Update 6 August 22:50 LIMA, PERU – A Geneva-based firm, MKS Finance, in 2011 reportedly purchased 19 tons of gold originating from illegal mining in the Peruvian jungle, according to a Peruvian newspaper Tuesday 31 July.
The daily, El Comercio, maintains that MKS purchased the gold, valued at $900 million, from Universal Metal Trading, a gold wholesaler, which buys the metal from the southeastern region of Madre de Dios.
Illegal mining in Peru has been buoyed in recent years by the high prices of the precious metal, and was estimated by Peruvian consulting firm Macroconsult to be worth some $1.8 billion in 2011, or approximately 22 percent of the country’s gold exports.
The government estimates some 50,000 “informal” miners work in the Madre de Dios area.
MKS, which defines itself on its web site as a “precious metals and financial services group”, contacted by GenevaLunch, neither denies nor admits to having purchased gold from Universal Metal Trading.
Geneva company says gold sources compliant with Swiss law
Jacqueline Mayor Meylan, MKS’s head of compliance, wrote to GenevaLunch in an e-mail: “MKS (Switzerland) SA has very strict Know Your Customer procedure which includes … a thorough understanding of the customer’s activities, sources of funds and origin of precious metal”.
Mayor Meylan says the company complies with Swiss anti-money laundering regulations and is “regulated by a Swiss regulatory body in respect to anti-money laundering. Independent auditors certify on a yearly basis our compliance to the above mentioned law.”
Daniel Thelesklaf, a board member of Transparency International Switzerland and executive director of the Basel Institute on Governance, has called Switzerland a trailblazer in the fight against money laundering in the financial sector in recent years, notably:
“as regards establishing the identity of beneficial owners. Identifying a beneficial owner is a core element of any modern anti-money laundering legislation. The FATF Recommendations require that not only the customer must be identified, but also the person who ultimately owns or controls a customer and/or the person on whose behalf a transaction is being conducted. In the case of legal entities, this verification must include measures to understand the ownership and control structures of the contracting partner. It is not enough in this process merely to rely on customer-supplied information. Such information must also be verified.”
It is unclear if auditors have recently checked MKS’s compliance in this area.
Peruvian supplier company chief awaiting trial
The director of Lima-based Universal Metal Trading, Jorge Zavaleta, has been charged by the Peruvian attorney general’s office with money laundering and trading illegal gold, that office told GenevaLunch. He could face eight years in prison, according to attorney general’s office.
But Zavaleta denies he has been charged: in an e-mailed message to GenevaLunch he says the charges mentioned by El Comercio refer to “alleged responsibility on his part for non-compliance to the law by third parties” in 1997 and 1988 involving the return of value-added taxes to the superintendent’s office of tax administration. He notes in a letter to El Comercio, a copy of which he sent to GenevaLunch, that his company’s operations were within the law, and that it halted operations this year when the new law was introduced, to conform to it.
MKS’s subsidiary PAMP, a gold bullion supplier, was also mentioned in the El Comercio article as having purchased gold from Universal Metal Trading.
El Comercio says Universal Metal Trading sent 19 tons of gold to Switzerland “via KLM”. Another Peruvian gold trader, AS Peru, is alleged in the article to have exported more than 4 tons of gold, worth $210 million, to Geneva. AS Peru could not be reached for comment.
Illegal mining has devastated areas of the Madre de Dios jungle, with illegal deforestation followed by flushing of soils and mercury pollution.
Paula Dupraz is reporting for GenevaLunch from Peru.