to Kenya in search of over 2.5 tonnes ($100 million) in gold looted from his country.

 It subsequently came to light – at considerable embarrassment to the government – that the two key brokers of this deal were Kenyan citizens, one of whom owned an artisanal refinery (as well as a major group of hotels) in Nairobi,” the report says. It notes further that while UAE imports of DRC gold have skyrocketed, official export figures from African countries have not kept pace, strongly suggesting that much of the precious metal reaches the UAE illicitly.

Indeed, a 2019 Reuters investigative report found that the UAE had imported gold worth $11.3 billion in excess of official exports reported by African nations. The trend takes a similar pattern in Kenya where recent UN Comtrade data shows Kenya’s global gold exports in 2021 (the most recent year for which UN Comtrade data is available) was about $16 million. This is far below the $200 million UAE data for gold imported from Kenya. The discrepancy of $185 million in the data from two countries illustrates the movement of illicit gold in the underworld.

Data tallied by the UN, The Sentinel Project and other international investigating agencies return verdict on similarity of discrepancies in proceeds of gold from Nairobi.