Gold for oil policy susceptible to illicit financial flows – ISSER says
The Institute of Statistical Social and Economic Research (ISSER) says the government’s ‘Gold for Oil’ policy, meant to address the foreign exchange demand of oil importers, is at risk of Illicit Financial Flows (IFF).
Dr. Fred Dzanku, Principal Investigator (PI) for ISSER, said a preliminary probe of the policy by ISSER revealed that the absence of parliamentary scrutiny, the lack of a legal basis for the policy, and the absence of pricing regulation made the policy an avenue for illicit financial flows.
He also said a lack of clarity on the refinery status of the gold before sale created an avenue for mispricing and under-devaluation of the gold, which was used as a barter for oil.
Dr. Dzanku said the absence of a criteria framework for selecting suppliers and buyers involved in the transactions called into question the transparency of the transaction since the suppliers, buyers, value, and pricing mechanisms of the transactions were unknown.
He said this during the presentation of a report on illicit financial flow risks in Ghana’s Gold for Oil (G40) policy.
The report analysed the legal, economic, and governance underpinnings of the Gold for Oil policy.
The Gold for Oil Policy, which commenced on January 15, 2023, was aimed at addressing the major challenges hindering oil importers’ access to foreign exchange and a counter-policy initiative to address persistent fuel price increments.
According to the World Bank, illicit financial flow refers to the cross-border movement of capital associated with illegal activity, or more explicitly, money that is illegally earned, transferred, or used that crosses borders.
The United Nations says IFFs cost governments around the world between $500 billion and $600 billion a year in lost tax revenues, while money laundering costs an estimated $1.6 trillion.
Experts say cumulative gross illicit flows in Ghana from mis-invoicing amounted to $14.39 billion over a ten-year period between 2022 and 2011, while illicit outflows through export under-invoicing amounted to $5.11 billion.
To address the institutional lapses of the policy, Dr. Dzanku asked the government to clarify the valuation of the gold, address the legal regulatory lapses, and disclose the pricing mechanisms.
“Regulations and the pricing policy for the G40 deal are very important to provide clarity on gold valuation and pricing methods. We also want the government to disclose the pricing to the citizens, and the broker channel must be a legal requirement for Precious Minerals Marketing Company (PMMC) and the Bank of Ghana. We also want specific rules for buyer selection and disclosure of beneficial owners. We want the government to enact a Mineral Revenue Management Law to be the legal framework guiding this policy,” he said.
The event also featured a panel discussion that included individuals from the extractive industry and the IFF ecosystem.
Contributing to the panel discussion, Mr. Sulemana Koney, Chief Executive Officer for the Chamber of Mines, bemoaned the inconsistent data characterised by reporting IFFS due to the variations in data by major regulators of the industry, notably the Bank of Ghana, PMMC, and Chamber of Mines.
He called for disintegration in the collection of data to address the data discrepancies in reporting IFFs due to the peculiarities of the sub-sectors of the mining industry.
Bishop Akologo, United Nations Expert for IFF Statistical Measurement in Ghana, advised the government to organise workshops and orientation programmes to educate the citizens on IFFs.
The regulatory agencies in the extractive sector, he said, must work in a coordinated manner to share data and information to prevent multinational companies from exploiting existing deficiencies in reporting IFFs.
