Español Authorities in Colombia claim to have dismantled the largest money-laundering network in the country. On Tuesday, January 20, the Attorney General’s Office announced police captured John Úber Hernández Santa, chief executive officer of CI Goldex SA, one of the largest exporters of gold in the country. Authorities say he laundered more than COL$2.3 trillion (almost US$1 billion), using gold exports to disguise illegal funds.
Police apprehended Hernández, also known as the “Czar of Gold,” and his wife, Gloria Patricia Álvarez, as they traveled in a public bus in Montenegro, in the Colombian department of Quindío.
The government alleges Hernández is one of the heads of an illegal mining business in Colombia, supported by various criminal gangs that operate across the country. Authorities have charged the “czar” with money laundering, procedural fraud, forgery, and conspiracy, and transferred him to Medellín to initiate legal proceedings.
Following the Golden Trail
Finance Minister Mauricio Cárdenas said during a press conference on Friday, January 16, that a joint effort between the Directorate of Taxes and National Customs (DIAN), the Information and Financial Analysis Unit (UIAF), and the Attorney General discovered Hernández’s network laundered close to US$1 billion between 2005-2012.
Cárdenas announced authorities issued an arrest warrant for Hernández, but the Goldex CEO had evaded police and was on the run. Deputy Attorney General Jorge Fernando Perdomo elaborated on Hernández’s operation during the meeting with the press.
According to Perdomo, Goldex purchased illegally mined gold from various sellers using false identities, then concealed the origin of the gold by exporting it abroad.
“The people who allegedly sold the gold to the trading company which then sold it to Goldex … do not exist. These companies that bought the gold to sell it to Goldex were newly formed, belonged to the same partners, and were established with little capital, but had transactions with large amounts,” said Perdomo.
According to the Finance Ministry, about 90 percent of the people registered as gold sellers to Goldex had no connection to mining. The investigation uncovered that many of the 6,000 alleged providers of gold to Hernández’s company existed in name only, or were registered in the names of people who were dead or homeless.
— Mauricio Cárdenas S. (@MauricioCard) January 16, 2015
Thanks to collaboration of @DIANColombia and @UIAF, @FiscaliaCol dismantled a criminal organization which laundered COL$2.3 billion with gold exports.
“In terms of money laundering linked to gold trafficking or trading, this is the most important and strongest strike ever carried out in Colombia,” Perdomo asserted.
Local newspaper El Espectador reported that the prosecutor does not discount the possibility that companies in the United States and other countries could be linked to this network.
Cartel of Gold
Inconsistencies found in its accounting records and register of suppliers alerted the DIAN to the irregular operations of Goldex, a limited company established in August 2001 that rapidly became an international trader.
In June 2014, Hernández admitted to El Tiempo that, between 2007 and 2009, Goldex bought COL$13 billion in gold from a company connected to Jairo de Jesús Rendón Herrera, one of the founders of the Urabeños criminal group. Hernández claimed, however, that he did not know about Rendón’s criminal history.
Following the arrest warrant issued for Hernández, authorities arrested 17 other people linked to his organization and allegedly involved in the illegal gold trade.
Two days after the mass arrest, Martín Monsalve Saldarriaga, also under investigation for conspiracy, committed suicide by throwing himself off the 18th floor of the Palace of Justice in Medellin, where a preliminary hearing in the Goldex case was underway.
Illegal Mining: Funding for the Cartels
According to the latest mining census conducted by the Ministry of Mines and Energy of Colombia in 2011, more than 60 percent of the mining activity in the country is illegal.
Much of it is carried out by drug cartels and paramilitary groups, such as the Revolutionary Armed Forces of Colombia (FARC) and the National Liberation Army (ELN). According to the Colombian Directorate of Rural Police and Security, the illegal mining of gold is even more profitable than drug trafficking.
Daniel Salamanca-Pérez, strategic litigation director of the Colombian Center for the Free Initiative, told the PanAm Post that the country has a problem with the “misnamed illegal mining,” because the government maintains a monopoly on natural resources.
“The state makes ‘concessions’ on the exploitation of natural resources and privileges certain individuals as they obtain the operating licenses of environmental resources,” he explains.
According to Salamanca-Pérez, current regulation of mining concessions makes the business excessively bureaucratic and complicated, ultimately working only in the interest of criminal gangs.
“The solution I see to the problem,” he argues, “is to strengthen property rights. Colombia cannot continue with the scheme of natural resources and subsoil belonging to the state, so it decides who the winners and losers are by delivering environmental licenses to their friends, who usually have no interest about the environmental costs of their operations.”
Salamanca-Pérez believes the solution can be found in a free-market option, one which allows for a more efficient extraction of natural resources and a reduction in the environmental damage currently affecting the country.
Edited by Guillermo Jimenez.