Govt. to beef up systems to curb gold smuggling

Jun 18, 2024 News

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– promises stricter enforcement, forfeiture of assets

Kaieteur News – In a move to combat rampant gold smuggling, Vice President Bharrat Jagdeo last Thursday said there would be a comprehensive legal overhaul of the system aimed at imposing stringent penalties on large-scale gold smugglers.

His remarks were as a result of the recent sanctions on Guyanese billionaire Nazar Mohamed, his son, Azruddin Mohamed, by the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) for allege corruption – including gold smuggling and evading taxes. The US Treasury in a report alleged that between 2019 and 2023, Mohamed’s Enterprise omitted more than 10 thousand kilograms of gold from import and export declarations and avoided paying more than US$50 million in duty taxes to the Government of Guyana (GoG).

Addressing the media at his press conference held at Office of the President, Jagdeo outlined a series of measures intended to clamp down on illicit activities that have deprived Guyana of significant tax revenues. He first highlighted a robust multi-agency system in place to ensure that gold exported through the system is properly certified. Jagdeo said, “Now, clearly we have to strengthen this arrangement further and possibly by some review by an external consultant to strengthen this to see what additional safeguards we can put…”

He expressed concern over the discrepancies between reported exports and the actual imports reported by those nations. He said, “Because when you look at the UN [United Nations] trade data, the UN trade data show how much gold was declared…and how much was exported. There is a discrepancy, but it is not of the magnitude like what the US has said been smuggled there.”

However, he noted that gold smuggling in such large quantities should be captured in the UN trade data. “So there are issues, so we may have to work this through a system and get more help from those countries to which [gold is] exported because they know what the figures are they could easily see in Guyana, every year, how much gold we exported, and how much they received because it’s part of their trade stats, and they can easily send us this information,” Jagdeo added.

Moreover, the Vice President highlighted the need to bolster existing systems with additional safeguards to prevent gold from being illegally shipped out of Guyana.  Jagdeo noted that there is no deterrence to smugglers because they might believe that if caught, they will only be subject to a small penalty under the Gold Board Act. He pointed out that current penalties under the Gold Board Act are insufficient to deter large-scale smugglers.  “So clearly we have to strengthen the system,” it was stated. Jagdeo noted that when the gold is smuggled, the country loses the royalty payment as well as the 5% corporate tax. He also pointed out that gold smuggling can also be used for other purposes like money laundering.

To this end, he underscored that while government awaits assistance from the countries importing gold from Guyana, strengthening the system of penalties should also deter smugglers.  He clarified that the efforts will be more focused on the big exporters smuggling gold. Notably, he disclosed that additional penalties are likely for the three individuals that were recently apprehended at Cheddi Jagan International Airport (CJIA) attempting to smuggle 240 ounces of virtually pure gold out of the country.

Jagdeo explained that the trio was charged in accordance with the Gold Board Act where the penalty is minuscule. “I’m told they are also going to be charged under the Money Laundering Act. That is additional charges coming. So it’s not just one end, we need to strengthen the charges and the penalties for illegal smuggling of gold abroad by these large smugglers,” he said.

Furthermore, speaking on the strengthening the penalties for gold smuggling, Jagdeo said that government needs to make the financial penalty more substantial. He explained that according to the Customs Act, individuals who evade taxes by smuggling goods will be subject to a fine three times the value that would normally be paid on the items. The Vice President explained, “So, like in this case now, it’s estimated that the US$50 million we lost is 7% of the total value of the gold, that is the royalty and tax rates amount to 7%…” He continued, “If you had to pay triple the value on that, you’ll probably have to pay a penalty of 25% of the value of the gold. Something of that nature so we may want to take what we do at customs now and introduce it here for the evasion of [tax] on gold.” This means that gold smugglers will not only have to pay the taxes they evaded but also incur a penalty that is several times the amount of the evaded taxes.

“So if you get caught, there’s a big risk. First of all, you get charged under an act that has severe penalties. Secondly, there’s a big financial risk because you have massive fines,” Jagdeo noted. The Vice President’s third proposal is exploring forfeiture of assets arising from illegal proceeds.  This practice is done under the laws dealing with money laundering and drug trafficking.

“So we intend to strengthen this to tackle gold smuggling to get more risks to the smugglers…” he said. Additionally, the Vice President expressed disappointment that despite all the incentives government implemented for the mining industry, smuggling is still rampant. “We have lowered the taxes so that they can have a better environment but still no compliance because the rewards of smuggling seem to be greater, the foregone tax revenue seems to be a big incentive,” Jagdeo said. He continued, “We have to take away that incentive now by putting a regime of penalties and sanctions if you get caught smuggling the large quantity of gold…I’m talking about these smugglers who have been smuggling at this magnitude.” Moreover, Jagdeo reiterated Guyana’s commitment to collaborating with international partners, including the United States, to tackle the issue effectively. “We have already requested their help and we hope that that help,” he stated, hopeful for prompt cooperation on the recent sanctions by the OFAC.

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