Reuters is calling it a “forgery crisis” and, in a recent exclusive story, the news outlet is reporting that the gold industry is being roiled – and it’s bad.
Reuters says that gold bars are being fraudulently stamped with the logos of major refiners and slipped into the supply chain, to the tune of about $50 million worth over the last three years. Reportedly the bars are so hard to detect, they were even discovered in the vaults of financial institutions like JPMorgan Chase.
But the problem is more nuanced than it sounds. Apparently fake gold is actually relatively easy to detect. In this case, the gold itself is real but it’s the markings that are fraudulent – making the knockoffs much harder to detect. But the underlying issue is serious – the fake bars reportedly stream into the supply chain from nefarious actors like those laundering money or running illegal mines.
Reuters says that high gold prices have enhanced the appeal of the bullion market, and no one has yet been able to determine who is producing these sophisticated fakes, but there are concerns that the illegal bars are reaching the west from regimes that could be sanctioned – meaning the $50,000 kilobars could be made of conflict minerals, or even funding terrorism.
Currently, banks and manufacturers are obliged to disclose whether the gold they use has come from central Africa, where its mining could fund conflict. According to several Reuters sources, when JPMorgan Chase discovered it was holding fraudulent bars, it analyzed the route of origin and determined they likely were made in Asia, prompting the bank to cease shipments of gold from Asia that didn’t come “freshly made from a small clutch of refineries it trusted.”
According to Michael Mesaric, the CEO of Swiss refinery Valcambi, the latest bars “are highly professionally done, and though only a few thousand have been found in circulation, he believes there are “way, way, way more.”