Gold Trading Firm Probed in Colombia Cocaine Laundering Case

May 26, 2014 11:26 pm ET

(Updates with additional comment from Goldex in second, eighth, 10th paragraphs; Attorney General in sixth paragraph.)

May 26 (Bloomberg) -- Colombia is investigating the possible involvement of gold trading firms and a Miami refinery in a cocaine money-laundering scheme that’s distorting the country’s trade data, according to the tax and customs agency.

As much as $3.3 billion of gold was smuggled into Colombia in the past two years from countries including Venezuela, Panama, Mexico and Chile, said Juan Ricardo Ortega, who heads the agency known as the DIAN and is assisting an investigation started by the Attorney General’s office in 2011. The contraband metal allegedly was sent via trading firms including CI Goldex SA to the U.S. and Switzerland and bought at inflated prices with drug money, he said. Goldex denies any wrongdoing and said it doesn’t export gold to Switzerland and its commercial ties with the Miami plant have been temporarily halted.

“It’s money laundering, a way of bringing back dollars,” Ortega said in a May 19 interview at a Bogota restaurant where he was accompanied by bodyguards. The DIAN and the U.S. Drug Enforcement Administration are assisting in the probe, he said.

The alleged gold scheme would be part of money-laundering operations that the Colombian government’s financial intelligence unit estimates at about $11 billion a year. Cracking down on illicit transactions is part of efforts to end decades of drug-related violence and boost foreign investment.

Reviewing Evidence

The investigation is centered on Goldex, although other companies may be involved, the Attorney General’s office said in an e-mailed response to questions.

“The objective of the investigation is to determine if Goldex was used to undertake asset laundering transactions,” the Attorney General’s office said. “The Attorney General’s Office is reviewing the collected evidence with a view to making a decision on whether to impute or shelve,” it said.

Goldex is collaborating fully in the inquiry and last year voluntarily opened its offices to investigators to show that all its exports were legitimate and it has had no contact with any illegal groups, it said in a May 22 e-mailed response.

In a subsequent statement sent today after this article was first published, the Medellin-based company said it approached the Attorney General’s Office after finding out about a preliminary probe into supposed fictitious exports that has yet to become a formal investigation. Goldex isn’t under investigation for money laundering or any other crime, it said.

Florida Refinery

Authorities are also looking into the possible involvement of Republic Metals Corp., a refiner in Miami known as RMC, Ortega said. The Attorney General’s office didn’t respond to questions about RMC’s alleged purchases of contraband gold.

RMC closed all accounts with Goldex and related entities last year after raising suspicions “in accordance with its stringent and proactive compliance program,” the company said in an e-mailed response to questions. Goldex said its business with RMC was put on hold by mutual agreement while a certification process was concluded.

Colombia exported 58 metric tons of gold last year and 77 tons in 2012, according to the statistics agency. More than half of that may have been smuggled into the country and booked as local production, with last year’s 28 percent gold price decline tempering illegal activity this year, Ortega said.

Gold is smuggled into the Colombian jungle town of Inirida in small quantities by river from Venezuela, as well as by sea from Panama, Ortega said. A seizure in the city of Bucaramanga several years ago revealed bars stamped by Mexico, he said.

The U.S. DEA’s policy is to neither confirm nor deny any ongoing investigation, Mia Ro, a media relations officer, said when asked if the DEA is collaborating with the investigation.

Rebel Group

Colombia’s Los Urabenos gang and Hernan Dario Velasquez, alias El Paisa, a commander in Colombia’s largest rebel group, the Revolutionary Armed Forces of Colombia, or FARC, are among traffickers using gold to launder cocaine profit, Ortega said.

Colombian authorities say El Paisa was the architect of the 2003 bombing of Bogota’s Club El Nogal that left 36 people dead. Illegal gold mining is a key source of revenue for the FARC, together with returns from the cocaine industry, according to Colombia’s rural police.

As well as implementing programs to regulate the informal mining sector, the government is in talks with the FARC in Havana in a bid to end the country’s five-decade civil war. The two sides reached an agreement on tackling illicit drugs on May 16, with three points on the six-point agenda still outstanding.

--With assistance from Matthew Bristow in Bogota.