Washington, D.C. — U.S. Senator Marco Rubio (R-FL), Chairman of the Senate Foreign Relations Subcommittee on Western Hemisphere, Transnational Crime, Civilian Security, Democracy, Human Rights, and Global Women’s Issues, convened a hearing titled “Illicit Mining: Threats to U.S. National Security and International Human Rights.”
Portions of Senator Rubio’s exchange with the witnesses are below.
Rubio: Thank you. Let me begin with Ms. Thompson and Mr. Lechleitner. We’ve seen numerous cases where there are private planes that are being used to transport illegal gold. How can we boost scrutiny of such flights at our nation’s airports and encourage stronger customs enforcement in countries through which the illegal gold passes?
Lechleitner: Thank you, Chairman. It’s a very difficult issue because of the way that gold is handled, and it’s virtually impossible once it’s melted and combined together to trace it. It’s very difficult to tell if it’s illicit or licit. One of the best solutions, I believe, would be working with our foreign partners to determine where this gold is being sourced and potentially where these flights are coming from. Working with our partners in transnational investigative units both domestically and abroad to determine where these flights are coming from and their source countries would be a way that we could potentially attack this issue. It’s not an easy issue, it’s very easily hid, and it’s very easily obscured. But only with the participation of our foreign partners, I think, can we really attack the issue to any measurable degree.
Rubio: Let me ask you both, maybe you guys can help us just logistically if you could walk us through how, for example, illicitly mined gold in Peru, in Venezuela, wherever, winds up in our marketplace here. What are the steps? Obviously they illegally mine it and then what happens? If you could just walk us through how it gets here – typically.
Thompson: Well there’s two main ways that it’s going to enter our markets. One is through fraudulent documentation that is given at the border. And the other way is the smuggling. So to take a step back, you said the gold is obviously illegally mined, and then it’ll pass through a number of hands – sometimes it’s more direct, sometimes it really is a number of hands – to hide the original source of the gold. And then sometimes that involves shell companies, and then as I said, it’s the two primary ways that it enters the U.S.
Rubio: But physically how does it get – does somebody have it on their person in a commercial flight, do they send it FedEx? I mean how does it-?
Thompson: Oh, sorry Sir. Yes, both. So for example if it’s crossing and declared when it’s coming into the country it can have fraudulent documentation with it – that’s one way the illegal gold can come in. The second is the smuggling routes which we had talked about a little bit earlier where it’s melded down – belt buckles, jewelry, purses, things like that – and that’s a way to smuggle it in.
Rubio: So I arrive at Miami International Airport with gold bars in my suitcase. What are the declaration requirements when you land?
Lechleitner: If it’s greater than $10,000, you need to declare it. But there would be no way to determine if those gold bars are illicit or licit.
Rubio: Right. But if it’s more than $10,000 they’re supposed to declare it. Obviously it’s the equivalent of cash in that case, right? How many of the entry points do we think come in through just the regular commercial flight where people are going to carry gold in amounts less of $10,000, but with sufficient back-and-forth travel to get it into the country in numbers that make sense for them?
Lechleitner: A specific number, I don’t have. We can research that and get back to you on the specific numbers if we could find that. We do know that the gold is coming in through various sources, both legitimate and illegitimate. What’s happening is in the source countries it’s being melted down and combined, and then it basically legitimizes it – launders the gold. Very often it’s coming in and it’s essentially legitimate commodity at that point.
Rubio: So one route is the way they clean it up and that they launder it basically. And that is they take the gold, they either pass it through various entities until it’s sort of – the paper trail makes it look like it came from – no one knows where it came from. The other is it’s melted down and mixed with other sources – again untraceable anyways – and then it comes in through the normal commercial transaction vias for the importation. The other is – and it was one of the cases that they were highlighting to us in the past – is somebody actually arrives at the airport in Miami, gets through customs, and then drives down to some company who converts the gold into a cash transfer. So what has happened with that route in terms of bringing it in? Do companies now – if I show up with a bunch of gold at one of these exchanges and they wire cash to me in exchange for the gold, does that transaction and wire have to be reported?
Thompson: It depends upon what you mean by being reported, because one thing with the reporting – and it’s an issue – is gold is not considered a monetary instrument, it’s considered a commodity. So, the paper trail is very minimal with the gold. So, there is no financial reporting to track, so when it comes to the payments – I mean that’s what we have like in the case you referenced – there was money wire transfers, so that’s what we were able to track.
Rubio: You were able to track the wire, but does it specify that this is turning a commodity into cash for the seller, and then that transaction is reported? Is that how that works?
Lechleitner: No, I don’t believe so. That wire is just a money transfer.
Rubio: Without knowing that the source of it was sold $10,000 worth of gold in exchange for $10,000 cash wire.
Rubio: So you have to know who to look for.
Rubio: Because if you’re just scouring transactions, that alone is not going to tip you off.
Lechleitner: No, that’s correct.
Rubio: And if the transactions are under $10,000 there is no reporting, correct? On the wiring side.
Lechleitner: Well with gold, like was stated, because it’s a commodity it’s handled a little differently. But even transactions – if you do enough of them under the $10,000 threshold that’s called structuring.
Rubio: Under the banking system – if you go to a bank I think the threshold is $10,000 as well. Any transaction over $10,000 there has to be a record made.
Rubio: So if you go to one of these exchange houses that buy gold from people, and you show up with $9,999 worth of gold and they give you cash for it – that’s not reported anywhere, correct?
Lechleitner: I’ll have to research that. I don’t believe so.
Rubio: Mr. Glenn, let me ask you. What can we do to bolster the investigatory and enforcement capacity of the governments in the region to go after firms that are laundering? We just talked about how some of this stuff is taken – illegally mined and mixed in with the other stuff and the other gold and so forth, and then at that point sort of they’ve laundered it basically, for lack of a better term. What’s the best thing we can do? Obviously in Venezuela the government is actively participating in it. But in places like Peru, Colombia, El Salvador, and others that want to be cooperative – what do they need and how can we help them to increase their capacity? And that’s for anybody who has an idea, by the way.
Glenn: Thank you for the question; it’s an excellent question. We’ve actually had, I would say, considerable success with Peru since they decided to attack this problem head on. Political will from President Vizcarra and his decision to take this problem on has been essential. In terms of our assistance and what we’ve been able to do to help, and what we can do to help in other countries – I think is very good if we model if upon what we’ve been able to do in Peru. So, we focus on building the capacity of investigative agencies to be able to do the complex types of investigations. We do that through partnering with the FBI, with DHS, with other U.S. agencies that have the expertise – we can bring those experts down to Peru, to Colombia, to El Salvador, to whatever country, and we can share those best practices and expertise. Another essential part is making sure that they have the laws that exist that gives the government the tools or the hammer or the stick that they need to do enforcement. So, in many countries asset forfeiture laws do not exist or they are weak or they are unenforceable. So we work to help them reform those laws or to pass those laws in the first place. And, then train, again, investigators, prosecutors, and judges so that they then have the confidence and ability to enact those laws. So going at if from a criminal and regulatory perspective has been essential. It has proven successful in Peru. There have been a large uptick in the number of cases that they’ve been able to successfully prosecute. So that’s one of the many ways that we can go about it, but we know that that one is successful.
Rubio: Could you just update us on the status of the 2017 Memorandum of Understanding with the Peruvians.
Glenn: The MoU with the Peruvians was essential in large part to get the U.S. government side talking to each other and in order. It then helped the Peruvian side as well to get their side – just like us there’s multiple agencies within the Government of Peru that engage on this issue. That MoU that was signed under the time that Ambassador Nichols was there has been continued under Ambassador Urs. We used that MoU to model a similar MoU in Colombia. And those have been the documents that we’ve used to strategically focus our assistance, our law enforcement efforts, and to help our partners do their part. But those MoU’s are focused not just on law enforcement; they’re focused on looking at alternatives – to formalizing the mining sector, getting the mercury out, and it’s a comprehensive approach.
Rubio: I’m sorry to go back to Mr. Lechleitner and Ms. Thompson for a second. I forgot to ask. What evidence do we have or are we seeing the use of shell companies in the United States to help launder money associated with this?
Lechleitner: Yes we are, quite a bit. We’ve seen quite a bit of shell companies – specifically I can address some that are in Florida, South Florida.
Rubio: Any in Maryland?
Lechleitner: No. Very often they go back to a residence and we’ve seen some commonalities with some B1/B2 holders as well – but shell companies are being utilized to launder the money.
Thompson: And to add to that – sometimes it’s not as simple as just a shell company. They often engage in what’s called layering. There will be multiple shell companies, therefore making it ever harder to track the documentation.
Rubio: Which is now a shameless plug for my bill with Senator Wyden to unmask some of these companies that are being used for these illicit purposes. Mr. Haeni, I’m gonna ask you, how is the USAID programs that are helping miners and targeting the artisanal miners? Can you give us an update on those programs?
Haeni: Sure. And as you noted they are a critical component to the MoU’s that were signed both in 2017 with Peru and in 2018 with Colombia. USAID Peru’s recent $23.9 million program is in direct support of that MoU, as is the ongoing Sensilla Project, which as Mr. Glenn mentioned, helped to establish the first ever mercury testing facility in Peru. It has also worked to promote innovative reforestation techniques. So we’re really taking a holistic approach, all the way from the formalization of the ASM sector – looking at the link to environmental degradation and including looking at alternative livelihoods. So both in Peru and Colombia, we’ve had success through USAID’s programs.
Rubio: I have maybe a final comment and a question. I want to focus specifically on Venezuela with you Ms. Filipetti and then the broader group if you have any comments as well. The interesting thing about illegal mining in Venezuela is – the first thing is the ecological disaster. Irrespective of the political outcome there, the ecological disaster is extraordinary and some of it irreversible. Much of that has been, frankly, underreported because the political disaster and the economic disaster has been so extraordinary. And there’s two things happening. One frankly is the regime has dipped heavily into their gold reserves just to sustain itself. The Central Bank puts out these numbers, but if you do the math they’re lying. They’re probably under $10 billion in reserves as is, and they’ll probably be lower by the end of the year because one of the ways Maduro holds onto power is he does these Christmas bonuses – pork for Christmas and so forth. He won’t even be able to meet the demand that exists, but he takes funds and sort of throws it into the street just to keep people calm over the holidays. They’ll have to use reserves to pay for that – so we’ve seen, sort of, U.S. origin gold bullion from the 1940’s winding up in the global market – stuff that was used during the Second World War to pay for oil, that’s now winding up out there in the global marketplace – that’s been openly reported in a number of sites. But the second piece, the one that’s leading to the degradation ecologically, is the illegal mining. Ms. Filipetti, it is my understanding that, correct me if I’m wrong, what is the role the ELN and the dissident FARC movements that are within Venezuela playing in the mining regions. Some report that they have almost complete control and operate with impunity. What’s the assessment of the State Department as to the role they’re playing in the illegal mining occurring in Venezuela?
Filipetti: Sure, thank you very much Senator. Well, it’s clear that the ELN and the FARC are very present in the mining arc. It really depends on what specific areas we’re focusing on – it’s essentially entirely ungoverned, lawless territory – so it’s common that terrorist entities like the ELN and the FARC will make themselves present there. In some cases we are seeing them control the mines themselves. In other cases we’re seeing them control transit routes. We’re seeing them take advantage of refugees who are trying to flee, and sort of forcing them to work in the mines and to stay. In other cases we’re seeing them have control over some armed weapons, which are enabling them to have control over medicinal supplies and things of that nature. So it really does depend. But the truth is, their presence in the region is one of the most dominant concerns of the State Department. We have seen also how – I spoke a little bit about the Maduro regime and its incompetence in gaining control over this problem – what it realized was once it was not able to effectively combat illicit mining, it decided to capitalize off of it in order to get more resources that it realized were being deprived of it, largely because of U.S. and international sanctions on the petroleum industry. So we’ve now seen how there’s a relationship between government officials, there’s a relationship between the army and the national guard, with some of these entities whether it’s the ELN and the FARC, or whether it’s the Pranes and Colectivos, who are also present – in order to really trade weapons, control over some of the territories, or cash, for support from these territories.
Rubio: I think that’s the key point because we’re not talking about criminal operations in a country that doesn’t want them there. We have criminal operations like that in other countries – like Peru or Colombia – but the governments by and large want them out. There may be some localized corruption, but the government wants them out. In this particular case, they’ve basically been deputized and/or the industry has been outsourced to them by the regime in exchange for those groups’ support, cooperation, and a small fee or whatever, that’s generating income not just for the regime, but for the individuals in the regime. This is one of the ways that Maduro keeps these people around him loyal – not to him but to that source of revenue of illicit gain, correct? So this is where there is cooperation.
Filipetti: That’s right, Senator. In some cases they have tried to cut down on instances of illicit mining simply because they don’t have the relationships with those gangs, and so in that case they do try to stop it so that they can generate those relationships. But absolutely, we’ve spoken a lot about how we need to generate political will. There are things that we can still do even with a country that is under a regime that has no interest in working with us on combating it. Venezuela is a really unique case because both Maduro is part of the problem, but also because we’ve sanctioned the entire gold sector for precisely the reasons that you’ve described because it has enabled this patronage network that has kept him in power. So that actually gives us a number of unique tools that we can use in order to combat illicit mining inside Venezuela. We’ve used some of them – I mean diplomatic engagement as Senator Cardin mentioned has been critical with some of our allies. We’ve seen how the Bank of England has confiscated $550 million worth of Venezuelan-origin gold. We’ve also seen a decrease in the amount of gold flowing to Turkey thanks to our engagement with Turkey. There are other things we’ve been working on as well, sanctions and imposing a cost for dealing with this sector has been effective as well. We’ll continue to look at other companies that continue to operate with the Venezuelan mining sector. And of course looking at a transition scenario, this is where we can be most effective. This is when we can start to deploy some of the resources and tools that my colleagues spoke about that we’re using in Peru and Colombia. It’s also an opportunity for us to consider how we might be able to encourage more legal forms of mining so that we can get rid of the illicit category within Venezuela, but of course that would require a lot of security assistance as well, and it would be something that we can only consider once we have a democratic government in place.
Rubio: My last question is what you’ve described and what I’ve talked about often. So you have a governmental agency, for lack of a better term, in the Maduro regime that basically cooperates with drug dealers for a fee, and they have done drug seizures, but it’s the drug seizures on the people that haven’t paid them. If you pay them, they actually might even fly the drugs for you or transport it for you. The same is true in the illicit mining, they may go after a group, but it’s the group that isn’t paying them – in essence, if you pay us we let you operate. How is that any different from how organized crime operates when it takes over a neighborhood and cracks down on loan sharking or gambling among those crews that are not paying the coppo the kickback that he’s asking for? What you’re basically describing is an organized crime effort dressed up – that retains some elements of a nation-state government. But in essence this is an organized crime ring that today not governs, but controls Venezuela.
Filipetti: Senator, that’s how we would describe it. We don’t refer to the Maduro regime as a government; it is a corrupt, criminal network. It’s corrupt and criminal in both -as you described- its involvement in the drug trade, and it’s also criminal and corrupt in its involvement in the mining industry. Not just gold, again we’re talking about a lot of illicit sources of coltan, of diamonds, of coal even, so I absolutely agree with your characterization of it as a criminal network.
Rubio: Thank you all for your time; we appreciate it very much. I think this has been a useful hearing for us. As you can see there is interest in this topic and it’s important. It’s not an easy one to address, but it’s one we’re trying to find ways to move forward that we can do both from a legislative perspective, but also from a public awareness perspective about this need.
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