In May 2011, Ecuadorean Army operations shut down the unlicensed gold mining in Selva Alegre, in the province of Esmeraldas close to the Colombian border, destroying 178 machines. As El Comercio reported, they justified this operation on the grounds that illicit mining was being used by Colombian criminal groups to launder money.
The newspaper quoted the former head of the Financial Analysis Unit (UAF) explaining how this money laundering network worked. He said that gold is taken illegally to Colombia, where mining companies which don't actually produce any gold export it to the United States. This gold is later sent back to Colombian, and processed once more. This means that a company that does not mine gold can buy it illegally, sell it in the US, and then bring it back to Colombia and sell it once again, disguising the source of their illicit profits.
El Commercio notes that in a recent report the Financial Action Task Force of South America (Gafisud) said that buyers and sellers of precious metal and stones were not covered by laws to prevent money laundering, and said that they should be better regulated.
InSight Crime Analysis
El Comercio's report offers another explanation of how unlicensed gold mining can be linked to organized crime. In Colombia, the main connection between the two is that illegal armed groups like the Revolutionary Armed Forces of Colombia (FARC) are thought to run many illicit mining operations. Mining is now thought to contribute 30 percent of the group's income. In northern Antioquia, the FARC charge the equivalent of over $1,000 for each bulldozer that enters territory they control. In other parts of the country, neo-paramilitary drug gangs like the Urabeños manage the business. For this reason, the government has declared illegal gold mining to be a top security priority.
Ecuador has launched a drive against clandestine mining justified on similar grounds, with President Rafael Correa saying in 2010 that he would not let Ecuador's security deteriorate to the point that extensive territories are controlled by illegal groups, not by the state.
In Peru, by contrast, there appears to be less evidence linking llegal mining to organized crime. The goverment has faced massive protests from local people in mining communities where it has attempted to bring unlicensed extraction to a halt.
Outgoing Colombian police chief General Oscar Naranjo noted recently that cracking down on illegal mines is more politically costly than operations against drug trafficking, as many question why the government needs to take strong measures against the extraction of a legal substance.