Amid concerns that Venezuelan gold was filtering into the local market in 2019 and the Guyana dollar was depreciating substantially as a result, the Financial Intelligence Unit (FIU) had recommended that a high level team be established to do a comprehensive review of the trading of the precious metal.
The FIU report in the second half of 2019 had also urged that action be taken against illegal cambios.
It is unclear whether the then APNU+AFC administration took any action on the recommendations by the FIU. There has been renewed interest in the gold trade following the disclosure in Stabroek News that the Guyana Gold Board (GGB) is currently investigating allegations made to the Minerals Grievance Platform (MGP) that local large-scale gold trader, El Dorado Trading is connected to illegally sourced Venezuelan gold, a claim the company has denied vehemently. Following the allegation, the Royal Canadian Mint (RCM) has suspended the intake of El Dorado gold from the GGB until further notice.
The FIU is an autonomous body responsible for requesting, receiving, analyzing and disseminating suspicious transaction reports and other information relating to money laundering, terrorist financing or the proceeds of crime. It was established under the Anti Money Laundering and Countering the Financing of Terrorism Act (AMLCFTA) 2009 and its Regulations.
In the second half of 2019 it set about to determine whether there was information to support the assumptions that USD traded through the illegal roadside cambios and even legitimate cambios were being used to support illegal gold trade between Guyana and Venezuela during the period January 2018 – July 2019.
The cambio operations specifically reviewed in the analysis included the following:
i. Confidential Cambio (Mohamed’s
Enterprise)
ii. El Dorado Trading (Tameshwar
Jagmohan)
iii. L. Mahabeer & Son Cambio
(Latchman “Latchoo” Mahabeer)
The FIU also sought to determine whether the elevated exchange rate for USD was being influenced by businesses involved in the gold trade/export.
The agencies reviewed in the analysis included the leading three gold dealers/ exporters (other than the Guyana Gold Board) namely:
iv. Mohamed’s Enterprise (Nazar and Azruddin Mohamed)
v. El Dorado Trading (Tameshwar Jagmohan)
vi. Dinar Trading (Mohamed [Arafat] Qualander and Mohamed Hussain)
The FIU report, which was not publicly released but has been seen by Stabroek News, said that Mohamed’s Enterprise and El Dorado Trading, given their involvement in both gold trading and the trade of foreign exchange, “have a unique ability, given the scope of their operations, to influence the supply for foreign currency (cash and non-cash) and hence the exchange rate”.
It said that L. Mahabeer and Sons is by far the largest non-bank Cambio operation in Guyana and hence, also has the ability to influence the free trade of foreign exchange and exchange rates.
It said that despite increased financial activity in Guyana, declared foreign exchange transactions by L Mahabeer and Sons was trending substantially downwards at that point. Based on declarations as at June 2019, foreign exchange sales were projected to decline by approximately 33% in 2019. The
FIU report noted that there were various explanations for this.
The FIU report also raised as a concern, the continued high level of declared currency (cash) exported from Guyana (over US$40M between January 2018 and June 2019).
“The FIU posits that significant sums are also being exported without being declared. There have been numerous reports of foreign exchange trading by businesspersons/ merchants (including Chinese businesspersons), many of whom openly advertise for persons to trade in Foreign Exchange without the merchant being the holder of a Cambio License. Traders from Venezuela and Cuba are primary targets for these illegal transactions”, the FIU report said.
It added that many persons are also suspected to be taking significant amounts of currency out of Guyana by staying just below the threshold thus obviating the need for a declaration.
In relation to El Dorado Trading, the FIU said that based on reports from the Guyana Gold Board, the Gold Purchased/ Exported by this entity for 2019, has shown steady increases over 2018.
“This is an indicator of positive business activity. It is noted however, that incoming USD transfers received by this entity via the local banking system has reduced from over US$48M in 2018 to less than US$8M as at July 2019”, the FIU said.
The FIU then posited a number of questions and recommended that “a high-level team be established to complete a more comprehensive review of the gold trading and Foreign Exchange trading markets to better understand its inner workings and implications. Action needs to be taken at addressing the issue of illegal Cambios including `roadside cambios’”.
The FIU also contended that the Central Bank should also review the appropriateness of gold dealers/ traders being approved to operate licensed cambios.
The FIU also recommended that the Central Bank and Law Enforcement should become “more proactively involved in addressing the various issues including undertaking of undercover operations to ensure all completed transactions are being declared/ reported by Licensed Cambios”.
The report called for improved signage and enforcement activities to be undertaken at ports of entry and exit to ensure all required movement of Foreign Exchange in or out of Guyana is appropriately declared.
It added that should law enforcement identify cases of persons moving cash frequently below the threshold, particularly persons travelling as a group where they may all have amounts just below the threshold, these should be reported to the FIU for analysis and investigation.
It further urged that cash smugglers when caught, should be prosecuted to the full extent of the law.
Another recommendation was that law enforcement should pay special attention to activities in the Port Kaituma area in Region One where it is believed that illegal trade of gold is occurring with USD cash being the preferred mode of payment.
“This illegal gold trade is reportedly being undertaken to provide desperately needed foreign exchange to Venezuela given the pressures being faced by their economy due to international economic sanctions, to which they are presently subjected”, the FIU said.
Based on discussions and recommendations at a multi agency law enforcement meeting, the FIU said that consideration should be given to the use of “Cash Detecting Dogs” to aid law enforcement’s efforts in addressing the problem of illegal cash smuggling from Guyana.
Following the disclosure last week of the GGB probe, Chief Executive Officer of El Dorado Trading, Tamesh Jagmoghan told this newspaper that he was not worried and that anyone could file a grievance but that when such action is taken, it not only puts a business establishment under a negative spotlight but the country could be impacted. He said he would hope that when the investigation is completed and his company’s name is cleared, a lesson would be learned by the person or persons who filed the grievance about the implications it could have.
“Totally untrue! There is no trace, not the slightest … that Venezuelan gold is seeping into our supply chain. We welcome the investigation because we are confident that the public will see this as just what it is,” Jagmohan said.
But he said he understands that given global standards and protocols that the Canadian Mint would procedurally put on hold any acceptance of metal from a company whose name has been tied to a severe complaint such as trading with sanctioned Venezuela.
He had also told Stabroek News that his company had helped to stabilize the foreign exchange rate
Giving a ball park figure of remittances into Guyana’s economy through the official banking system from its operations, Jagmohan, told Stabroek News that it has been about US$400 million for 2020, which has helped to stabilise the country’s foreign exchange rate while helping the economy.
Jagmohan emphasised that while Guyana’s largest income earner now is oil, the importance of the gold industry must not be forgotten as it “has been the backbone of this country” for years, ensuring always a ready supply of foreign exchange and stabilisation of the exchange rate.
And now that the price of gold is at a high – averaging around US$1900 an ounce – coupled with the removal of Value Added Tax on mining equipment by the PPP/C government since taking office in August, Jagmohan said that this country should expect additional output.
