Perth Mint has been allowed to remain on a list of approved refiners to operate on the London bullion market, but told to strengthen its management systems in a review by the key international gold and silver trade association.
Key points:
- The London Bullion Market Association launched a probe into the Perth Mint last month
- The investigation is now over, and the mint retains its ‘good delivery’ status
- But it found there were parts of the mint’s management that needed stengthening
The London Bullion Market Association (LBMA) launched an incident review of the mint’s practices in mid-March following allegations raised in an ABC Four Corners report about gold dilution, or “doping”, and concerns around money laundering safeguards.
Financial and gold experts said the LBMA’s review had been quick considering the complexity of the issues, but it was a good outcome for the Perth Mint and an opportunity for it to continue overhauling its governance practices.
The LBMA’s investigation focused specifically on whether the Perth Mint conformed with the association’s Responsible Gold Guidance, which sets standards for combating money laundering and terrorist financing practices, and the importance of strong corporate governance.
The incident review did not assess the mint’s assay lab, which analyses the purity of gold before it’s cast into bars.
‘Very good news’ for Perth Mint
Following discussions with the mint, auditors and other market operators over the last three weeks, the association decided the Perth Mint could remain a Good Delivery List refiner, meaning its gold and silver bars meet the required standards for the London bullion market.
“LBMA did not find any instances of zero-tolerance non-conformance,” the association said in a statement.
But it found there were elements of the mint’s management systems that needed to be strengthened through a Corrective Action Plan, to be audited by a third-party auditor.
Professor Dirk Baur, from the University of Western Australia, researches financial economics with a focus on gold and other commodities, and said he was not surprised at the result.
“Anything else would have been pretty bad for the Perth Mint,” Professor Baur said.
“So this is very good news for the Perth Mint and I’m not surprised, because it would have been a big step for the LBMA to say this government-backed institution in Australia, if we take the Perth Mint off this list, it would have been a very bad signal.”
Financial regulation expert Nathan Lynch said fundamentally, organisations like the Perth Mint needed a strong risk management culture.
“The LBMA review has been very quick, considering the complexity of these issues around money laundering, terrorism financing, sanctions and environmental standards,” Mr Lynch said.
“It’s a good outcome for Gold Corporation [Perth Mint operator] and gives them a window of opportunity now to push ahead with the work they’re doing to rebuild their governance framework.
“That work on developing a sophisticated risk culture cuts across the entire organisation.”
The Four Corners investigation revealed the mint supplied gold to China that met broader industry purity standards but — in at least one instance — fell below Shanghai’s stricter standards.
There were also concerns on whether the mint had adequate anti-money laundering and counter-terrorism funding safeguards in place.
‘They need to get this right’
Perth Mint chief executive Jason Waters said the mint was committed to working through the Corrective Action Plan.
“The Perth Mint has embarked on a comprehensive, fully-funded program to remediate our anti-money laundering processes and ensure best practice in everything we do,” Mr Waters said.
Mr Lynch said there was a lot on the line.
“The mint is well aware that the LBMA will reopen its incident review if any new information comes to light, so there’s a lot at stake here.
“They need to get this right. Otherwise, as we saw with Australia’s banks and casinos, the consequences of money laundering failures are far-reaching and can become very expensive to fix down the track.”
Four Corners had reported the mint faced a potential $9 billion recall of gold bars after selling diluted or “doped” bullion to China and then covering it up, citing a leaked internal report.
The mint is the largest processor of newly mined gold in the world.
Last year it sold $20.3 billion in gold, and is the only mint in the world that has a government guarantee.
The mint is also the subject of an ongoing investigation by financial crime regulator AUSTRAC, into its compliance with Australia’s anti-money-laundering laws.