For years, United States investigators meticulously pieced together a complex puzzle, targeting Kaloti Jewellery Group, a colossal name in global gold trading and refining, headquartered in Dubai. Their findings painted a troubling picture: Kaloti was allegedly a central player in the murky world of dirty gold, sourcing precious metals from actors suspected of laundering illicit funds for drug cartels and criminal syndicates. This revelation came from a task force spearheaded by the U.S. Drug Enforcement Administration (DEA). Investigators believed Kaloti’s modus operandi involved substantial cash transactions – sometimes requiring wheelbarrows to transport the sheer volume – and wiring funds on behalf of dubious clients to other businesses.
In 2014, armed with compelling evidence, the task force urged the Treasury Department to classify Kaloti as a money laundering threat under the USA Patriot Act. This designation, a severe financial sanction often termed the “death penalty,” could effectively cut off a company from the international banking system.
illustration with banks logo
However, the Treasury Department hesitated, never imposing sanctions on Kaloti. Former Treasury officials disclosed that the decision was deliberately delayed, fearing repercussions on the United Arab Emirates (UAE), a crucial U.S. ally in the Middle East. When attempts to persuade the UAE to take independent action against Kaloti faltered, the investigation was quietly shelved.
U.S. investigators expressed their bewilderment and disappointment to the International Consortium of Investigative Journalists (ICIJ). Money laundering cases are notoriously difficult to prosecute, and policing the opaque gold trade poses significant challenges for the U.S. They believed the Kaloti case presented a rare opportunity to send a strong deterrent message across the gold industry.
“I was incredibly frustrated,” lamented a former official. “What’s really sad is a lot of really, really good investigators, some really talented people, put a lot more time than they got paid for into trying to uncover a huge wrong.”
This previously unreported U.S. investigation into Kaloti underscores the inherent difficulties in pursuing money laundering cases. Investigators are often forced to trace funds across international borders and through companies located in secrecy jurisdictions like Dubai, where regulatory enthusiasm for cracking down on financial crime remains limited. Successfully prosecuting powerful entities also demands political resolve and consensus among various U.S. agencies with potentially conflicting priorities.
The details of the investigation surfaced within a trove of confidential bank filings exposing over $2 trillion in suspicious transactions flowing through the global financial system. JPMorgan Chase, Deutsche Bank, and other major financial institutions inundated the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) with alerts concerning Kaloti. These Suspicious Activity Reports (SARs) flagged thousands of transactions, totaling $9.3 billion between 2007 and 2015, as potentially illicit.
Bank reports highlighted financial movements exhibiting hallmarks of money laundering. Several banks initiated internal investigations and severed ties with Kaloti, or announced intentions to do so.
These SARs, part of the FinCEN Files investigation, were obtained by BuzzFeed News and shared with ICIJ and 108 media partners. It’s important to note that SARs reflect the suspicions of bank compliance officers and do not automatically indicate criminal activity. Some documents within the FinCEN Files originated from U.S. Senate committee probes into Russian interference in the 2016 U.S. presidential election, while others stemmed from law enforcement requests to FinCEN.
ICIJ corroborated details of the government’s inquiry into Kaloti with nine current and former law enforcement and other officials who agreed to speak anonymously due to lack of authorization and fear of reprisal.
A Kaloti spokesperson issued a statement vehemently denying any misconduct allegations, asserting the company has never “knowingly engaged with any criminal or criminal group.” Kaloti claims to conduct thorough due diligence and anti-money laundering checks, including database searches, which have never revealed any criminality among active clients. The company maintains it has never faced accusations or inquiries from regulators or legal authorities regarding material wrongdoing.
A DEA spokesperson confirmed the Kaloti case is now closed, declining further comment.
There is no better mechanism in the world for laundering money than gold.— David Soud
U.S. investigators never directly questioned Kaloti. As the case did not result in charges or Treasury sanctions, Kaloti never had the opportunity to review or challenge the evidence gathered.
Law enforcement has long recognized the gold trade as a critical vulnerability in the global fight against money laundering. Drug gangs and militant groups utilize gold to launder profits and finance conflicts. This activity fuels illegal mining operations causing rainforest destruction and serving as hubs for sex trafficking and child labor. In Peru, a major gold producer and cocaine supplier, the illegal gold trade now eclipses drug trafficking in scale.
“There is no better mechanism in the world for laundering money than gold,” stated David Soud, head of research and analysis at I.R. Consilium, a firm specializing in resource-related crime analysis. “It is concentrated, portable wealth, has essentially the same value anywhere in the world, and can be moved outside the global financial system.”
Consequently, scrutiny of precious metal transactions by banks is common. Gold companies are implicated in roughly a quarter of all suspicious transactions within the FinCEN Files.
However, the FinCEN Files reveal that inquiries into Kaloti went beyond routine monitoring. As the U.S. investigation gained momentum, concerns about Kaloti’s business practices also surfaced in the United Kingdom.
In 2014, a former partner at EY’s Dubai office reported that Kaloti accepted gold exported from Morocco disguised as silver, accompanied by falsified documentation. EY auditors also found Kaloti purchased gold from Sudan – a region where the precious metal has financed a militia group under investigation for genocide – without proper supplier vetting, according to the whistleblower. Subsequently, in 2015, Kaloti’s refinery lost a crucial industry accreditation.
A Kaloti spokesperson refuted allegations of conflict minerals in its supply chain, stating no regulators, international bodies, or auditors have found evidence of conflict minerals or even their likelihood.
Despite these controversies, Kaloti has maintained business relationships with major corporations, including Swiss refiner Valcambi, according to Global Witness, an anti-corruption advocacy group. Kaloti recently inaugurated a new refinery in Dubai.
General Electric, Amazon, General Motors, and numerous other U.S. companies disclosed in SEC filings in 2019 that Kaloti might have processed or supplied gold within their supply chains.
GE and General Motors clarified they do not directly source gold from Kaloti. GE stated it requested the supplier who reported using Kaloti to remove the company from its supply chain. Amazon, GE, and General Motors affirmed their commitment to ethical supply chains.
Dubai’s Ascent in the Gold Trade
Gold is a cornerstone of the global economy. Investors trade gold futures on major exchanges, and banks procure gold from mines to sell to manufacturers for diverse applications, from jewelry to electronics.
Gold prices are volatile, reaching highs and lows, yet it remains a safe-haven asset during market instability due to its enduring value. Gold has underpinned empires throughout history, from 16th-century Spain to the modern United States, which holds billions of dollars in gold reserves.
For Munir Al Kaloti, founder of Kaloti Jewellery Group, gold was the foundation of a business empire.
Al Kaloti migrated from Jerusalem to the nascent UAE in the 1960s. He began by trading scrap metal and later imported livestock.
In 1988, Al Kaloti established a jewelry shop with his son-in-law. They soon expanded into gold buying. “People carrying scrap gold and gold from mines in Africa and Asia were coming in more and more and they are asking who can handle this, who can buy this?” Al Kaloti recounted. “So we said: ‘Why not?’”
Dubai evolved into a major financial and commercial hub, also becoming a significant center for gold trading, facilitated by low taxes, proximity to key markets in Africa and Asia, and a reputation for discretion.
In 2000, Kaloti Jewellery Group commenced trading gold bars. By 2008, it established its own refinery in Sharjah, becoming a leading gold trading and refining conglomerate in the Middle East, with international branches, while remaining a family-run enterprise.
However, Kaloti’s operations began attracting scrutiny from U.S. law enforcement.
gold bars stamped with kaloti
Operation Honey Badger: Unmasking the Scheme
In late 2010, a DEA-led task force in Florida initiated Operation Honey Badger, investigating a complex money laundering scheme spanning continents, linked to Project Cassandra.
An international criminal network allegedly channeled illicit cash from European cocaine sales to Africa, combining it with used-car sale proceeds from Benin, prosecutors claimed. Cash couriers with Hezbollah ties allegedly moved cash to Beirut for a cut.
Lebanese Canadian Bank and money exchange businesses allegedly wired hundreds of millions of dollars to the U.S. for further used-car purchases, completing the laundering cycle. Funds also flowed through the bank to Asian consumer goods companies to buy products shipped to South America to pay cocaine suppliers.
In early 2011, the U.S. Treasury Department designated Lebanese Canadian Bank a “primary money laundering concern,” the same sanction later considered for Kaloti.
The DEA task force, analyzing bank records, noticed funds linked to the Lebanese Canadian Bank case now appeared to transit through Kaloti, a gold trader then unfamiliar to them.
“Overnight the wire transfers you saw with Lebanese Canadian Bank and these other companies switched over to Kaloti, like a light switch,” a former official recalled. “We were, like: ‘Who’s Kaloti?’”
Kaloti became a focus of Operation Honey Badger. Investigators focused on two Kaloti clients suspected of laundering drug money through gold: Dubai-based Salor DMCC and Benin-based Trading Track Company.
Financial records revealed large, frequent wire transfers from Kaloti to Salor, referencing gold trading and Trading Track in payment details.
Salor often wired funds to used-car dealers on the same day, law enforcement records showed.
“Kaloti was used to mask the source of a lot of those funds,” a former investigator stated, emphasizing the complex money trail.
Another red flag: Kaloti made substantial cash payments to suppliers. Cash is favored by criminals due to its untraceable nature. Documents showed Kaloti paid Salor $414 million and Trading Track $28 million in cash for gold in 2012 alone.
Kaloti cited confidentiality obligations regarding its relationships with Trading Track and Salor, asserting it only onboards clients after “robust due diligence” and that any cash transactions were legitimate.
Kaloti stated that while cash was common in the UAE, it made a commercial decision to cease cash transactions by August 2013.
Salor and Trading Track share an owner, according to their lawyer, who remained unnamed. The lawyer denied any illegal conduct by either company, stating they were unaware of the U.S. investigation and have not faced charges. Salor affirmed its Dubai activities were regulated and approved.
Trading Track manager Nemer Talj told ICIJ media partner Banouto that Trading Track transports gold for Salor, entrusted to Kaloti for refining.
Bank Alarms: Suspicious Activity Reports
The United States is a leading global enforcer of anti-money laundering laws, largely due to the U.S. dollar’s dominance in global finance and the pivotal role of Wall Street banks in international payments.
Financial institutions operating in the U.S. must comply with U.S. regulations, including reporting suspicious transactions to FinCEN. This occurs when an institution “knows, suspects, or has reason to suspect” transactions could involve money laundering, sanctions violations, terrorist financing, or lack legitimate business purpose.
The DEA-led task force subpoenaed bank records, triggering heightened vigilance among financial institutions.
The FinCEN Files reveal a surge of SAR filings in 2012 and 2013 as banks alerted authorities to suspicious activities.
In 2012, Kaloti began large transfers from Deutsche Bank to its Emirates NBD account in Dubai. Kaloti agents then allegedly withdrew so much cash from Emirates NBD it required wheelbarrows, a former Deutsche Bank employee claimed.
Deutsche Bank reported these withdrawals to U.S. authorities in 2013, FinCEN Files show. The bank noted concerns that London commodities exchange traders were distancing themselves from Kaloti and that Deutsche Bank intended to do the same.
a fincen files document
Deutsche Bank also shared concerns with UAE authorities, including the U.S. investigation into Kaloti. The Dubai Financial Services Authority stated it lacked jurisdiction to investigate Kaloti. The UAE Central Bank did not comment.
Around the same time, JPMorgan Chase suspended commodities trading with Kaloti, citing law enforcement interest and “high-risk” transactions.
Emirates NBD maintained Kaloti’s account until at least August 2014, filings indicate.
Deutsche Bank, JPMorgan Chase, and Emirates NBD declined to comment, citing confidentiality. Kaloti also declined to comment on banking relationships, stating some major banks are reducing gold market exposure to minimize risks.
Kaloti asserted it conducted roughly 75,000 transactions between 2012 and 2016, and the number of SARs naming the company in FinCEN Files was “statistically insignificant.”
The Whistleblower and Industry Scrutiny
During a 2013 visit to Kaloti’s Dubai office, EY auditors discovered silver-coated gold bars. Munir Al Kaloti’s son revealed the gold beneath, explaining a Moroccan supplier disguised the bars to circumvent export restrictions, according to an internal EY report.
EY inspectors were alarmed. Accepting gold with falsified paperwork risked Kaloti’s “Dubai Good Delivery” accreditation, potentially deterring major international clients.
Auditors concluded Kaloti knowingly accepted up to four metric tons of Moroccan gold with falsified documents. These shipments included gold from a criminal group laundering $146 million in drug money through Kaloti, a BBC Panorama investigation later found. Kaloti stated it vetted suppliers and “swiftly rectified” any “shortcomings.” It denied buying silver-coated gold and claimed it would “never knowingly” deal with criminal entities.
The auditors informed the Dubai Multi Commodities Centre (DMCC), which manages the accreditation program aimed at establishing Dubai as a leading gold trading hub.
International standards require gold buyers to vet suppliers for conflict and human rights abuses. However, in many countries, including the UAE, these standards are not legally binding, relying on voluntary programs like DMCC’s.
Instead of revoking Kaloti’s accreditation, DMCC allegedly changed rules in 2013 to allow Kaloti to keep the auditor’s findings secret, according to Amjad Rihan, a former EY partner. DMCC disputes this.
DMCC eventually removed Kaloti’s Sharjah refinery from the “Good Delivery” list in April 2015, citing failure to meet standards, though without specific reasons. The move was largely symbolic. Kaloti continued to operate. Kaloti claimed the removal lacked “valid grounds” and was unrelated to its sourcing policy, adding that the gold industry has undergone “significant regulatory changes” and Kaloti complies with all requirements and best practices.
Rihan accused EY of a cover-up and wrongful dismissal. A London High Court judge later ruled in Rihan’s favor, ordering EY to pay him $11 million. EY is appealing.
“Tremendous Amounts of Illicit Value” and Diplomatic Hesitations
In August 2014, the DEA task force submitted a report to the Treasury Department, detailing evidence that Kaloti, Salor, and Trading Track were money laundering threats. The report identified Kaloti Jewellery International DMCC as the primary target within Kaloti Jewellery Group.
Investigators concluded these entities were “providing financial services for a variety of criminal organizations based throughout the world,” converting illicit cash into gold and establishing “a significant capability to transport or otherwise transfer tremendous amounts of illicit value through the use of gold as a commodity, as well as bulk cash transfers and third party wire payments,” according to report excerpts seen by ICIJ. Salor and Trading Track were named as “core entities” in drug money laundering.
These findings were based on extensive investigation: over 230,000 wire transfers, warrants for email accounts containing 450,000 conversations, and interviews in Europe. U.S. Special Operations Command and other agencies contributed.
A lawyer for Salor and Trading Track denied wrongdoing, stating investigations without findings of wrongdoing are common.
Kaloti “categorically denies” being a money laundering “threat” and claimed “wholly unaware of alleged criminal connections” to Salor and Trading Track. Kaloti stated it would have severed ties if presented with evidence of customers facilitating criminal activity.
Kaloti clarified third-party payments were legal and common before 2013, were transparent, for vetted clients, identified sources, and ceased by end of 2012. Kaloti maintains full compliance with all regulations and licensing.
The Treasury Department conducted its own Kaloti investigation. U.S. authorities prioritized diplomatic discussions with the UAE before imposing sanctions, former Treasury officials said.
Kaloti is economically significant in Dubai, and the UAE is a U.S. ally, particularly in counter-terrorism. Treasury officials met with UAE authorities in 2015 and 2016 to discuss Kaloti. However, the DEA task force distrusted Emirati authorities and withheld evidence, former investigators said.
Reasons for not designating Kaloti as a “money laundering concern” remain unclear. Besides diplomacy, the Treasury Department rarely uses this sanction, created post-9/11. It has been applied only 26 times in two decades, never to a precious metals dealer.
“Should we have taken action? Yes, we should have,” said a former Treasury official. However, applying the sanction to a precious metals company was unprecedented and complex, making the case “never a slam-dunk.”
It’s unclear if the Treasury Department also investigated Salor and Trading Track.
Kaloti’s spokesperson believes Treasury concerns would have been “easily allayed” with proper investigation or liaison with UAE authorities or Kaloti.
Despite no Treasury action, by 2013, three major banks had closed or planned to close Kaloti-linked accounts, FinCEN Files and other records show.
Deutsche Bank kept accounts open longer than desired at Justice Department request for monitoring purposes, according to Rihan lawsuit testimony.
HSBC Hong Kong closed Kaloti’s account in early 2016, two years after Rihan’s public disclosures. HSBC declined comment.
The Treasury Department, Justice Department, and UAE did not comment on the Kaloti investigation. The DEA only confirmed the case is closed.
Following ICIJ’s inquiries, the Treasury Department stated “unauthorized disclosure” of SARs was a crime and “referred this matter” to its Inspector General and the Department of Justice.
“Lip Service” and Lingering Concerns
Despite U.S. money laundering investigations, EY’s PR crisis, bank account closures, and DMCC’s accreditation revocation, Kaloti proceeded with a new refinery in Suriname, a South American country flagged by the U.S. State Department as a cocaine transit hub.
This refinery was a joint venture with the government of Dési Bouterse, convicted of drug trafficking in the Netherlands in 1999. A security consultant who visited Suriname in 2016 reported “no evidence that the refinery exists.”
“Under these circumstances, the government can certify the exports of any amount of gold, real and fictitious, from a refinery that exists only on paper,” consultant Douglas Farah wrote. Kaloti and Suriname disputed these findings. Kaloti published an auditor’s letter certifying the refinery’s operation between 2015 and 2017.
Kaloti appears to be prospering. Despite removing Kaloti’s original UAE refinery from its “Good Delivery” list in 2015, DMCC allowed Kaloti to open a new refinery in 2017. DMCC stated all company registration applications undergo a “robust compliance process.”
Global Witness reported that in 2018 and 2019, Kaloti bought Sudanese gold possibly funding armed groups and sold roughly 20 metric tons of gold to Valcambi, a Swiss refiner on Dubai and London Bullion Market Association “Good Delivery” lists.
Valcambi declined to confirm or deny Kaloti purchases, stating it ensures gold origin and avoids sanctioned countries like Sudan.
Kaloti called Global Witness’s findings “not accurate” but declined to comment on customers, stating it sourced Sudanese gold directly from artisanal mines producing “non-conflict gold.” The LBMA stated Valcambi underwent audits due to recycled gold from the UAE, a high-risk jurisdiction, in 2018.
As of January 2015, Kaloti was a COMEX member. The exchange declined to confirm 2020 membership, citing confidentiality. Kaloti is also a Shanghai Gold Exchange international board member and its Turkish branch is on the Borsa Istanbul. Neither exchange commented.
Experts suggest the UAE shows limited interest in combating illicit gold trade. Billions in gold are smuggled from Africa via the UAE annually, depriving poor nations of revenue and allowing conflict gold into the global system, a Reuters investigation found.
The Financial Action Task Force recently criticized the UAE for insufficient anti-money laundering efforts.
“The ruling family pays lip service to following the rules, but it’s basically laissez-faire, anything goes,” said John Cassara, a former U.S. Treasury special agent. “Money goes in, money goes out and nobody enforces anything.”
The UAE Embassy in Washington, D.C., stated the country “is continually improving its own security—and those of its allies—by limiting and preventing illegal transshipments and money flows” and recently updated anti-money laundering laws.
Current and former officials on the Kaloti investigation believe inaction against the company set a negative precedent.
“In my opinion, what is the risk factor? Being exposed?” one official questioned. “If you’re not being prosecuted or shut down, then what would stop you?”
Contributors: Simon Bowers, Agustin Armendariz, Emilia Díaz-Struck, Will Fitzgibbon, Yao Hervé Kingbêwé, Emmanuel K. Dogbevi, Alloycious David, Sylvain Besson, Lisseth Boon, Delphine Reuter, Andrew Lehren, Emily Siegel, Miguel Gutiérrez.
