About 10 years ago, a potential client from abroad requested legal assistance in a gold transaction with local traders in Ghana. From the story the potential client told and the fake-looking documents they had received from the local traders, it was obvious that we had been contacted in the middle of a scam. We told them about our concerns and how gold was neither easily available nor easily traded in Ghana. In reply, their main concern was our reluctance and if the country was not the “Gold Coast” (Ghana’s pre-independence name). Clearly disappointed, they vanished into thin air.
Many lawyers are unwilling to ‘touch’ gold transactions in the small-scale mining sector in Ghana because of the level of fraud involved in that sector. In truth, too many foreign traders do not involve lawyers at all in their transactions. They deal directly with local gold traders. But how would they know about the licences and permits that small-scale gold dealers need in order to trade in gold? Because some foreign traders hardly use the services of lawyers, they are unaware of all the legal requirements needed for the trade. So they get scammed by unlicensed small-scale gold miners and traders.
The scammers have a simple mode of operation. The foreign trader pays in advance for gold. The local trader exports (smuggles, really) gold to the foreign trader’s designated destination in a foreign country. There are no major issues for the first five or more trades. Trust is built. Then the confident foreign trader transfers a large sum of money to the local trader. Then the issues come up. No gold is exported. The local trader may just disappear. Or they may give excuses (“I’m unwell”, “the police extorted the gold from me”, “I lost my spouse”, etc).
If your local gold-trading partner is not licensed, you face "double jeopardy". Apart from losing your money, you may not be able to sue successfully for the gold because an illegal contract is not enforceable. It does not matter that you did not know that you were dealing with an illegal trader. Often, people know they are dealing with smugglers-turned-scammers (and just like the below-market prices they are getting). The police? Criminal complaints against these scammers usually end nowhere.
What about fraud? What if the scammers had fake licences from the Minerals Commission? Maybe one can bring a case in fraud. But would such fraud have been possible if one had acted through lawyers? More importantly, the Minerals Commission’s website has a list of the gold traders it has licensed. It would be difficult to get the court’s sympathy after getting scammed by a trader whose name is not on this public list.
Apart from the licences gold traders need from the Minerals Commission, they need other authorisations and registrations from the Bank of Ghana to trade in foreign currency and the Ghana Revenue Authority to pay their taxes and comply with all tax laws.
It is not difficult for a foreign trader to buy gold from Ghana, if they do so from authorised sellers. However, because it is easier and cheaper to buy gold under the radar, buyers are incentivised to go this route. More often than not, this route ends in the buyer being defrauded resulting in very little recourse available for the recovery of their money.
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Read the full publication at ENSafrica.