FIB warns against suspect gold transactions

The ICC Financial Investigation Bureau (FIB) has recently been referred a number of suspicious transactions relating to gold that has purportedly originated in Africa.

The ICC Financial Investigation Bureau (FIB) has recently been referred a number of suspicious transactions relating to gold that has purportedly originated in Africa.

The first case was referred to the Bureau by the South African lawyer of a Dubai-based jeweller who had undertaken to buy several gold bars from a Tanzanian gold trader. The seller had copies of documentation that seemingly proved the gold to be of the requisite purity. The buyer insisted on a secondary test at a venue of his choosing. Without giving any reason, the seller declared he was unhappy with the new testing venue and promptly departed.

When the buyer took issue with this behaviour, the seller’s representative took steps to convince him that the seller was experienced in the gold trade, had been present at the testing and that the stated results were correct. Thus persuaded, the buyer handed over a cash advance of USD 100,000, representing two-thirds of the value of the gold, and waited for the goods to be cleared by Tanzanian authorities for export. The goods were subsequently shipped to Dubai.

The sealed parcels were taken to a Dubai refinery and the bars were found to be constituted of copper and zinc. Despite a clear breach of contract, the buyer is yet to recover any of the advance fee paid.

FIB Manager Karen O’Neill commented: “With gold prices at a record high, it has become one of the favourite commodities for unscrupulous traders to exploit. Cases such as this underline the need for stringent due diligence on all transactions. It is vital to verify the track record of all parties to a transaction, particularly the seller.”

In a second case, an FIB member referred details of an offer received for some gold that appeared too good to be true. On this occasion, the potential buyer was offered gold from Mali at a price some 12% lower than the market value. The offer came from an individual in Malaysia, but his company claimed to be registered in the UK and to have a shipping office in the Netherlands.

The most significant ‘red flag’ in this transaction was that the seller offered up to 10,000 tonnes of gold. The US gold reserves at Fort Knox total about 8,500 tonnes.

FIB also quickly identified suspect terms in the proposed contract that it had seen in a number of commodity frauds. It was thus able to advise its member to take all prudent steps..

Ms O’Neill continued: “Whilst the second case is one of the less convincing contracts we have examined, it did have a number of hallmarks of fraudulent transactions. Perhaps the lesson here is that if an offer appears too good to be true, it probably is. Or, in this case, that not all that glitters is gold.”

For more information on FIB services, please e-mail fib@icc-ccs.org or telephone: + 44 20 7423 6960.