The Kaloti Jewellery, is a
group of companies
controlled by the
Kaloti family,
whose headquarter is based in Dubai. Documents obtained by BuzzFeed
News and shared with ICIJ, ARIJ and other media partners reveal how
over $9 billion worth of transactions involving the Kaloti Group
that occurred between 2007 and 2015 were flagged by several banks.
These transfers were monitored over a long periods of time and were
on the radar of the US Department of Justice since 2011.
In this investigation, we reveal the Kaloti Jewellery Group’s
suspicious banking activity, and we ask why banks and regulatory
bodies did not stop these transactions despite describing money
flows in some suspicious activity reports that they said had the
hallmark of money laundering. There may have been a good reason for
not taking any action, since suspicious transaction reports by a
bank do not constitute wrongdoing, but an indication of possible
irregularity.
Munir Al-Kaloti is a businessman and Chairman of the Kaloti
Jewellery Group. His journey into metals trading began in Abu Dhabi
towards the end of 1968 when he established a group of supply and
investment companies. It was only after moving to Dubai in 1976,
that Al-Kaloti started trading in gold. In 1989, Kaloti started to
buy scrap gold from the local market on a small scale, and then in
2000 started bullion trading in bars. In 2004 the group established
the Kaloti Jewellery International DMCC as their main headquarter,
according to their website.
In 2012, several banks reported suspicions surrounding the Kaloti
Jewellery Group in Dubai and its activities across the globe. Some
of these banks even dropped the group as a client. Other banks took
action by following up on the group’s activities, especially
transfers of money in and out of its accounts. They also reported
their suspicions to the Financial Crimes Enforcement Network
(FinCEN).
Suspicions surrounding Kaloti became public in February 2014 when a
UK newspaper, The Guardian published an
investigation
which revealed how inspectors from the accountancy firm Ernst &
Young in Dubai, hired to audit Osama Al-Kaloti, found evidence of
Kaloti dealing with suppliers from Sudan, a country linked to what
is known as conflict areas gold known also as ‘blood gold’, in the
past.
In 2012, Kaloti’s cash purchases of gold were estimated at $5.2
billion. This technique known as cash-for-gold, can also be used in
order to evade the supervision of the international banking clearing
system. Kaloti’s trading of gold using bank transfers, on the other
hand, reached $6.6 billion.
Kaloti often paid in hard cash — sometimes so much, it had to be
moved in wheelbarrows — and wired money for suspect clients to other
businesses, investigators believed.
In 2014, the US task force recommended that the Treasury Department
designate Kaloti a money laundering threat under the USA Patriot
Act.
Towards the end of 2010, a task force led by the US Drug Enforcement
Administration (DEA) in central Florida started to receive calls
from colleagues who had worked on an
investigation
into suspected money laundering through used cars being sold between
the United States and a number of countries across Africa. The
Florida office opened an investigation after discovering that some
of the cars were being sourced from used cars salesmen in Florida.
In early 2011, the US Department of the Treasury classified the
Lebanese Canadian Bank as a
primary money-laundering concern, forcing the bank out of
business.
FinCEN stopped the bank from working inside the United States as
they believed that it was routinely conducting operations for
drug smugglers and money laundering operations all over the world,
including the US, Europe, Africa and the Middle East.
The bank’s clients also included members who provided Lebanon’s
Hezbollah with
financial support,
and FinCEN had reason to believe that some of the
bank’s managers
were also involved in the money-laundering operations.
“There is no better mechanism in the world for laundering money than
gold,” David Soud, head of research and analysis at I.R. Consilium,
a consulting firm that specializes in analyzing resource-related
crime, told the International Consortium of Investigative
Journalists (ICIJ).
Kaloti Jewellery Group became one of the targets of a new
investigation named “Operation Honey Badger”, according to six
current or former law enforcement and other officials with knowledge
of the investigation who spoke with ICIJ.
“Overnight the wire transfers you saw with the Lebanese Canadian
Bank and these other companies switched over to Kaloti like a light
switch,” one former official told ICIJ, who added: “We were like:
‘Who’s Kaloti?’”
Investigators saw huge transfers, sometimes more than once a day,
from Kaloti to
another Dubai based gold trading company called Salor DMCC.
The Kaloti Group referenced these transfers by stating that they
were sending money on behalf of Trading Track, which is a company
headquartered in Benin, and that the purpose for the transfers were
to trade in gold. On the same day, Salor DMCC would then transfer
money to used car dealerships — including some of those listed in
the complaint against the Lebanese Canadian Bank — according to law
enforcement records viewed by ICIJ.
According to the documents viewed by ICIJ, Kaloti paid Salor DMCC,
$414 million in cash for gold in 2012.
A Kaloti spokesperson said in response to ICIJ’s questions about the
DEA-led task force investigation into Kaloti, and its finding that
Kaloti made large cash payments for gold: “Any cash transactions
conducted by Kaloti would have been made long ago and were not in
any way improper. Cash has been (and remains) a common method of
payment in the UAE, in both personal and commercial transactions.
Kaloti, however, made a commercial decision almost a decade ago to
cease all cash transactions in all of its businesses.”
According to the leaks obtained by ARIJ, Kaloti’s dealings extend to
most countries of the world. US investigators believed Kaloti was
buying gold from sellers suspected of laundering money for drug
traffickers and other criminal groups.
Between November 2012 and April 2013, the Kaloti Group sent a total
of $44,343,467.00 to
Fine Gold Impex Limited,
a gold company registered in Accra, Ghana. Some of that money went
into Fine Gold Impex’s account in Fransabank in Beirut, Lebanon. But
why does a gold company in Ghana have a bank account in Lebanon?
According to a SAR (Suspicious Activity Report), JLM sent around
$400,000 to ‘La Guineenne D Industries’, a
a metal company in Guinea
with an account in Audi Bank (a Lebanese banking group). Payment was
made over two instalments on April 25, 2012 and May 16, 2012.
A Kaloti spokesperson said in his response to questions about the US
DEA-led task force investigation into Kaloti. “Kaloti vehemently
denies any allegations of misconduct, whether those allegations stem
from today or a decade ago.”
“These questioned activities also predate significant regulatory
changes in the industry. Kaloti’s business has evolved to comply
with those changes and has consistently met or exceeded all
applicable regulatory requirements, consistent with industry best
practices,” they added.
The Kaloti Jewellery Group is still active despite what is said
surrounding its financial operations in the gold trade and even
after investigations conducted into them.
In 2015,
the Dubai Multi Commodities Centre (DMCC)
removed the Kaloti
Jewellery Group’s refinery in Sharjah from the list of companies
that adhere to the Dubai Good Delivery (DGD) standard of quality and
responsible sourcing.
“DGD was launched in 2005 to formally acknowledge (gold) refineries
globally that have proven to meet a high standard of business
practices, responsible sourcing, (good) governance and quality
control when refining, measuring, storing and trading in gold. DGD
list is continually updated in collaboration with relevant
international bodies, industry stakeholders and market participants
and in alignment with OECD Guidelines”, DMCC told ICIJ.
Despite removing Kaloti's original UAE refinery, which has since
closed, from its “Good Delivery” list in 2015, the DMCC allowed the
company to open a new refinery - MTM & O Gold Refinery DMCC - in
2017, according to the recent Global Witness report. The DMCC told
ICIJ that all applications for company registration are subjected to
a “robust compliance process.”
ICIJ asked Kaloti for their response to their findings that the U.S.
Treasury Department conducted its own investigation into Kaloti and
planned to designate the company as a “primary money laundering
concern”. But for diplomatic reasons, U.S. authorities decided to
meet with officials in the United Arab Emirates first to see if they
would take action against Kaloti. Did Kaloti know that the U.S.
Treasury Department notified authorities in the UAE in 2015 and 2016
about its alleged involvement in money laundering? Did authorities
in the UAE contact Kaloti about the allegations or take any action
against the company?
The spokesman responded: “You have advised me that the U.S. Treasury
Department never created any report of its own purported
investigation – nor, we submit, could U.S. Treasury have fairly
reached the conclusion you suggest, even less so having never
contacted Kaloti. In any event, as noted above, your letter is the
first time Kaloti has heard of these allegations. Again, if U.S. (or
UAE) officials, or any other competent authority, had ever provided
Kaloti with evidence that any of its customers were facilitating
criminal activity, Kaloti would have immediately disengaged from
those relationships. Furthermore, had the US Treasury Department
really harbored concerns that Kaloti was in any way involved in
money laundering, upon proper investigation, either by liaison with
UAE authorities, or Kaloti or both, we are confident their concerns
could have been easily allayed.”