As concern grows about enormous amounts of money unlawfully leaving Africa, two new reports and a significant court case highlight the growing problem. A new report by the UN Conference on Trade and Development, UNCTAD, 'Economic Development in Africa 2020', estimates that if illicit capital flight from Africa were stopped, it could virtually halve the financing gap of $200b that the continent faces if it is to achieve its Sustainable Development Goals. And while experts are unanimous that illicit financial flow must be stopped, another report gives a concrete example of what seems to have been going wrong. Entitled, 'The Golden Laundromat; the conflict gold trade from Eastern Congo to the United States and Europe', it is a report of an investigation into 'the dirty money connected to African war criminals and transnational war profiteers'. In particular, the report points to the Uganda-based African Gold Refinery (AGR), saying it has been refining gold from conflict areas of the eastern Democratic Republic of Congo, which is then exported through a series of companies to Europe and the United States. AGR is challenging the report in court in Uganda, claiming it is defamatory. Pending a full hearing, however, AGR asked the court for an interim order that the report has to be removed from the website. As readers will quickly see, however, there was no chance that the court would agree to silence the Laundromat: the two brothers running AGR were recently convicted in a court in Antwerp of both money-laundering and fraud.
Why did the applicants in this case imagine they had a case? I still haven’t been able to work it out.
African Gold Refinery (AGR) brought its action in Uganda’s high court against The Sentry and Enough Project, complaining about a report they published, entitled ‘The Golden Laundromat’. The report – it concerns gold allegedly mined in conflict zones in the Eastern Congo and then sent to the United State and Europe – was defamatory according to AGR, and an application had already been filed for the court to make a formal, permanent declaration to this effect.
AGR said the damaging report was freely available on the respondents’ websites and ‘millions of people’ could have downloaded it, despite its ‘many baseless accusations attacking and demeaning (AGR’s) business, integrity and reputation’. For this reason, it wanted an urgent interim interdict to remove the report.
The report – still available online – concluded that AGR ‘is a grand conspiracy to perpetuate the illegal trade of gold, and launder money through connections’, according to AGR’s complaint. The refinery said it had lost business, clientele service providers and suppliers, all of whom stopped doing business with AGR ‘and have raised concerns about the integrity of (AGR’s) business as a direct result of the continued hosting and publishing’ of the Laundromat report.
The Laundromat report is a fascinating piece of work. It points to one among many serious results of the alleged failure by AGR’s network to comply with international supply chain due diligence and international anti-money laundering safeguards while buying, refining and selling gold. One result is that hundreds of publicly-listed US companies that may source gold from the AGR network are at risk of purchasing conflict gold.
Uganda, where AGR is the only gold refinery, is the main transit hub for smuggled gold from eastern Congo according to reports by the UN Group of Experts. The Laundromat continues, ‘Following AGR’s opening, Uganda increased its gold exports by a staggering 85 000 percent, going from exporting approximately $443,000 worth of gold in 2014 to an estimated $377m in 2017.’
How would The Sentry and Enough Project respond to claims by AGR that the report was defamatory? This was where things became really interesting.
Turns out that Allan Goetz (AGR CEO) and his brother, Sylvain Goetz, were both convicted of money laundering and fraud in February by a court in Antwerp. According to Business Insider, that court found the two had set up a fraudulent system in 2010 and 2011 for customers to sell gold anonymously to the Tony Goetz refinery for cash, a move that created the basis for a black-market trade.
The court in Antwerp found that Tony Goetz had paid more than 1 billion euros in cash for gold during 2010 and 2011, and had created about 9.2 million euros in illegal capital gains. After conviction, AGR said that it contested the facts as found by the trial court and was ‘considering whether to appeal’.
Needless to say, The Sentry quoted the result of the Antwerp money-laundering case when AGR tried to have the ‘Golden Laundromat’ report taken down on the grounds that it was defamatory.
During the Antwerp trial, the Goetz brothers told the court that the traders from whom they purchased merely sold the gold they privately owned to the refinery. But the court in Antwerp did not believe this explanation, ‘given the frequencies of the transactions and the large quantities of gold purchased by (the) Goetzes’.
Back in Uganda, the presiding judge, Ssekaana Musa, had to consider whether to grant an interim interdict against The Sentry. Judge Musa said it was true that the right to reputation was acknowledged as an inherent personal right of every person. ‘A man’s reputation is his property and perhaps more valuable than any other property.’
On the other hand, AGR had not denied the truthfulness of the sources from which The Sentry obtained its information, for example, the Financial Intelligence Authority of Uganda which had asked the prosecuting authorities to prosecute AGR for non-compliance with the law on money laundering. Then there was also a letter from the directorate of geological survey and mines in Uganda, setting out the illegalities of AGR’s operations and its non-compliance with the law on gold trading.
Judge Musa then quoted from a decision of Lord Denning: ‘Where there is a defence of justification or truth, an injunction restraining further publication should not be granted unless it is shown that the defendant … maliciously published information which he knew to be untrue.’
In this case, said Judge Musa, the AGR had failed to persuade him to exercise his discretion to grant a temporary injunction against The Sentry. He therefore dismissed the application and awarded costs against AGR.