Claim against Swiss Gold Refinery demonstrates increasing problem with “commodity laundering”

Zurich/Lausanne, 05.11.2013 - A criminal complaint was filed last Friday against Argor-Heraeus SA, registered in Mendrisio (Ticino), for laundering gold plundered from an armed conflict. BD’s partner organisation, Trial, accuses the company of having knowingly processed nearly three tons of plundered gold between 2004 and 2005, the proceeds of which financed an armed group’s participation in the conflict in Congo. This perfect example of commodity laundering demonstrates either that the money laundering laws are insufficient, or that they are not being used properly.

Despite prolific reporting from the UN, various NGOs and media on the bloody conflict in Congo and the blooming business in stolen natural resources, between 2004 and 2005, Argor-Heraeus refined nearly three tons of Ugandan gold. It was already well known that this East African country acted as the main transit route for Congolese gold, particularly given that it managed to export precious metals in quantities over 100 times more than it could actually produce. New evidence shows that the origin of these valuable goods was in fact clearly marked on the customs documentation. The legal basis of the claim against the Ticinese refinery – which until 1999 was owned by Swiss bank UBS – is for “suspicions of aggravated money laundering of assets”. This offence includes (despite its name) the laundering not only of money but also of other assets such as commodities.

In its commodity report last March, the government acknowledged: “Companies – including some that are domiciled in Switzerland – are criticised for example, for buying commodities from sources that disregard human rights [and] finance conflicts”. And in response to a Parliamentary motion the government clarified: “The prohibition against money laundering per Article 305bis of the Criminal Code also applies to trade in raw materials.” So the Swiss authorities are generally aware of the problem. Yet while significant effort has been invested in keeping black money out of Switzerland’s financial system, no such comparable systems exist to protect the Swiss commodity hub from illegitimate commodities.

But of all the commodities, one might think that at least in the case of gold there should be hope: According to the Ordinance on the Control of Trade in Precious Metals and Articles of Precious Metals (EKV, Art. 168a), should gold refineries have doubts about the origins of their melt material they are required (as they were at the time of purchase) “to clarify [the origin of the material] in detail” and where they have suspicions that the purchase is unlawful, “the relevant police authorities must be informed immediately and their instructions obtained”. But as this recent Ticinese gold refinery case shows, this defence mechanism is clearly ineffective. No one can say here that a detailed clarification as to the origins of the gold was carried out. The supply chain policy supply chain policy that Argor-Heraeus claims so proudly to have applied since 2004 was apparently not of much help in this case.

The government likes to refer to the sensibility of Swiss companies to human rights issues, even though the Argor-Heraeus example clearly shows the appalling ignorance such high-risk companies display. In terms of the prevention and prosecution of commodity laundering in the global trading hub that is Switzerland, either there are essentially no regulations, or if there are, they are not being implemented. Or their application is being suspended by the authorities themselves as the following example suggests: the clarification of origin as required under the EKV actually extends not only to melt material (e.g. raw gold) but also to melted products (e.g. gold bars). Despite this, in 2006 in reference to melted products, the government reported: “according to the practice of the Central Office for Precious Metals Control, in the context of the Ordinance on the Control of Trade in Precious Metals and Articles of Precious Metals, there is no verification as to whether or not precious metals have been purchased legally abroad. (…) Extensive clarifications would be extremely time and resource intensive.”

For more information, please contact:

Oliver Classen, Berne Declaration, +41 44 277 70 06, oliver.classen(at)