By Michelle Nichols and Louis Charbonneau
UNITED NATIONS (Reuters) - Traders in Rwanda profiting from tin, tungsten and tantalum smuggled across the border from mines in eastern Democratic Republic of Congo are helping fund a rebellion in their resource-rich neighbor, according to a U.N. expert panel report.
The confidential report, seen by Reuters on Tuesday, said while Congolese government requirements that exporters ensure minerals are conflict-free had halted nearly all trade from the country's east, smuggling into Rwanda and Burundi had increased.
Impoverished Congo sits on large reserves of gold and the minerals used in electronics production and - according to a Chatham House study - an estimated 10 million people are directly or indirectly dependent on the mining industry.
M23 rebels commanded by warlord Bosco Ntaganda, who is wanted by the International Criminal Court for war crimes, have been fighting government soldiers in eastern Congo's North Kivu province since April. The U.N. report said Rwanda and Uganda were providing arms, troops and advice to M23.
"The credibility of the mineral tagging system in place in Rwanda is jeopardized by the laundering of Congolese minerals, as tags are routinely sold," the report said of the practice to "bag and tag" products at the mine to certify their origins.
"Several traders have contributed to finance M23 rebels out of profits resulting from smuggling Congolese minerals into Rwanda," it said, adding that Rwandan exports of tantalum and tungsten had risen in 2012 in tandem with increased smuggling out of Congo.
A recent study by nonprofit rights group the Enough Project, citing Rwandan government data, found that from 2010 to 2011 Rwanda's mineral exports jumped 62 percent compared with a 22 percent rise in domestic mining production.
SHIFT TO GOLD
But profits by armed groups from trade in tin, tungsten and tantalum have been dented by a 2010 U.S. law requiring companies to disclose if they use minerals from the Congo. The U.S. Securities and Exchange Commission approved guidelines in August to enforce the conflict minerals law.
Companies need to conduct a due diligence check to track minerals through the supply chain to their origins to identify if any conflict minerals were used in their products.
The 44-page report by the U.N. Security Council's Group of Experts - a panel monitoring compliance with U.N. sanctions and an arms embargo for Congo - said those profiting from the conflict mineral trade had easily adapted to the drop in price for some resources by shifting their focus to gold.
It also accused criminal networks within the Congolese army (FARDC) of profiting by smuggling resources and overseeing the trafficking of ivory by armed groups.
"Armed groups, FARDC criminal networks and miners easily shift to gold mines where due diligence requirements haven't affected the trade," the report said. "Nearly all gold from eastern DRC is smuggled out of the country and channeled through a few major traders in Kampala and Bujumbura."
"In the United Arab Emirates, most Congolese gold is smelted and sold to jewelers," it said.
The U.N. report was delivered earlier this month to the council's Congo sanctions committee. Congo has also called for an embargo on trade in minerals from Rwanda.
Rwanda has historically benefited from the exploitation of hundreds of millions of dollars of Congolese minerals. Last year Rwanda returned to Congo more than 80 tonnes of smuggled minerals that had been seized by customs officials.
(Writing by Michelle Nichols; Editing by Paul Simao)