When Will This Scourge Stop?

Gold smuggling has become a persistent problem in Nepal, making it challenging for law enforcement to eliminate it completely. The regular confiscation of illicitly transported gold, the arrest of numerous smugglers, and the revelation of their connections to influential individuals highlight the threat this illicit activity poses to our financial and security systems. Analysts claim that Nepal’s open borders, absence of an appropriate number of security checkpoints, strict surveillance, and corruption among government officials and politicians have resulted in the nation becoming a safe haven for gold smugglers.

Reasons

With its greater global value, gold is seen as a representation of wealth, social status, and cultural significance. It is worth noting that gold smuggling occurs in countries like Nepal for a variety of reasons. Due to their widespread use in jewellery, cultural and religious ceremonies, and as a form of savings, they are highly sought-after and culturally significant. When lawful supplies are scarce or too costly, smuggling of this precious item becomes more prevalent. 

Owing to economic concerns, many people view gold as a safe investment, especially in countries with unstable economies or currencies. It is a popular asset due to its value and ease of liquidation. The variation in gold prices between countries offers opportunities for smuggling and making a profit. Smugglers may buy cheaper gold in one country and sell it for a higher price elsewhere. The imposition of high taxes and import levies on gold may lead to an increase in smuggling. By evading these taxes and duties, smugglers can sell gold at prices that offer them higher profit margins.

Furthermore, strict restrictions on gold imports may restrict the legal supply, leading people to turn to illicit means to meet the demand. Smuggling is encouraged due to the presence of well-established illegal gold markets and when law enforcement agencies are unable to bust these networks and capture criminals who transport and sell this contraband. Corruption among border officials, police officers, politicians, and other authorities may encourage smugglers, while unlawful actions can avoid detection by using bribery and collaboration. In the meantime, Nepal's location also contributes to the prevalence of gold smuggling, as it becomes a useful transit route for smuggling operations due to its proximity to China and India.

Reports indicate that during the wedding season, the demand for gold is 50 kg per day, but only 20 kg is obtained through legal means. Smuggling is believed to be responsible for the remaining gold market supply. Nepal has become a major transit location for gold smuggling, and over the past few years, the country has witnessed a surge in the smuggling of this precious metal, amounting to thousands of kilogrammes.

The Central Investigation Bureau (CIB) reported that approximately 3200 kilogrammes of gold were brought into the country through the establishment of five fake companies in recent times. These companies imported a range of electronic devices, primarily from China, and concealed gold in electronic goods such as vapes and motorcycle brake shoes. What's more concerning is the discovery of digital payment gateways—Paywell Nepal and Sajilo Pay—in the payment process, helping fuel the illicit gold trade activities in the country.

According to CIB sources, Paywell received digitally transferred money worth Rs. 86.17 billion between April 26, 2023, and May 3, 2024. Whereas from May 16, 2022, to June 3, 2024, Sajilo Pay’s wallet received a total of Rs. 36.94 billion in electronic money, with the highest sum of Rs. 19.46 billion credited through voucher payment. During the investigation, the Bureau confiscated voucher details valued at Rs. 1 billion. The CIB reported that all these transactions were conducted without the necessary clearance from Nepal Rastra Bank and were carried out by agents. 

Systematic approach

These instances show a systematic approach to gold smuggling into Nepal, involving smugglers from China, India, and Nepal who transport the valuable metal through various routes. The involvement of both local and international traffickers highlights the global extent of this illegal operation.

Customs evasion is common among international gold smugglers, who import gold through various channels. The findings show that Nepal is being used as a hub by a well-coordinated network of international traffickers. Gold is smuggled into Nepal from China, Thailand, Gulf countries, Switzerland, and African countries, with India being the final stop. Smugglers currently use the Nepal-China border from Kerung to Rasuwadi; Tatopani in Sindhupalchok via Khasa; Olangchunggola in Taplejung and Lonak via Rongsar; Napche Chule in Solukhumbu via Tingri; and Lapchegaon in Dolakha. Subsequently, they exploit the porous border between Nepal and India to transport the illegally imported valuable metal. The CIB discovered that domestic gold jewellers are the chief buyers of smuggled gold, as they use this cheaper gold to sell jewellery at inflated prices.

While Nepal consumes a small portion of smuggled gold, the majority is used in India. According to experts, tighter gold import restrictions in India have led to an increase in gold smuggling in Nepal. According to sources, inadequate surveillance and monitoring systems at border crossings lead to the trafficking and occasional confiscation of illicit gold. The police investigation shows that Chinese and Indians are the major contributors to gold smuggling, with a smaller number of Nepalis also involved. The evidence from gold seizures confirms that there has been a longstanding history of gold smuggling between China and Nepal.

According to reports, those seeking to smuggle gold into Nepal rely on human mules for transportation. Nepali migrant workers are used to transporting an acceptable amount of gold to Nepal. Gold smugglers in the Gulf supply gold jewellery through Nepali migrant workers, who are tasked with delivering it to their connections in Nepal in exchange for some cash rewards.

As gold is smuggled to Nepal through insufficient border inspections and ineffective surveillance systems, it is brought to Nepal with much ease. The corrupt tendency among customs and police also helps traffickers. With the high import taxes on the import of authorised gold, significant economic motives have become rife for smuggling. The price difference between legally imported and smuggled gold can reach as high as NPR 13,000 per 10 grammes, allowing smugglers to make a substantial profit.

No arrest of main ulprits

Nepalis often get furious over allegations of gold smuggling involving politicians and their relatives. Reports of politicians' involvement emerged after the revenue investigation agency confiscated approximately one quintal, or 100 kg, of illicit gold that went through Tribhuvan International Airport customs last year. The authorities are troubled by the fact that even though a significant amount of gold is being trafficked, only the mules or carriers are arrested, and the main culprits behind the smuggling remain unidentified.

It is concerning to witness the connection between gold smuggling and top officials and politicians. After the seizure of several kilos of gold concealed in electronic vapes by customs authorities, some politicians requested the officials return the confiscated vapes. Meanwhile, the son of ex-vice president Nanda Bahadur Pun was apprehended for his alleged role in gold smuggling. The police apprehended a Chinese individual who possessed a Belgian passport and Nepali citizenship, along with several Chinese nationals. They have connections with the former vice president’s two sons and with Krishna Bahadur Mahara, a senior leader of the CPN-Maoist Centre. Mahara was arrested and later released on health grounds. Furthermore, there are allegations involving bureaucrats, customs agents at the TIA, and police personnel who assisted gold smugglers. Likewise, police arrested Indian nationals possessing large caches of gold and expensive machines used for melting gold.

Some people think that it is impossible to smuggle a large quantity of precious gold from border points and the international airport without the help of well-connected individuals such as customs and police officials. Questions as to what the reasons are behind the failure to apprehend the main culprit behind such a large amount of gold smuggling often remain unanswered.

Nepal has a long history of smuggling this precious metal. During the Panchayat era, it became the norm, with well-known cases such as Rashtriya Panchayat members smuggling gold from Hong Kong. Following the 1970s, there was an escalation in the trend, with significant upswings in the 1980s. The trend picked up after the restoration of democracy in the 1990s and after the nation was rendered a federal democratic state following the popular uprising of 2007. 

It’s disheartening to witness how the problem persists despite multiple changes in government, with smuggling often tarnishing the image of individuals from political, administrative, and commercial backgrounds. A few years ago, the country's law enforcement discovered the involvement of various individuals, including government officials and merchants, in high-profile incidents like the 33 kg and 88 kg gold smuggling.

Gold smuggling has significant political consequences. The discovery of 100 kg of gold at Tribhuvan International Airport has sparked a political controversy, leading to allegations of involvement by high-ranking politicians and their relatives, as well as demands for key ministers' resignations. Such issues are also raised in parliament, underscoring the sensitive nature of the issue, with opposing parties demanding comprehensive investigations.

Economists say the smuggling of gold causes economic instability and harms legitimate enterprises and their workers. When jewellers rely on smuggled gold due to strict import restrictions, they merely perpetuate the criminal trade. And when senior officials engage in smuggling, it erodes public trust in government and law enforcement.

Gold smuggling in Nepal is a multifaceted problem shaped by historical, economic, and political factors. It is disheartening to see that, despite law enforcement authorities making significant efforts to combat the issue, the persistence of smuggling highlights the need for more comprehensive solutions. The CIB discovered that domestic gold jewellers extensively buy smuggled gold, indicating that they use this cheaper gold to sell jewellery at inflated prices.

Alarming increase

The alarming increase in illicit gold smuggling in Nepal needs immediate attention. The country’s convenient location near major gold-consuming nations like India and China, combined with its lenient law enforcement and border control measures, have turned it into a prime hub for illegal gold trafficking. Although every government makes a pledge to eradicate gold smuggling, the existing trend indicates a persistent problem with the illegal gold trade, which has increased in recent years.

There is no denying that the act of smuggling gold has negative effects on the economy, such as tax evasion, illicit activity, and destabilisation of the financial system. To combat it, measures such as stricter border controls, improved law enforcement, and global cooperation need to be implemented.

According to authorities, other reasons for the rise in gold smuggling include a lack of investment in technology, skilled personnel, and knowledge needed to prevent smuggling, particularly at the border with two major countries. Lately, increased monitoring by the Nepal Police and Revenue Investigation Department has been utilised to combat gold smuggling. Also, the practice of rewarding informants who provide tips that result in the apprehension of smugglers and the seizure of contraband has been initiated. The purpose of this reward is to encourage the public to participate in anti-smuggling efforts. Nonetheless, experts recommend additional stringent actions, including advanced detection technology investment, border agent education, and stronger law enforcement. Although significant arrests and seizures have occurred, the root problem has remained unchanged as more criminals remain out of law enforcement’s net.

(Upadhyay is a former managing editor of this daily.)