Drug lords make billions smuggling gold to Miami | Hacker News Reader

Drug lords make billions smuggling gold to Miami

miamiherald.com

85 pointsjohnny31331 comments

You might also be interested in: https://www.nytimes.com/2017/06/14/business/japan-gold-smugg...

Gold smuggling, which Japan is getting mildly more serious about combatting, is largely just about tax fraud. Japan has a VAT-style consumption tax. When you buy gold you pay the seller 8% of the value of the gold you are buying. This includes if you buy it from e.g. a natural person.

When you legally import gold, you pay the same rate as a duty. So in the ordinary course of business, you import the gold (pay 8%), you sell the gold onto someone (who pays you the 8% back and holds that 8% on their own books), who sells it onto someone (who pays them the 8% back and holds the 8% back), etc ad infinitum. All gold in Japan essentially has an 8% tax asset virtually attached to it.

So if you can create gold in Japan which came "from nowhere", you get instant 8% of the gold created in profit, by selling it at market. Presto: join the ranks of smugglers by the simple expedient of buying $10k of gold abroad and selling it when you get home, collecting an easy $800.

$10k of gold is smaller and lighter than a Gameboy, and if you can bring a Gameboy into the country, you could bring in $10k of gold instead.

This is lucrative, simple, socially viral ("Did you hear that you can fly for free? All you need to do is buy gold abroad. It's always more expensive in Japan; taxes or some nonsense."), and never requires you to deal with the criminal element, other than yourself. Both transactions are with well-regulated gold firms in well-lighted commercial districts and don't strike either shop as being at all out of the ordinary.

So the government is trying to be very splashy about educating people that a) this is, factually, smuggling and b) the kid gloves are coming off... at some point in the ill-defined future.

Hah, really interesting. I wonder how they do the money-laundering though. Perhaps they never do try to get the cash back into the legal system, but we've heard of people profiting >1m, meaning they've done 10m in cash transactions. At some point you want to use it, and need to account for it. Not sure what it's like in Japan, but typically notaries or even expensive car dealers will not just let you bring a bag of cash to buy an asset.

Japan has AML laws but, broadly, has a much higher tolerance for high-value cash transactions than e.g. the US does, particularly if you read as obviously socially established.

If you're in possession of $50k cash in the US, presumption is that you're crooked in at least one way. If you bring $800k cash to a real estate closing in Japan, presumption is heavily in favor of "Ahh, a traditionalist."

(This assumes, regretfully but accurately, that you don't have a complicating factor like being a foreigner while doing it...)

How is it a “tax” if the 8% goes to the seller and not the government?

Same as all VAT taxes, right.

My business buys a mouse; I pay 8% to the store selling the mouse. My business sells a $FOO; my customer pays 8% to me. I file a tax return, remitting the government 8% of a $FOO less 8% of the mouse.

> So if you can create gold in Japan which came "from nowhere", you get instant 8% of the gold created in profit, by selling it at market.

And then, since you're a criminal, you simply don't file a tax return?

Yes, Gold is the original smugglers currency. Yes, gold extraction is typically exploitative and often environmentally destructive. No, the gold in Miami is not used in your mobile phone or electronics, because those aren't manufactured in the US. Look at Africa and Asia for those sources... even though it's a global market.

Child labor in mining: http://www.ilo.org/ipecinfo/product/download.do?type=documen...

> By using drug profits to mine and sell gold to American and multinational companies, criminal organizations can launder “staggering amounts of money,”

Another disaster caused by making drugs illegal.

I absolutely think drugs should be legal or decriminalized depending on the drug. However, blaming this on US drug policy is an overreach. The United States has illegal drugs, but no encampments of slaves and child sex slaves destroying the environment to dig for gold. The culprits here are the corrupt and weak government of the countries like Columbia that permit such activities and, of course, the criminal gangs that execute these activities.

If you want to play the blame game, US is more to blame because that's where the money comes from. US could stop that by legalizing drugs and therefore cutting of source of cartel's income.

Columbia's sin is that it's poor and there's hardly anything they can do about it.

If you think that US is morally superior to "weak, corrupt" Columbia, consider this: during prohibition "Al Capone bought legal immunity by administering bribes to police and politicians. He practically paid off every law enforcement agent and politician in the districts in which he operated his illegal businesses." (source: http://www.umich.edu/~eng217/student_projects/nkazmers/organ...).

There's no escaping economics.

If your opponent (be it Al Capone or Pablo Escobar) can spend hundreds of millions of dollars on bribes, he will beat you unless you have billions to spend on counter measures.

And if you think that "it was then, it wouldn't happen in US today", consider Citizens United or net neutrality repeal, paid for with legal bribes by large corporations against the wishes of majority of citizens.

Comcast doesn't do anything illegal so they don't have to hide their activities the way drug lords do but the underlying mechanic is the same: they have millions to spend and they figured out a way to spend it to buy legislation that is good for them from "weak and corrupt" US Government.

To reiterate: the issue is not moral failing of Columbia or Mexico but a simple fact that rich and powerful always find a way to corrupt the system.

The bigger the imbalance of power, the bigger the corruption. In extreme cases you get extremely rich actors (drug cartels) operating in a relatively poor countries.

We should be thankful that US is a rich country so it can win at least against violent criminals but let's not kid ourselves: US is plenty corrupted.

Don't forget that the weak governments in South America exist in part due to USA interfere.

It's a strange form of chauvinism to assert that the US is responsible not only for it's misdeeds, but also the misdeeds and deficiencies of others. By claiming that the US is more responsible for the problems of Columbia than Columbians are, you tacitly deny them agency.

I would never say the US is without corruption, but it is less corrupt than Columbia. I don't think that's a function of wealth, there are poorer countries less corrupt than the US.

However, regardless of the corruption of the US, Columbia - the government and cartels operating there, are responsible for their own misdeeds. The money comes from America - sure. So legalize the drug trade in Columbia and handle it that way, or stamp out the cartels. What's not acceptable is to allow the cartels to corrupt and corrode society and commit evil on innocent people.

When there's a willing buyer and seller, aren't they both responsible for the consequences of the transaction? Blame is not zero-sum.

Do you know why Columbia can't just legalize drugs in a meaningful way?

Because US won't let them.

Source: Obama Administration (http://www.nytimes.com/2012/04/15/world/americas/obama-says-...).

I imagine if Obama was opposed then anti-marijuana Jeff Session is super extra opposed.

Do you know why Columbia can't just "stamp out the cartels"?

Because US spent billions helping Columbia do just that and they failed. For decades they tried every tactic you can imagine: destroying crops, military raids etc.

The definition of insanity is doing the same thing and expecting different results.

By that definition trying to stamp out cartels by force is insanity.

We know you can't do it.

Columbia has as much chance of destroying cartels as US has getting Americans to stop doing drugs.

BTW: the really bad violence in Columbia started when US pressured Columbia to create a law allowing extradition of narcos to U.S. Escobar started a wave of violence against the government trying to pressure it into eliminating the law.

Let's not be naive here: Columbia agreed to US demands because US was even bigger threat to them than narcos.

My point is not to argue that Columbia has no part in the mess.

But I would assign much bigger part of the blame to US.

US was an architect and a sponsor of Columbia's failed war on cartels. A DEA agent participated in the raid that killed Pablo Escobar. US Special Forces were training Columbian anti-drug army. US supplied military equipment and billions of dollars to be used to fight drug lords.

Failure to eliminate drug trade in Colombia is as much U.S. failure as it is Columbia failure.

US, not Columbia, spent last 45 years championing failed drug policies internationally.

We won't have meaningful change until most countries legalize drugs and most countries won't do it unless U.S. also does it.

All roads lead to Rome. Or in this case Washington, DC.

There's people in Colombia literally starving and with no roof, and they can make a living by moving drugs. This is financed by [some] US citizens.

I'd put the responsibility on the one dishing out the money, not the person who's just trying to literally avoid living on the streets.

> child sex slaves destroying the environment to dig for gold

I'm no expert, but I think the sex slaves and the environment destroying slaves are probably different slaves.

Oh, well that's OK then.

Those billions of dollars come from the USA, and the cartels only “earn” those billions in profits because of the war on drugs. Were they legal, their profits would be a fraction of the amount. When’s the last time tobacco or liquor companies employed assasins and private armies?

Back during Prohibition. We didn't learn a thing from Prohibition.

This is why I hope, really hope, that bitcoin or some crypto currency becomes a stable value store, pushing people away from the likes of Gold, diamond. Almost all these resource based value stores are exploited - gold, diamonds, oil, animal skins, etc. There seems to be no end in sight to check the illegal ways of extracting these resources, since the profits are so high. The only way ,in my head at least, to check the illicit activities is to shift that value to something else which is not amenable to such exploitative extraction.

Not sure what you mean by exploitive, but electricity is also usually rough on the environment.

True but we don't hear such atrocities committed in producing electricity. I am talking of large scale human exploitation not just the environment. Though I must admit the coal mining is heavily exploited in poorer countries.

Yes, if you don't hear about it, you can be comfortable that it doesn't exist.

Ever heard of mass forced migration for hydroelectric projectsa and air pollution in cities from coal burning causing asthma

Forced migration != slavery, forced prostitution and mercury poisoning of drinking water. Yes, I am well aware how electricity generation degrades the environment, but there is a ray of hope that renewables will kick in and take some or most of that degradation away. I don't see such a line of sight for the issues raised in that article.

“Over the past two decades, as the U.S. war on drugs undercut the cash flow of narco-traffickers, kingpins diversified”

Unsupported. The war on drugs likely increased the cash flows for surviving traffickers. Either way, diversification always happens when making massive profits in a capped or risky market.

"America’s addiction to the metal burns as insatiably as its craving for cocaine."

Article is way to sensationalist to be worth spending time reading.

How? It's an interesting investigative piece that explains a serious issue.

The US does not charge import duties on gold. Why smuggle it?

Why is the police destroying the machinery instead of shipping it off to the city and using it? Seems like a gross waste, especially since these mines are right on the river. Besides, aren't dead robots going to only further pollute the environment?

That Miami gold import of 2% of USA gold reserves makes 2%8000=160 tons. That’s roughly how much Russia is adding to it’s reserves officially every year since about 2008. China seems to match that exactly. Is this where’s real economy happens now?

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