In 1996, the United Arab Emirates (UAE) was far from being a major gold-importing country. Fast forward two decades, and it now ranks among the top four gold-importing countries, rubbing shoulders with giants such as China, Switzerland, and India after it reached a striking $48.2 billion worth of gold imports in 2021. The UAE has imported from a plethora of countries located in Africa, South America, and South Asia, with Africa emerging as a primary source. While some sources utilize lawful artisanal and small-scale gold mining, which remains an important source of income for the rural communities, they fail to fully account for the UAE’s exponential gold surge. This begs the question: What methods has the UAE employed to vault into the top ranks of gold importers – and are these methods lawful?
Ideally, when countries import gold, strict measures and standards are implemented to ascertain the gold’s origin, extraction conditions, and destination of revenue. These measures, known as supply chain due diligence, aim to help companies and governments assess whether there is a risk that the gold they acquire or handle is linked to human rights abuses, conflict, corruption, or environmental destruction. The underlying principle is that companies and governments bear a responsibility to ensure that they do not profit from serious harm to individuals, communities, or the environment.
The UAE, however, follows very few of those standards – which is particularly evident in its gold trade data with African countries. The data reveals two main illicit practices: gold smuggling and false attribution of origin. When comparing declared gold exports from African countries to the UAE with the UAE’s declared imports from these same African countries, the values should ideally align. Significant gaps between these values strongly suggest that something is amiss. Such inconsistencies were found in 2018 when African gold exporting countries reported having sent gold worth almost $4.7 billion to the UAE, and the UAE’s reported gold imports from these same countries amounted to a staggering $7.4 billion. This difference in values indicates the use of gold smuggling, a process in which gold exits the exporting country illegally, often to evade taxes, and thus goes unregistered with the relevant authorities. Upon reaching the importing country, the gold enters legally and is duly recorded in its statistics, leading to an imbalance in trade figures.
Another issue is the false attribution of the country of origin. In 2018, for instance, 23 African countries did not report any gold exports to the UAE, yet the UAE reported imports of gold worth $6 billion from these same countries. Such a discrepancy occurs when gold is imported from conflict-affected African countries, where it is often subject to taxation to benefit illegal armed groups or linked to gross human rights violations. To circumvent scrutiny upon its arrival in the UAE, the gold is therefore declared as originating from a different, less contentious country. The Democratic Republic of Congo (DRC) exemplifies such a conflict-affected country, where gold is trafficked to the UAE using neighboring countries such as Burundi, Rwanda, and Uganda to disguise the origin. The illicit trade in turn generates major revenues for armed actors who utilize the proceeds to purchase arms and engage in extensive violence against civilians, as seen in the case of Nduma Defense du Congo-Renove (NDC-R).
These two practices are facilitated by fraudulent and corrupt companies who falsify documents to modify the origin of the gold or under-declare it. This is further exacerbated by weak law enforcement turning a blind eye to irregularities at the borders, making the UAE an attractive destination for African exporters seeking to launder conflict gold. Ultimately, these practices mean that UAE companies capitalize on unlawfully acquired gold, reaping substantial profits at the expense of human rights abuses in African nations. This underscores the urgent need for stricter regulations and enforcement to combat illicit gold trading.
External governments can have a major impact in mitigating this issue such as by enforcing consequences for illicit gold trading, closing loopholes in the UAE, and incentivizing responsible gold trade. The UN, the US, and the EU must use their sanction regimes to impose punitive measures on companies and governments engaged in illicit gold trading which fuels conflict and disturbs peace and security. In addition, when advocating for policy reforms with the UAE government, global leaders and companies must exert pressure on the UAE to close policy loopholes that continue to enable illicit gold trade. Finally, gold taxes in Africa must be harmonized and reduced to discourage gold smuggling, which currently offers significant financial incentives. Without significantly more attention and efforts from both companies and governments to regulate the illicit gold trade between the UAE and African countries, it will continue to fuel armed conflict and human rights violations.