GLOBAL audit firm Ernst & Young (EY) has been caught up in a complex web of money laundering and illicit financial flows in Dubai, raising questions on the integrity of accounting firms in discharging their duties, the latest episode of the Al Jazeera docuseries on ‘Gold Mafia’ operating in and outside Zimbabwe has exposed.’
According to the one-hour-long documentary titled Gold Mafia: El Dorado Part 3, EY, which has an office in Zimbabwe, was fined US$11 million in damages and expenses to a former EY partner.
Amjad Rihan, who features in the documentary, claimed he was pushed out of Britain-headquartered EY after raising concerns about irregularities at precious metals dealer and refiner Kaloti in 2013. British High Court judges ruled that the EY had tried to “sweep under the rug” the findings of Kaloti money laundering.
EY, one of the world’s “Big Four” accounting firms, threw out findings made by Rihan and team of auditors exposed how the refiner had US$5 billion cash holdings within a year.
A team of auditors which carried out intensive interviews at Kaloti as well as sifted through the company’s records saw something amiss, Rihan observed.
“They started discovering some shocking disturbing violations. We found out that Kaloti was doing over US$5.2 billion in cash in one year. That represents about 40% of Kaloti’s business done in cash,” Rihan narrated.
“You think about US$5.2 billion, you are talking about US$100 million a week. That’s a huge number and to be done in cash that raises a lot of suspicions. We concluded that Kaloti due diligence management system is a huge failure, it is not functioning effectively.”
EY, according to the documentary, accepted Rihan’s findings but ordered him to work with the Dubai authorities.
“To my shock, instead of supporting me and backing me up, they instructed me to help the Dubai regulator and the Dubai refiners.”
He refused to go along with the plan and resigned.
“I felt that it was unsafe for me to challenge the decisions made to actually do my job properly while the regulator, the refiner and EY all of them were not supportive of what I said,” Rihan said.
“I would be at odds with very powerful people and entities in Dubai. I would have been at risk.”
After his resignation, he then brought a claim to a London Court challenging EY.
In 2013, Kaloti was one of the UAE’s largest gold refineries in Dubai’s US$70 billion gold industry. Independent statistics show that 25% of the world’s gold trade passes through the UAE capital.
Kaloti remained accredited by the UAE authorities until 2015, when a different auditor found it was buying gold from Sudan, which was then under US sanctions. The company, according to Al Jazeera, is now known as MTM & O Gold.
The four-part documentary has so far revealed that the UAE is the destination for billions of dollars’ worth of gold smuggled from across Africa.
Having access to refineries, the documentary revealed, is central to the mafia’s ability to launder money through gold. Kamlesh Pattni, who is named as a central figure in gold smuggling and money laundering activities in Zimbabwe, works with four Dubai-based refiners—MTM & Co, Emirates Gold, Sam Precious Minerals and Al Etihad Gold — in carrying out underhand dealings.
In Zimbabwe, Pattni, Al Jazeera revealed, worked hand-in-glove with Fidelity Printers and Refiners. Patnni allegedly paid former Fidelity Printers and Refiners general manager Fradreck Kunaka and the company’s ex head of gold operations Mehluleli Dube US$30 000 and US$3 000 kickbacks apiece each to facilitate illicit transactions and gold smuggling activities.
“The gold refiners are very important point in the gold supply chain,” Rihan said.
“Without the refiner doing a good job in ensuring that it is scrutinised in the supply chain and they cover the risks in the supply chain, it is so difficult for those after the refiner to do that job. The refiner’s job is critical in ensuring that the gold before it refined is cleaned.”