The Kaloti Gold Machine

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.

Who Is Al-Kaloti?

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.

Kaloti and Lebanon

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.”

More Suspicious Dealings

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.

Still Operating

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.”