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Gold & Greed

Gold & Greed

Can Kerala Chief Minister Pinarayi Vijayan’s effective management of the Covid-19 help return the ruling Left Democratic Front to power in the Assembly polls slated for May next year?

Well, no easy answers. Primarily it would depend on the outcome of the ongoing investigations following the seizure of substantial quantity of gold on 5 July this year by the Customs Authorities. Yes, the smuggling of gold using the diplomatic channel has literally stirred up a hornet's nest of angry opposition and criticism.  As media reports indicate, with many political parties seemingly pointing fingers at the CM’s Office, massive counter campaigns are proposed to be launched in August to explain the party’s stand in the smuggling row.

The long and short of it is that gold was found camouflaged in a diplomatic baggage that is exempted from inspection as per the Vienna Convention. The Customs Department, following established protocol and procedure, opened the said consignment received from abroad in the name of an official working in the  Consulate General of UAE in Thiruvananthapuram and found nearly 30 kg gold valued at around Rs 15 crore.

Ever since the seizure was made, things have moved in fast pace. An enquiry has been ordered against a senior bureaucrat that is the CM’s Principal Secretary Sivasankar who is alleged to have connection with the “smugglers”. He has since been suspended from service and 11 other persons have been taken into custody by the Customs Department. Following the request made by Mr Pinarayi Vijayan to the Prime Minister for a probe by the CBI, the National Investigation Agency has since been entrusted to investigate the case.

An important observation made by NIA is that the smuggled gold could be used for funding terrorism in the country. According to the NIA, as the case pertains to smuggling of large quantity of gold into India from offshore locations threatening the economic stability and national security of the country, it amounts to a terrorist can act as stated in section 15 of the Unlawful Activities (Prevention) Act, 1967. Accordingly, NIA has registered FIR against Sarith, Swapna Suresh, Sandeep Nair and Fazil Fareed under Sections 16, 17 and 18 of the said Act. Both Sarith PS and Swapna Suresh, who worked in the UAE Consulate Kerala as PRO and Executive Secretary respectively are believed to be the masterminds in gold smuggling. That the diplomatic consignment was received by Sarith and if reports are to be believed, he had received multiple consignments in the past as well clearly show that a well-coordinated network could be at work. If convicted, the accused will have to spend at least 5 years in jail that can be extended to life imprisonment along with a fine.

In the meanwhile, the UAE diplomat in whose name the diplomatic bag was received is stated to have returned to his country. However, the gunman provided for his security in Thiruvananthapuram, said to be under severe mental stress ever since the scam broke out, had been found with his wrist slashed and is undergoing treatment at a hospital.

The entire smuggling episode using diplomatic channels may look like a Bollywood thriller. Notably, gold smuggling, like drug trafficking is an activity that is said to generate high economic returns. Since the activities are illegal, so are the gains. 

Gold is highly attractive to criminal syndicates wishing to hide, move or invest their illicit proceeds. Studies have shown that there are two broad characteristics of gold and the gold market that seems to entice criminal groups: (i) the nature and size of the market itself is highly reliant on cash as the method of exchange and (ii) the anonymity generated from the properties of gold which make tracking its origins quite difficult.

For a moment, let us briefly revisit the  book  Dongri to Dubai (published in 2012, also brought out as an Hindi film “Shootout at Wadala”) written by a former investigative journalist Hussain Zaidi. He has aptly depicted the life and times of notorious gangsters like Haji Mastan, Karim Lala, Varadarajan Mudaliar, Chhota Rajan, Abu Salem and Dawood Ibrahim who all evolved from simple thugs to end up as dangerous smugglers. Zaidi says that at the time, smuggling was not a full-fledged activity and people were not yet aware of the massive amounts of money they could make in the business. The only smuggling operations that existed consisted of small-timers trying to bring in imported goods in permissible quantities, which back then consisted of such prize catches as six watches, two gold biscuits, four Philips transistors, and so on. However Dawood’s men invented new ways of smuggling using the cavities of human bodies that the X-ray machines of those days failed to detect. They began hiding gold pieces in the rectum and named it the ‘godown line’ or ‘underground line’. Passengers were called carriers and in addition to return airfare and a week’s stay in Dubai, they were paid a satisfactory amount of what was relatively easy money. People began to queue up to become carriers and the business flourished. While smuggling through air had its limitations in terms of volume, but by sea the cargo could be much bigger. They just had to ensure they dodged the customs cleverly.  Small fisherman boats would set out to the high seas which would meet the steamers or ships with the smuggled cargo of gold or silver, which would get to Indian waters. The fishermen’s boats would then ply the cargo back onto the shores across the coast of Maharashtra and the Union Territory of Daman. It would take an estimated four hours to get to the Indian coasts, thereby avoiding the Customs.

A couple of years ago, the Mumbai Police while dealing with a case of assault on a woman found that couriers were flown to some Middle East countries by a well-knit gang from where gold that was to be smuggled to India. Gold was treated with some chemical which would turn it into a jelly form and fused with clothes, mostly undergarments, which would be worn by the couriers. Baggage and body scanners would not detect the gold hidden in chemicals in jelly form. On landing in Mumbai, the couriers would meet the receivers and head to a pre-decided location, usually the nearest hotel or public restroom to hand over the gold-fused undergarments to the receiver. Such smuggled gold would then be taken to select gold jewellery manufacturers where the gold would be separated and turned back into solid form. There are many such incidents reported regularly.

Reports suggest that the depreciation of the rupee in relation to the dollar coupled with rift in US-China trade has made investors find a safe haven in gold, which has led to its steep price hike. With a hike in customs duty 10 per cent to 12.5 per cent in the 2019-20 Union Budget along with an increase in GST to 3 per cent from 1 per cent, plus an additional 5 per cent GST on making charges of gold ornaments it has possibly become more attractive to smuggle gold form abroad where it is said to be cheaper by at least 25 per cent. Reports seems to suggest that if anyone is able to smuggle in a kilo of gold, they could earn six times. So, isn't it lucrative to smuggle gold?

Although it is unknown how many smugglers succeed in getting past the customs scrutiny at airports, whenever they are caught, news reports provide details that are undoubtedly new and innovative. Although scanning of goods does not detect any abnormality, at times, random physical checks by authorities on suspicion has reaped rich dividends. It been found that some people had concealed gold inside laptop hard disks, packed food tins, inside metal dies that are used to cut sheet metal, date seeds, bra straps, belt buckles, shoe soles, sausages, gold beads mixed with pulses etc. A passenger at the Kozhikode airport was found walking away with 500 grams gold in his sole while a woman was holding her infant water bottle made of gold. Some have been found hiding gold in body cavities including rectum and in the form of gold capsules.

So, smuggling gold encourages money laundering which in simple terms is the process by which this illegal money, also known as ‘dirty money’, is made to appear legitimate. This is a threat to financial systems of nations and India is no exception. Smugglers and their syndicates  deserve no mercy. 

As Mahatma Gandhi once said, “It is health that is real wealth and not pieces of gold and silver”. 

(Published on 20th July 2020, Volume XXXII, Issue 30)