Controversy in the World of Bullion

By its very nature, bullion is a valuable and more expensive commodity than standard commemorative coins comprised of nickel, copper or zinc, for example. This can lead to greater scrutiny of the items produced and their provenance.

Below are a couple of recent news items that illustrate what can happen when bullion production and trading go awry.

$146 million penalty for missing bullion coins

A US court has ordered a $146 million penalty to be paid by two companies, precious metals dealer Argent Asset Group and First State Depository Company, following hundreds of thousands of bullion coins going missing.

Investigators alleged that tens of millions of dollars’ worth of the coins were misappropriated, with 500,000 American Eagle silver coins and 9,000 gold coins going missing from customers’ accounts. Upon entering the vaults designated for storing the coins, they found ‘‘IOU’ slips in empty boxes marked to indicate a customer’s account, yet containing no assets’.

The US Commodity Futures Trading Commission, which investigated the case, has said that under two programmes – Maximus Program and the Silver Lease Program – the companies ‘solicited and misappropriated at least $7 million in funds and silver from at least 200 customers’ between 2014 and 2022.

The companies were ordered to make restitutions of $122.7 million and make a penalty payment of $33 million. The firms were also ordered to be closed down and the ruling bars the owner from working in the commodities industry again.

Emirates Gold refinery removed from good delivery lists

At the beginning of this month, one of the largest gold refineries in the Middle East, Emirates Gold DMCC, was suspended from the UAE Good Delivery (UAEGD) list of approved refineries. According to media reports at the time, the UAE government is investigating the refinery for links to alleged money launderers.

In the same week, the London Bullion Market Association (LBMA) also suspended Emirates Gold’s affiliated membership ‘due to the outcome of the recent LBMA due diligence review’.

In a statement, the refinery noted that the ‘suspension of the UAE Good Delivery accreditation is merely a temporary suspension and management are working with the Emirates Bullion Committee to resolve their concerns and have the accreditation reinstated’.

The company reiterated that it ‘has at all times strictly followed the rules and processes of the UAE Good Delivery requirements, the LBMA responsible sourcing requirements and the UAE Ministry of Economy Anti Money Laundering rules’.

The suspension comes after the UAE’s Ministry of Economy introduced a new policy around the responsible sourcing of gold for importers and refiners, which came into effect in January this year.

According to the Financial Times, ‘a person familiar with the matter said the UAE federal government…would review the situation at the end of the year and make a final decision on whether to strip Emirates Gold of its accreditation’.