The Illegal Gold Rush Enriching Maduro's Regime

The Illegal Gold Rush Enriching Maduro's Regime
AP Photo/Leonardo Fernandez
The Illegal Gold Rush Enriching Maduro's Regime
AP Photo/Leonardo Fernandez
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The authoritarian regime of Nicolás Maduro in Venezuela has kept its hold on power despite a dramatic economic and political crisis. Its tenacity has confounded observers. Policymakers pressing for a political transition in Venezuela have targeted various support structures that sustain the Maduro regime, including corrupt cronies, military officials, and Cuban advisors. However, lawmakers in the United States and in the countries neighboring Venezuela must do more to confront transnational criminal and guerrilla organizations. These groups’ support of the Maduro regime is an important barrier to political change in Venezuela.

The Maduro regime has greatly expanded its alliances with these groups, especially with National Liberation Army (ELN) guerrillas from neighboring Colombia. They are central to the Maduro regime’s survival. While nominally Colombian, approximately half of the ELN’s forces are now located in Venezuela, including most of its leadership. There, the ELN manages the extensive illegal mining operations that are at the heart of the group’s Venezuelan expansion. Documents and accounts by defectors point to arrangements in which the Maduro government allows the guerrilla group to control Venezuelan’s mining regions in exchange for financialmilitary, and even governance support. The proceeds from these mining operations are also key to maintaining the loyalty of the Venezuelan military by way of bribery.

My recent report for the American Enterprise Institute details how the ELN has shifted its focus to lucrative illegal gold-mining activity in both Venezuela and Colombia, making it the group’s primary source of revenue. With gold prices now at a six-year high, this trend will continue and provide even more illicit revenue to the ELN, and therefore to the Maduro regime.

To move the needle in Venezuela, U.S. President Donald Trump’s national security team needs to take decisive action to weaken the ELN. To accomplish this, U.S. and regional leaders must work to ensure the integrity of gold markets and prevent the laundering of illegal gold.

U.S. agencies are taking appropriate action to sanction Venezuela’s state mining company, as well as some foreign firms that purchase and launder Venezuelan state gold. However, loopholes in regulations allow unscrupulous firms and smugglers to bypass sanctions and facilitate the laundering of massive amounts of illegal gold into traditional markets closer to home.

In Colombia, a key transit point for smuggled Venezuelan gold, as much as 80% of exported gold is mined illegally. Those gold exports go to markets around the world, but the vast majority are destined for the United States. In one recent case I highlight in my report, Colombia’s prosecutors found that a single gold-trading company laundered nearly $750 million in illegally mined gold. Colombian investigators found that one of the country’s largest mineral trading companies easily falsified documents meant to identify the origin of gold, taking advantage of the country’s largely informal gold trade.

Colombia is far from the only laundering point for illegal gold. One journalistic investigation recently highlighted the major role of Caribbean islands such as Curaçao as a hub for the laundering of illegal Venezuelan gold. Firms and smugglers there take advantage of uneven customs enforcement and relaxed regulations in free trade zones to launder gold, hiding its illegal origins before selling and exporting it. 

The existence of these vulnerabilities in the regional gold industry make illegal mining a highly profitable endeavor for transnational criminal organizations. Closing these loopholes with more stringent enforcement, verification, and reporting requirements is essential.

There are other reasons for officials to prioritize this issue. The ELN’s growing entrenchment in Venezuelan territory means that it would remain a dominant, criminal force in the country even if the Maduro regime were ousted from power. At the same time, the ELN is strengthened by its illegal mining operations throughout Colombia, ensuring the guerrilla group’s ability to disrupt national initiatives for sustainable peace and development by a vital U.S. ally.

Washington can lead on this challenge by pushing for enhanced regulatory scrutiny of the region’s gold industry, particularly in markets known to be facilitating the laundering of illegal gold. The U.S. Treasury Department should back this with an active campaign to identify and sanction foreign firms that are found to be laundering illegal gold in connection with transnational criminal organizations. The United States should also support regional enforcement efforts by designating funds to bolster the investigatory capacity of the Colombian government, enabling it to identify corrupt firms.

Finally, the region must work to enhance monitoring of cross-border smuggling routes to intercept illegal gold before it can be laundered.

The challenge of cracking down on illegal mining is significant and resource-intensive. However, if the United States and countries in the region leave these vulnerabilities unresolved, the ELN and other malign actors will continue to derive illicit wealth and resources to fund campaigns of violence and destabilizing actions throughout the Western Hemisphere.

Andrés Martínez-Fernández is a Senior Research Associate with the American Enterprise Institute’s Latin American Studies Program where he works on transnational organized crime and economic development in the Americas. 



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