Update (10 March 2023): In an announcement released overnight, the London Bullion Market Association (LBMA) said it was taking the allegations relating to The Perth Mint 'very seriously', and that an Incident Review Process had been invoked to review the current circumstances as a high priority.
The Perth Mint has today offered a guarded response to allegations of a $9 billion gold ‘doping’ scandal involving the Shanghai Gold Exchange (SGE) revealed by a Four Corners investigation earlier this week.
The Western Australian Government-owned bullion provider was accused in the program of short-changing the SGE, its biggest client, between 2018 and 2021 by supplying gold bars with non-gold components that didn’t meet the standards set by the exchange. The shortfall is said to have occurred from the sale of an estimated 100 tonnes of gold over that period.
The program also alleged that the Mint failed to meet its legal anti-money laundering and counter-terrorism financing (AML/CTF) obligations by allowing a former bikie to buy $27,000 worth of gold without investigating the source of those funds.
The Four Corners investigation warns that The Perth Mint could potentially face having to recall up to $9 billion worth of ‘doped’ one-kilogram gold bars from customers in China as a result of the SGE scandal in a major reputational blow for Australia’s gold bullion refiner and supplier.
The shortfall in gold sold during the period was uncovered following a complaint received from the SGE.
However, the Mint today has affirmed that ‘there is no question about the gold purity and value of the gold bars’ it has sold to China.
“At all times the one-kilogram bars The Perth Mint produced and sold contained at least 99.99 per cent gold, as per their specifications,” says the Mint. “This has never been in dispute.”
The balance comprises non-gold materials, such as silver and copper, which the Mint says meets the purity specifications set by the London Bullion Market Association. However, the SGE has a tougher specification of 0.005 per cent non-gold materials, meaning that it should have received gold bullion with guaranteed 99.995 per cent purity.
“In September 2021, The Perth Mint was made aware that some of its one-kilogram bars did not meet the non-gold specifications of the SGE,” says the Mint.
“The Perth Mint immediately launched a review of its refining practices, including how it applied the industry-wide accepted process of ‘doping’ or ‘alloying’ its one-kilogram bars.”
The doping process is designed to minimise the gold 'give-away' level without compromising gold purity. There are varying amounts of extra gold above 99.99 per cent in each bar, known as the give-away, which are not calculated in a gold bar’s price.
The Perth Mint says today that as part of its review of refining practices, new processes were implemented in December 2021 to ensure that one-kilogram bars would have on average minimum gold purity of 99.996 per cent, compared with the industry standard of approximately 99.992 per cent.
The Mint says this new standard now meets the SGE’s non-gold specifications.
“The Perth Mint is working with its customers and other stakeholders to assure them of our commitment to quality and compliance with all relevant laws and regulations,” it says.
However, the Mint has failed to respond to the specific allegation of selling $27,000 in gold bullion to a notorious bikie gang member.
“The Perth Mint is not able to discuss existing or potential customers,” it says, citing the Gold Corporation Act which precludes it from doing so.
The latest scandal comes on the heels of a torrid few years for Gold Corporation, the corporate entity that operates the Mint.
In August last year, AUSTRAC appointed an external auditor to the company following compliance concerns in relation to the AML/CTF obligations governing the company’s operations.
In 2020, the Mint was rocked by an investigation by The Australian Financial Review that revealed it was buying up to $200 million a year in ‘conflict gold’ from a convicted killer in Papua New Guinea.
The Mint today revealed that AUSTRAC’s independent audit is expected to be completed later this year.
“The Perth Mint is a complex business operating under a mix of state, federal and international laws,” says the Mint.
“We have acknowledged there have been shortcomings in the past that led to some non-compliance with relevant laws.”
The Perth Mint notes that the appointment of Jason Waters as CEO of Gold Corporation early last year was a milestone on the path to a ‘significant refresh’ of the leadership team. New heads also have been appointed to oversee The Perth Mint's refinery, treasury and risk and compliance divisions.
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