Increasing sophistication of bullion forgeries a concern for the United States Mint as well

 

By Joshua McMorrow-Hernandez for CoinWeek …..
 

While the numismatic world combats a growing number of sophisticated counterfeit coins from Asia, another major challenge has arisen for those who deal in gold bars.

As Reuters has recently reported, there has been an increase in gold bars with fraudulent seals resembling those of reputable bullion refineries. Over the past three years, a variety of bullion and banking sources have reported that at least $50 million in gold bars with fraudulently labels masquerading as those from Swiss refineries were found in the holdings of JPMorgan Chase & Company, a major player in the world bullion markets.

The stakes are high in an industry that processes millions of bars and billions of dollars in assets each year. But the problem doesn’t necessarily concern falsely branded bars made of cheap, gold-plated cheap base metals – those are relatively easy to detect through simple diagnostic checks such as metallurgical testing. Rather, the gold industry is finding more and more high-purity “dirty gold” bearing labels or seals purportedly from Switzerland’s world-renowned refineries.

These pirated gold bars, likely originating in China, contain real gold that can easily pass much of the random testing to which gold bars are usually subjected. But while the fake gold bars may look and even feel quite convincing, their seals are often faded or otherwise “off” upon closer inspection.

Still, this poses an obvious concern: the emergence of highly sophisticated gold bars bearing counterfeit seals poses major financial risks to purchasers who put their faith in the assurance that comes with such branding from reputable refineries and bullion firms. Even if these bars are gram-for-gram identical to those from the refineries that purportedly made them, they are nevertheless counterfeit items. This puts a justifiable degree of doubt into the minds of consumers and investors regarding all products manufactured by these otherwise innocent companies.

Making matters worse, the origin of the gold is spurious; it may have been mined or processed in North Korea, Venezuela, certain countries in West Africa, or other places upon which the United States and Western European nations have placed economic sanctions and therefore from which it is illegal or geopolitically unacceptable to purchase gold. The potential that the cash transferred during transactions for this fraudulently labeled gold can aid in money laundering schemes and fund drug lords, tyrannical governments, or other undesirable activities is another concern though perhaps less obvious.

The forged gold bars are being reported in several countries, including Switzerland, where customs agents noted that 655 counterfeit bars were directed to prosecutors in 2017 and 2018. And it’s a problem that’s not likely to subside anytime soon, with rising gold prices and more channels for distributing these forged bars than ever before. Once these fake gold bars enter the trading circuit, they can infiltrate virtually any area of the market, as evidenced by their appearance in JPMorgan Chase & Company vaults.

At present, at least 1,000 fraudulent gold kilo bars have been identified, representing a tiny fraction of the two million or more kilo-weight gold bars produced on a global scale each year. But surely there are more of these fake bars, described by Valcambi Chief Executive of Refinery Michael Mesaric as “highly professional done,” out there that have yet to be detected.

How the US Mint Plans to Fight Back

While the epicenter of the forgery crisis is presently in Western Europe, officials at the United States Mint are aware of the threat posed and the potential impact it may have on its bullion products–specifically the American Gold Eagle and American Silver Eagle programs–now and in the future.

“Discussions with mints around the globe have informed our approach to anti-counterfeiting,” says Deputy Chief of Corporate Communications Todd Martin. “A special team within the [United States] Mint is reviewing both overt and covert options that could be incorporated to enhance the protection of our bullion products. By improving anti-counterfeiting measures and reaching out to educate and inform the numismatic community and consumers about potential counterfeits, we are ensuring confidence in bullion products for years to come.”
 

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