$10M in Gold Disguised as Machine Parts Seized from Cargo Plane | Hacker News Reader

$10M in Gold Disguised as Machine Parts Seized from Cargo Plane

jalopnik.com

87 pointsmhb103 comments

Here's [1] a very relevant article from 2018 explaining what was probably going on in more detail.

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When [Japan's consumption tax] was last increased in 2014, to 8% from 5%, smuggling of [gold] jumped as criminal organizations quickly realized how to game the system for their own enrichment.

The scheme works like this: Procure gold in places like Hong Kong, which does not tax it. Have mules hide it in their luggage and blend in with tourists, traveling to Japan to sell to stores that buy gold from the public. The stores pay for both the gold itself and the consumption tax. The tax component becomes pure profit.

And with the consumption tax set to rise to 10% in October 2019, margins will grow even fatter. Japan has an unflattering reputation as a "go-to place" for gold smugglers.

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[1] - https://asia.nikkei.com/Economy/Japan-braces-for-gold-smuggl...

This explanation doesn't make any sense to me. The business model of stores buying gold is to pay below the market price. If their nominal price+taxes paid to the seller ends up higher than the above the market price, the business isn't profitable, and they'd stop buying.

They can claim the tax back from the government when they sell it.

Could the gov tell there’s a discrepancy in taxes paid and taxes reimbursed?

Right, the stores would actually pay a little less than market value+tax on any "presumed used" gold.

Charging taxes on a consumer resale is hard and unpopular as it is double taxation, the only example I can think of is weird places with house sale stamp taxes and such.

Neither X-ray nor x-ray fluorescence (XRF) is going to be able to scan large objects properly for gold from a distance. XRF machines only show the surface or slightly below the surface. If you put gold inside a lead pipe - no chance.

If there was ever a method to reliably detect gold from a distance without costing millions of dollars, it would start a new gold rush.

So, this was either discovered by a very careful inspection or more likely a tip-off.

> Authorities reportedly believe the smuggler went to the lengths he did in an effort to avoid Japan’s 10-percent import tariff.

To my understanding, when selling in Japan, the smugglers will need to either declare the capital gain tax, or sell it (at some) the black market heavily discounted.

When determining the capital gain tax, if no purchase receipt (=purchase price) can be provided, the purchase price is set at 10% of the current market value, leading to a big capital gain tax.

In any case it will be difficult for the smuggler to make up the savings of the 10% import tariff.

To my understanding, that 10% tariff is actually an added 10% consumption tax, which can be claimed back when transporting gold out of Japan.

The real reason is because of Chinas strict capital controls. Presumably the authorities(Chinese) are trying to deflect from that.

Or even more likely because the origin of the gold [1].

[1] "‘Gold bars and Moutai’: TV series spotlights China’s corrupt officials" - https://www.ft.com/content/25e510aa-77bc-4a3d-be3b-0ed19f6bb...

Ah - I was wondering about that. When I lived in HK long ago it was famous for not having any import export controls apart from for drugs and weapons. It made it a very cost effective place to trade from on account of the lack of bureaucracy and paperwork.

I saw that trick in a couple of movies, but don't rememberch which ones.

In one of them they made a whole car of gold, maybe it was Goldfinger?

In the other one, they fled the country in a boat and replaced some parts of the boat with gold. This one is better, because it's more difficult to scan the boat.

"Tower Heist" had a car made of disguised gold. But I don't know if they ripped it from another movie.

Babylon Berlin: the gold wasn't smuggled in rail cars, it was the rail cars.

In "The Lavender Hill Mob" (1951), Alec Guinness stars as a meek bank clerk responsible for gold bullion shipments. He joins three others in a plot to steal a gold shipment, cast the melted gold into Eiffel Tower souvenirs, and smuggle them out of the country.

Goldfinger (1964) was about a rich British guy who always travelled with his Rolls-Royce, taking it with him by plane and ship. As it turned out he was smuggling gold by replacing the bodywork of the car at each side of the trip, leaving no apparent external difference.

Of course the finale was about his plan to irradiate the gold in Fort Know with a dirty bomb; increasing the price of all his gold.

One of my favourite Bond's, also the song is pure gold!

It's Tower Heist, which is pretty funny.

Heist with Gene Hackman, 2001.

That's it, thank you!

How would xraying the cargo find gold? Because its denser than steel? Is that a routine inspection?

I am curious about this as well. Maybe the details on how this was discovered are intentionally missing, so that would-be smugglers don't know how to avoid being discovered.

They obscure in order to secure? Interesting strategy.

> They obscure in order to secure? Interesting strategy.

I mean we do it all the time.

The US government has nuclear submarines so no one knows where they are in the world.

We hide things all the time to keep them from others.

This is a practice that practically everyone does.

There is something that has always felt off about “security through obscurity is no security at all”. There is no reason to give a malicious actor a guide to your operations.

> This is a practice that practically everyone does.

I don't find that a strong argument. I doesn't sound true, but even if it were it wouldn't make it a good idea. Furthermore, there is a difference between hiding a detail (submarine location) and hiding a process (the fact that there are submarines, that they have ICBMs, that they slink around waiting to avenge).

So, in this case, the process would be the existence of customs checks. The hidden detail might be "we've got an informant in the smugglers' organization".

Sure! And it's a matter for debate, but I would draw the line somewhere between what kinds of customs checks there are (e.g. we scan everything leaving a foreign vessel with an MRI and 10% at random with a mass spectrometer) and something covert and sensitive like an informant.

Isn't it well known for example that banks have some rules or algorithms that flag potentially illegal activity, and those rules are secret? Revolut just tells you your transaction is suspect and it will take more time to go through, or just tells you you are suspect, and your account is being closed. They don't tell you what the rules are and which one you broke.

Or if Google thinks you are cheating on ads somehow, they just ban you with no information. Intentionally, so you can't construct a cheat that avoids the cheat detection algorithms. This has been discussed at nauseam, and you're saying it doesn't sound true.

More importantly, what exactly do you think "secret" in "secret service" means? Or "classified" information? Are you actually arguing that these things don't exist? Do you think while the location of secret agents is a secret, the hiring rules and the training and the infiltration strategies are public? Go try to find them.

Yes; I'm convinced most intercepts are not reported on except maybe in end of year statistics.

That said, they do seem to report on large catches. I'm not sure if that's effective, given it means they will just change tactics. I see this mainly with drugs.

But also, I keep thinking if they intercepted this one $100M worth of cocaine, how much did actually pass by?

I would guess, this was not x-ray photography, but spectroscopy: https://en.wikipedia.org/wiki/X-ray_spectroscopy

There are these slick handheld units that exist, where you basically point them at something, and they tell you what elements are in something!

https://www.youtube.com/watch?v=LWPSrXB2OZw

at $2k the ounce of gold thatd be 312lb(142kg)...not easy to disguise

> that be 312lb(142kg)...not easy to disguise

I think that’s a cube about 8 inches (~19cm) per side.

Tough to disguise if carrying it solo, but maybe not so tough to hide in a cargo plane somewhat inconspicuously.

The pictures in the article show them as being shaped like machine parts.

Yeah, gold is not quite twice as dense as lead. It's weirdly heavy, but few people handle it in large enough quantities to notice.

Uncle is a goldsmith. I once held a decently sized bar of gold (I'd say 30x10x2cm) in my hand and you're absolutely right, it really is weirdly heavy in a way you'd not expect.

If anyone wants to try it, Sovereign Hill in Ballarat, Australia does daily forgings of a gold bar. They melt it down, pour into a mold, let it cool for a minute or two, and then guests can hold it. I've got a picture of my kids almost dropping ~$300k onto the floor.

https://www.sovereignhill.com.au/events/gold-pour/

Seems to fit in 1 truck:

  10,000,000 / 2,000 = 5,000 ounces
  1 ounce = 28.35 grams
  5,000 * 28.35 = 141,750 grams
  1 cm^3 = 19.3 grams gold
  141,750 / 19.3 = 7,345 cm^3 gold
  % Truck bed volume: .4%
  % Truck bed volume: 16%

https://www.ford.com/trucks/f150/models/f150-xl/

  Base model:
  Cargo box volume: 52.8 cu. ft. = 1,495,129.5 cubic centimeters
  Cargo box weight limit: 1,785 lbs = 809,662.38 grams

Yes. Gold is about 2.5x as dense as steel; gold is about 19.3 g/cc while steel is about 7.8 g/cc.

So, I'd expect it to show up as significantly more opaque in x-ray imaging. I wonder if it would have been noticed if they made all the components out of gold (so they all show up with similar density) or if the operator or a feature of the imaging software would notice that the whole thing was unusually dense.

I also expect that they might have noticed the units were exceptionally heavy, if all the components were gold.

Not an easy problem to solve, as our protagonist smuggler found out.

It would have been much harder to fabricate, but tungsten would be the ideal cover for this as it's almost the exact same density as gold. It's often used in fake gold bars even, where tungsten rods or slugs are cast into a bar in a way that's undetectable without either breaking it open or using a ultrasound technique.

I think tungsten carbide is less dense though, so making fake drill bits wouldn't work.

You could make fake bucking bars, commonly used in metalworking. The whole point of them is to be small enough to fit in your hand but dense enough to backstop a rivet gun, so they are very heavy for their size. Perfect form factor for gold bars, too.

It doesn’t matter if it’s gold, tungsten, or lead.. the x-ray can’t see through it.

If the x-ray can’t see through it, it’s going to get inspected as a possible place where drugs are being smuggled.

They probably got tipped off by something else that triggered a deeper investigation. It is not economical to do x-ray spectrometry on every single machine part leaving HK.

Or they noticed the weight of it was unusually high for what it was supposed to be

I wonder if gold will alloy with something that would reduce it down to "normal density".

When Nazi Germany occupied Denmark during World War II, Niels Bohr and George de Hevesy dissolved Max von Laue's and James Franck's Nobel Prize medals (entrusted to Bohr for safekeeping) in aqua regia. After the war, Hevesy found the flask of dissolved gold undisturbed, and precipitated the gold for the medals to be recast.

https://www.aip.org/history-programs/news/invisible-prize

Sure, but would it still be enough to make converting, transporting, and converting it back to purer gold economically viable?

I mean by that logic you could also have a couple of mules wear expensive jewelry or watches or the like; if it's convincing enough that someone wears a $500K watch as personal effect then they wouldn't be flagged for inspection.

In theory anyway, I don't know how these things work in reality. I wonder if someone's financial status is pulled up at passport control.

I don't believe it's uncommon for rich people to travel coach though.

Can you tell the difference between a $500K watch and a $50 knockoff? You don't need to be rich to wear an imitation watch.

The problem is a $500k watch is only like $20k in gold, even if it were solid gold. You'd have to wear a lot of watches.

Also the amateurish paint job.

This is what happened with a similar operation where cocaine was disguised in rubber ground mats for tents.

It's not economical to have a person walk up to every package with an XRF gun, but it feels like it ought to be possible to do this in bulk. Maybe use high intensity XRay to quickly capture an overview image / tomograph of each container and then follow up with lower intensity on areas of interest to tease out the spectrum. Is the best way to capture X-Ray spectra still to choke down intensity to the single-photon regime, watch the size of each scintillation event in the detector, and assemble a histogram? In any case, the best way can't be worse than the old way, and the old way is probably viable as a second automatic step in a two step process.

Come to think of it, airport luggage inspection happens at high throughput. Surely they could scale that up from suitcases to containers?

Of course, "physically possible" doesn't mean "politically possible given the budgets involved" which in turn doesn't mean "has actually happened." I'm mostly fishing here to see if anybody knows things about high-throughput X-Ray screening.

There are several paths to discovery here, none perfect, but is a swiss cheese hole method for tripping suspicion.

\0 Social tipoff - did somebody snitch in advance?

\1 Behavioural - is the sender a regular dealer in machine goods | compressors | etc .. a financial accountant suddenly transfering compressors is a behavoural spike.

\2 Consistencey WRT thousands of items per day ... does this load weigh the same as other loads on a pallet with the same Bill of Loading?

\3 Actual Tomography - it's easier than many might think to calculate a rough volume at speed via either X-Ray and|or paired oblique laser scans .. combine that with conveyer weight sensor and you have a density ... see \2.

All these things raise flags .. depending on the number and types of flags per hour, things may or may not get a closer look.

Sounds more like a cover for parallel construction.

Agreed. Are inspectors really looking for smuggled gold vs drugs, bombs, etc?

$10 million in gold is only ~130kgs. Feels very plausible to intermingle that among of material in a cargo shipment.

X-raying cargo is a routine activity on the EU's land and sea borders. I assume they do it for air freight and luggage too.

Here's an example x-ray [1].

At the land borders there are large pillars which the lorry driver must drive between (and the same by railway tracks).

I don't know if that's enough to detect steel replaced by gold. It would seem too small to notice.

[1] https://www.smithsdetection.com/press-releases/smiths-detect...

That link is to vapor detection of narcotics, not x-ray.

And those vertical towers are almost certainly radiation detectors.

Pretty sure he was just linking for the picture on that page which is a full vehicle x-ray produced from a system like https://www.smithsdetection.com/products/hcvg/

> The system’s high-performance imaging capability provides the operator with detailed radioscopic images of container or vehicle and its contents, with organic and inorganic material discrimination and colourisation based on atomic number, allowing for rapid and reliable results in a single scan.

It colorizes the x-ray based on the atomic composition of the materials so this system could probably detect a bunch of solid gold parts.

The parts of the turbine look too janky. It has imperfections and irregularities on the surface. So looks like a total piece of junk. Then it’s a bit odd to pay to ship that on a cargo plane.

Gold is also pretty heavy so if they handled any parts they could tell, too.

I think where they screwed up was shipping something heavy and not particularly valuable or obviously necessary to send by air freight via air freight. If it had gone the slow way on a few pallets via LCL ocean freight as mundane industrial machinery it probably wouldn't have been noticed.

It's a routine random inspection of commercial freight. Gold is extremely dense. It's about the same density as Uranium and Plutonium (which is a big reason why they and/or software look for it in the x-rays).

I wonder how many are attempting to smuggle gold that is dissolved in a liquid (I'm guessing that's a lot harder to detect)

Aqua regia? I think that would look a lot more suspicious

What liquids are gold soluble in, and how much gold could you dissolve per litre?

Aqua regia. Famously used to dissolve Nobel prizes to hide them from the Nazis[0]

  When Germany invaded Denmark in World War II, Hungarian chemist George de Hevesy dissolved the gold Nobel Prizes of German physicists Max von Laue (1914) and James Franck (1925) in aqua regia to prevent the Nazis from confiscating them. The German government had prohibited Germans from accepting or keeping any Nobel Prize after jailed peace activist Carl von Ossietzky had received the Nobel Peace Prize in 1935. De Hevesy placed the resulting solution on a shelf in his laboratory at the Niels Bohr Institute. It was subsequently ignored by the Nazis who thought the jar—one of perhaps hundreds on the shelving—contained common chemicals. After the war, de Hevesy returned to find the solution undisturbed and precipitated the gold out of the acid. The gold was returned to the Royal Swedish Academy of Sciences and the Nobel Foundation. They re-cast the medals and again presented them to Laue and Franck.[12][13]

[0] https://en.m.wikipedia.org/wiki/Aqua_regia

Wow, that's actually pretty cool!

Zero. The volume needed would make that completely impractical. Smuggling 100L for 10oz is definitely conspicuous.

I think you're off by several orders of magnitude

https://www.finishing.com/236/27.shtml#:~:text=The%20amount%....

Correct me if I'm wrong but 100 litres would be able to dissolve about 23kg of gold which is more than 800oz

Yeah, my only knowledge is from watching sreetips on YouTube and his process for refining. My point was about the volume of aqua regia required. I’m not a chemist. Wouldn’t that scrap need further refinement into pure(er) gold? To get 99.9?

Well you wouldn't start with scrap

Even with your numbers... 100L is about 25 gallons. 10oz is about $23,000. That seems perfectly reasonable to attempt.

With the corrected numbers, 25 gallons to move 800 oz, which is nearly $2 million? Yeah, that seems quite enticing.

The secret may be that you have to look like you're smuggling hazardous chemicals into the other country, rather than smuggling money out of the country of origin. I have never attempted either side of this, but I suspect that the bribes for smuggling small[1] amounts of hazardous chemicals is smaller than the bribes for smuggling money.

[1] Small by industrial standards.

Yes very good points. Although I would guess that the number of barrels out of a whole shipment that are tested to see if it is what is says it is very small.

E.g importing 50 barrels of a specialist but non suspicious acid and one happens to be aqua regia with $2m dollars of gold dissolved in it sounds fairly good odds to me

Bootleg Goldschläger.

Gold is already hard to detect and it's very compact for its value. Dissolving it in liquid would likely defeat the purpose.

How would it defeat the purpose?

It's strong acid, no sane shipping operator will transport it.

Then how do you think strong acids get transported to countries that don't make them?

By using proper insurance, import documents and inspections which would make acid dissolved gold quite obvious.

You think every liquid brought into a country is tested in a lab?

I read somewhere that the estimated value of a fictional bar of gold-pressed latinum (from Star Trek) was about $4000 in today's dollars. However, the gold in the bar would be worth $100,000.

So if some time traveler from the Federation gives you some bars of that stuff, just separate out the latinum (maybe some physicists will want it?) and sell the gold.

Quark practically had a gold mine :)

The reason latinum was so valuable is because it couldn't be made in a replicator for hand wavey reasons. Gold could be and therefore its value became the energy cost to produce it in a replicator, the same as anything else really. Latinum was a scarce material in an otherwise post scarcity society.

Quark said the gold was worthless in one episode. Gold is the only element that could contain the latinum.

AFAIK there is no tax importing or exporting gold into or out of the US. You just have to declare it. Which might trigger an investigation of where the gold came from and if the gold is part of a criminal enterprise.

Exactly, same with carrying large sums of money; if there's no tracing of any transaction it will be used for money laundering and international movement of value.

Seems like it would have been safer to send 10 or more shipments with a much smaller ratio of gold to machine part.

For all we know they were sending 10 times as much and this was the smaller amount of gold.

That's it, same with big drug catches; reminds me of the survivorship bias picture, on the one side it's like "wow that's a big catch", but they don't say - or they don't know - how much similar sized big catches they've missed.

I guess I should start buying used air compressors off of eBay.

Parts and technical group, forest moon.

I recall a story, some time ago (1970s or earlier) of some rich person trying to leave a country (which was allowed) with their money (which was not). So they converted their money to platinum, had wrenches and such (normal car-owner tools) made out of the platinum, and drove out of the country.

For extra believability, smear a bit of oil and grease here and there on the tools.

I read about this in the 1970s (yeah, I'm old). Can anyone supply concrete details?

Another reason why people like Bitcoin, it's easily portable

Yeah but just try making machine parts out of it and see how far you get.

Wait, bitcoins aren't those gold coins with a B on them?

I really should look more into this Bitcoins money thing...

I know that hacker news frequently dislikes Blockchain but this comment is accurate and relevant and there’s no reason to downvote it.

"This crime would've been way easier to get away with using Bitcoin" isn't the huge positive endorsement the parent poster implies.

Transporting value across borders is what Bitcoin routinely does, and quite well too: https://news.ycombinator.com/item?id=39520886

And if you want to force Afghan refugees (for example) to return and pay their taxes to the Taliban, then I don't know how to respond to that.

Bitcoin gives people freedom, as you can read more about here: https://hrf.org/hrf-op-ed-why-central-bank-digital-currencie...

Cool. When you enter Japan with $10M in gold, their democratically elected government has opted to charge an import tax. That is one of their freedoms as a sovereign nation.

edit: Post above originally said "One country's crime is another country's freedom" instead.

This incident almost certainly revolves around capital controls in China, with the Japanese infraction only being collateral damage justified by the China problem.

Are you of the opinion that, upon arrival in Japan, the smugglers would've disclosed the gold and gone "phew, here's your $1M we owe in tax"?

> And if you want to force Afghan refugees (for example) to return and pay their taxes to the Taliban, then I don't know how to respond to that.

This is such an absurd straw man.

How is it accurate? If you have $10M worth of gold in country A and want to get it into country B without paying the 10% import tax, how does Bitcoin help?

- Sell $10M gold for the sum of $10M - Buy $10M worth of Bitcoin - Transfer $10M worth of Bitcoin to country B, or just travel to country B - Convert $10M worth of Bitcoin to local currency

That said, you'd have to do all the conversion of BTC to fiat through shady channels, as by now all of the legal / above ground exchanges report every transfer to the local and international tax offices. Second, any conversion will charge a percentage.

In theory, BTC travels freely across borders without import taxes. In practice, it's useless if not converted to fiat, and all conversions are logged and taxed.

I guess if you're a billionaire it's more convenient. I just did a little googling and a 1 oz gold coin appears to be pretty small and is worth something like ~$2300 today. That seems portable enough in my eyes, although I can't see that being super useful for everyday transactions.

Edit: I guess you're probably talking about entering another country's border. I guess portability makes more sense there in that you don't have anything physical.

Now this is clever and creative. Compare it to the man everyone was fawning over for being "clever" a few days ago for stealing a copy of someone's boarding pass and stealing a seat on a secheudled flight.

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