The Gold Scam has now reached alarming levels as unsuspecting foreign nationals are being swindled large amounts of money by the Fraudsters.
— DCI KENYA (@DCI_Kenya) May 9, 2019
High-profile gold scam hurts Kenya’s UAE ties and highlights wider legal problems
A scam that caused a diplomatic hiccup between Kenya and the United Arab Emirates (UAE) has triggered the latest in a series of gold-related investigations in Nairobi.
The ruler of Dubai, Sheikh Mohammed Al-Makhtoum, sent an official protest note to the Kenyan government demanding the release of a gold consignment held by customs in Nairobi. A video linked to the case, which includes newspapers marked 16 March 2019 and shows different metal cases filled with gold nuggets, was also leaked online.
- Ali Zandi, the Emirati at the centre of the gold deal, runs a gold trading company in Dubai. He met a Kenyan who told him he could source gold from the Democratic Republic of Congo (DRC). The deal then followed a familiar route, where Zandi was told that his gold had been confiscated at Jomo Kenyatta International Airport.
- Zandi then paid $2.5m to have it released, before finally flying out of Kenya after being shown fake news headlines that the police were after him.
- At one meeting in Nairobi, someone masquerading as interior cabinet secretary Fred Matiang’i asked for money and assured the Emirati that he would release his gold.
- Also mentioned in the letter from the UAE is opposition leader Moses Wetangula, currently a senator, who went to Dubai in September last year and assured Zandi that he would get his gold. One of Wetangula’s aides told People Daily that it was a business deal gone sour and that the senator had lost money too.
The case involving Sheikh al-Makhtoum’s associate is just the most recent case of foreign nationals who have been scammed in gold deals in Kenya and Uganda.
In the past few months, more than 40 suspected gold scammers have been arrested in Nairobi alone. Other than Kenyans, those arrested include Bulgarians, Tanzanians, Rwandans, Nigerians and Congolese. Another link among them has been a tendency to live in Kilimani, an upmarket part of Nairobi.
- In one case in Nairobi, a Russian national was scammed out of more than KShs20m ($198,000).
- Uganda is prosecuting a similar case where a South Sudanese national is accused of swindling $1.9m from two Ethiopians.
- Crackdowns by criminal investigators in Nairobi since last year have netted gold nuggets, fake gold and different fake currencies.
Gold scammers are to Nairobi what Yahoo Yahoo boys are to West Africa. They are mostly young men who live large and chronicle their exploits on Instagram. In Kenya, they leverage their money to build political clout, which goes a long way into helping them get out of trouble.
The primary ‘person of interest’ in the UAE case is a young politician named Zaheer Jhanda.
- Like many other suspected gold scammers, Jhanda created a high-profile public persona that involves vast amounts of money, political contacts and political ambitions. He unsuccessfully ran for a parliamentary seat in 2013 and 2017.
- Another person of interest, Jared Otieno, was arrested on Thursday. The police made a point of noting that they had also towed away a Porsche and a new Bentley from a home he had recently bought for cash.
- One of the other people listed as under investigation in the scandal was recently released from a five-year sentence in Tanzania, where he pleaded guilty to money laundering charges.
The crackdown on gold cartels in Nairobi brings into focus how attempts to clean the trade in conflict minerals are failing. The amounts involved also suggest Kenya’s financial system is still a conduit for extensive money laundering.
- In 2011, then presidents Joseph Kabila (DRC) and Mwai Kibaki (Kenya) held an emergency meeting in Nairobi about a specific gold consignment that had been smuggled from the DRC. A senior official at the Kenya Revenue Authority had been assassinated because of the same gold shipment, which was never found.
- In September 2017, then cabinet secretary for mining Dan Kazungu issued a public notice that listed only one company, Aurical Kenya Limited, as licensed to carry out gold dealings. Only two others were listed to carry out mineral dealings other than gold.
- The chairman of Kenya Chamber of Mines, CP Mwangi, said that “What people are buying on the streets is brass, which once cooked, looks like gold. Some items are gold plated and unless you cut through, you will always think it is gold.” He also wrote that the government has bought an x-ray spectrometer for testing gold.
Eastern DRC has nearly 200,000 gold miners who produce an estimated eight to ten tonnes, but only an estimated 200kg gets exported legally. The rest gets smuggled through neighbouring countries, and the crackdown in Nairobi is only a small part of a much larger international network.
- Kenya’s role as a transit point for gold from the DRC was the building block on which the Goldenberg Scandal of the 1990s was built. The export compensation scheme scandal saw the treasury lose billions of shillings for a mineral that Kenya barely mines. The gold on which the scandal was built was bought in the DRC, smuggled into Kenya and then re-exported as coming from Kenya.
The high-profile gold racket does not seem like it will harm Kenya’s relations with the much UAE, but President Uhuru Kenyatta will have to show his Emirati counterpart that he is going after the scammers. Kenyatta already has the momentum from the previous crackdown on the rackets, but so far no one has been convicted of a crime. The cases bring into focus much that is wrong in the East African country, including gaps in policing, border points, customs and the financial system.
In Nairobi, gallows humour now has it that some high-end pubs might have to close down as their regular patrons are now guests of the state.