Increasingly, you find news of fake and forged gold bars in the news. According to a Reuters article published August 29th, 2019, a forgery crisis is quietly roiling the world’s gold industry.
For Global Gold, this has not been an issue or concern, since we buy precious metals produced and delivered directly from the Swiss refiners. The forgeries largely stem from Asian sources. Therefore, it is larger entities and banks who trade and do business globally, that are suffering from – both financially and reputationally.
At Global Gold, our procedures and closed business network avoid exposure to the kind of risks that larger institutions will find difficult to mitigate.
According to the aforementioned Reuters article, gold bars were found to be fraudulently stamped with the logos of major refineries. They are apparently being inserted into the global market to launder smuggled or illegal gold. The fakes are hard to detect, making them an ideal fund-runner for narcotics dealers or warlords.
The last instance discussed in the media relates to some 1000 bars found in the vaults of JPMorgan, which they believe came into circulation via metals traders in Hong Kong, Japan and Thailand.
In the last three years, bars worth at least $50 million (£41 million) stamped with Swiss refinery logos, but not actually produced by those facilities, have been identified by all four of Switzerland’s leading gold refiners and found in the vaults of JPMorgan Chase & Co., one of the major banks at the heart of the market in bullion, said senior executives at gold refineries, banks and other industry sources.
The fake bars were discovered through their serial numbers, as they were the same with other bars. This would trigger alarms at Loomis at the time of storage, so the inconsistency would be detected at this point, if not earlier. The LBMA and a few high-tech firms, including our own subsidiary aXedras Holding, are actively working to counter these issues via improved digital tools and distributed ledger technology (DLT).
Sakhila Mirza, who heads up the digital innovation efforts of the LBMA, reacted to the latest news with the following commentary on LinkedIn:
“LBMA has been exploring how technology can help to provide confidence in trading gold bars. Can blockchain mitigate the supply chain risks? Is creating a 'digital twin' of a physical gold bar from its unique features (gold bar fingerprint) enough? Governance? Costs? Regulations? Lots of questions, some answers, but more needed. LBMA continues to work with the market to address these questions, and then implement suitable standards. There is no simple solution. However, we are committed in supporting tech innovation.”