While anti-graft organisations including the Inspectorate of Government and Ethics ministry deal with corruption-related cases, there is less scrutiny on a far more sophisticated form of crime – illicit financial outflows.
The opaque gold sector in the clutches of cartels has been handed free rein by government to set the rules of the game. This is because government has not streamlined the processes of registration and supervision in the sector.
Firms are now relying on a complex system to hide funds in safe havens and secrecy jurisdictions.
One of the companies facing investigation is Africa Gold Refinery (AGR) owned by wealthy Belgian businessman Alain Goetz.
Mr Goetz is a director or owner of 15 different companies located in Uganda, Dubai, Belgium, and Luxembourg, and eight of these have the same address in Belgium, which raises eyebrows.
AGR has established a $23 million (Shs85.6b) refinery facility in Entebbe to process gold for exports.
An investigation by The Sentry places Mr Goetz, who is close to the political establishment in Uganda, into the crosshairs.
The Sentry is a team of policy analysts, regional experts, and financial forensic investigators that probe corruption, illicit financial outflows, and stolen mineral wealth. They also focus on abetting profiting from war and genocide largely by the political elite.
According to The Sentry report, AGR exported gold at least worth $377 million (Shs1.4 trillion) in 2017 to an affiliate of the Belgian refinery Tony Goetz NV, based in Dubai.
Interviews conducted by The Sentry bring to the fore sticky issues among, which include the allegation that Goetz has refined illegally-smuggled conflict gold from eastern Congo at AGR in Uganda and exported it through a series of companies to the United States and Europe.
Given the geo-political implications in the volatile Great Lakes, Uganda should be worried about giving sanctuary to an investor who is dealing in conflict minerals from the DRC.
In 1999, the International Court of Justice (ICJ) slapped a $10 billion (Shs37 trillion) penalty on Uganda for plundering minerals from eastern DRC and committing crimes against humanity during the protracted conflict in the late 1990s. Uganda is yet to pay this debt, which outstrips its annual budget for this financial year.
According to the United Nations (UN), conflict gold provides the largest source of revenue to militias and other actors involved in the flashpoint eastern Congo, where an estimated 3.3 to 7.6 million people have died.
A number of sources interviewed by The Sentry pointed at AGR as sourcing conflict gold from DRC.
Twelve traders and government officials in the region told The Sentry that AGR has trafficked a huge amount of gold from DRC to Uganda.
This has driven the volumes of Uganda export records reviewed by The Sentry, which indicate that AGR accounted for more than 99 percent of gold officially exported from Uganda in 2017.
The UN group of experts reveals that Uganda is also the main transit hub for gold smuggled out of Congo. Two major gold smugglers in Congo confirmed to The Sentry that they illegally trafficked gold from eastern Congo to AGR and other regional gold traders backed these accounts.
The Sentry revealed that four regional traders mentioned gold traffickers, Buganda Bagalwa and Mange Namuhanda, who have been named in several U.N. Group of Experts reports on Congo as purchasers of conflict gold, supplied gold to AGR in 2017.
AGR in its response specifically denies having received gold from Bagalwa or Namuhanda. It also rejects allegations that it received significant amounts of undocumented gold from other sources.
These claims are noncompliant with both international supply chain due diligence guidance and international anti-money laundering safeguards because the network’s companies buy, refine, and then sell the gold.
In Uganda, AGR has been handed a tax waiver, which was not approved by Parliament.
On the heels of AGR’s opening in 2014, Uganda increased its gold exports by a staggering 85,000 percent, going from exporting a paltry $443,000 (Shs1.6 billion) worth of gold in 2014 to an estimated $377 million(Shs1.4 trillion) in 2017.
Mr Goetz resigned from the position of Chief Executive Officer not long after The Sentry report was released, and has since been replaced by Mr Alphonse Katarebe.
AGR said: “The Golden Laundromat, a 56-page report by the United States non-governmental organisation; The Sentry, which attacks the African Gold Refinery (AGR), contains several untrue and wild allegations, and is biased.”
The company says The Sentry did not attempt to speak to its officials to get their side of the story.
Rejecting the allegations they said, “The AGR compliance team conducts detailed checks on our first phase clients by inspecting the relevant documents of the supplier of the raw material. We have turned down a considerable number of individuals who did not have the relevant and necessary documentation.”
Highly placed sources that preferred to speak off the record, have revealed that beyond Mr Goetz are senior government officials and security personnel involved in this sector.
Many of them are trading in trafficked gold largely from DRC and South Sudan where Uganda’s army has been involved in military adventures.
“Kampala is a major transit for smuggled gold from Congo and South Sudan. Even as we speak now, there is a gold deal being executed in a hotel or elsewhere,” revealed the source.
A number of watchdog organisations in Uganda have commenced investigations on AGR including claims of money laundering, under-declaring, tax evasion and flouting registration requirements.
Uganda’s Financial Intelligence Authority (FIA) is among the bodies tasked with enforcing the registration of gold mining activities.
The FIA’s executive director, Mr Sydney Asubo, says the sticky issues surrounding this company were recently thrust into the public domain by The Sentry report.
“Of course we are aware of The Sentry report. We are aware of other reports. One of the issues they claim is the non-reporting arrangement with FIA. We responded to say that it is not true. We do not have powers to exclude anyone from reporting.”
Mr Asubo said: “We have written to the Director of Public Prosecutions to have this company prosecuted for two crimes; refusing to register, it is also a crime to disobey the directives of the FIA. The law requires that all accountable persons should register by end of year. They should have been registered by December 31, 2016. That requirement is emphasised in the 2015 anti-money laundering regulations.”
He revealed that whereas FIA will enforce the ancillary offences, there are more gross allegations being pursued by the Inspector General of Government and other agencies against AGR including money laundering.
According to an audit report for the financial year 2016/17, Uganda lost a staggering $16.95 million (Shs65b), in undeclared royalties in the exportation and importation of gold in 2016/2017.
The audit indicates that the Directorate of Geological Surveys and Mines issued gold export permits for only 16.281 kilogrammes, yet records from Uganda Revenue Authority, indicated that 8,691 kilogrammes of gold, valued at $339 million (Shs1.2 trillion) were exported from Uganda in the financial year 2016/17.
Gold is now the second largest foreign exchange earner for Uganda after coffee, according to Bank of Uganda statistics.
As a result, Uganda loses revenue for both exports and imports. The local gold sector is dominated by small-scale and artisanal miners. They however are being pushed out of the fields by investors who are close to regime cronies.
Recently, in Mubende District artisanal miners were expelled from the gold mines in favour of an investor. Emerging reports indicate that security officials deployed in the area are involved in gold mining.
According to the new mining policy, government plans to streamline their activities, enforce transparency and improve the safety records in mines.
A recent visit to Buhweju District in western Uganda, revealed that many areas rich in gold deposits are enveloped in poverty.
“The schools, roads and hospitals are in an ailing state. Buhweju is the capital of poverty in western Uganda. We shall no longer accept investors who come here to exploit locals,” opined the area Member of Parliament, Mr Francis Mwijukye.
Yet in the interest of the cartels, they are better off with an opaque gold sector away from the prying eyes of law enforcement officials.
This story was done with support of Wealth of Nations, a media skills development programme run by the Thomson Reuters Foundation. More information at www.wealth-of-nations.org. The content is the sole responsibility of the author and the publisher.
By Emma Mutaizibwa