Forging branded gold bars has become increasingly sophisticated, so thousands may go undetected each year.
A forgery crisis is quietly roiling the world’s gold industry.
Gold bars fraudulently stamped with the logos of major refineries are being inserted into the global market to launder smuggled or illegal gold, refining and banking executives tell Reuters.
The fakes are hard to detect, making them an ideal fund-runner for narcotics dealers or warlords.
In the last three years, bars worth at least $50m, 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 JP Morgan 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.
Four of the executives said at least 1,000 of the bars, of a standard size known as a kilobar for their weight, have been found. That is a small share of the gold industry’s output, which is roughly 2 million to 2.5 million such bars each year. But the forgeries are sophisticated, so thousands
more may have gone undetected, according to the head of Switzerland’s biggest refinery.
“The latest fake bars … are highly professionally done,” said Michael Mesaric, chief executive of refinery Valcambi. He said that perhaps a couple of thousand have been found but the likelihood is that there are “way, way, way more still in circulation. And it still exists, and it still works.”
Fake gold bars – blocks of cheaper metal plated with gold – are relatively common in the gold industry and often easy to detect.
The counterfeits in these cases are subtler: The gold is real, and very high purity, only the markings are faked.
Fake-branded bars are a relatively new way to flout global measures to block conflict minerals and prevent money-laundering. Such forgeries pose a problem for international refiners, financiers and regulators as they attempt to purge the world of illicit trade in bullion.
High gold prices triggered a boom in informal and illegal mining since the mid-2000s. Without the stamp of a prestigious refinery, such gold would be forced into underground networks or priced at a discount.
By pirating Swiss and other major brands, metal that has been mined or processed in places where conflict, human rights abuses, or sanctioned regimes make it illegal or unacceptable for trade on the global market – including parts of Africa, Venezuela or North Korea – can be injected into
the market, channelling funds to criminals or regimes that are sanctioned.
It is not clear who is making the bars found so far, but executives and bankers told Reuters they think most originate in China, the world’s largest gold producer and importer, and have entered the market via dealers and trading houses in Hong Kong, Japan and Thailand.
Word of the forged bars began to circulate quietly in gold industry circles after the first half of 2017, when JP Morgan, one of five banks which finalise trades in the $10 trillion-a-year London gold market, found that its vaults contained at least two gold kilobars stamped with the same
identification number, 10 people familiar with the matter told Reuters.
JP Morgan declined to directly address questions about the fraudulent bullion, or comment on any of the details in this story.
“It’s our standard practice to immediately alert the appropriate authorities and refineries should we discover mismarked gold kilobars during routine checks and procedures,” the bank said in a statement. “Fortunately, we have yet to have an incident resulting in a loss to the firm or a
client.”
The Shanghai Gold Exchange, which regulates China’s gold market, said in a statement it was not aware of counterfeit bars being made in or transported through China. “The Shanghai Gold Exchange has established a thorough delivery and storage system. The process for gold (material) to
enter the warehouse is strictly managed and in compliance with the regulations,” it said.
When others who store and trade such gold found forged bars, they returned them to the refiner concerned, some of whom have operations in Asia. Bars returned to Switzerland have been reported by refiners to the Swiss authorities who impounded them, refiners said.
Swiss Customs said 655 forged bars were reported in 2017 and 2018 to local prosecutors in Ticino, a region bordering Italy that contains three of Switzerland’s four large refineries. “In all cases the marking of the 1 kg bars were fake,” a Customs official said by email, without commenting
further.
The public prosecutor in Ticino confirmed it had received three reports of gold bars with suspect serial numbers, but said it could not disclose more information. The police in Neuchatel, where Switzerland’s other large refinery is located, said neither it nor local prosecutors there had
received reports of any forged bars. Switzerland’s Attorney General said its office was not concerned with the topic at present.
Refinery executives said forged bars had also been reported in other countries.
An estimated 400 to 600 tonnes of gold are smuggled every year across the border from mainland China to Hong Kong in car boots and delivery vans, most of it in kilobars, said Cameron Alexander, head of precious metals research at consultants GFMS Refinitiv, which conducts detailed
studies of global gold flows. Hong Kong Customs said it had received no complaints in the past decade about kilobars with forged trademarks.
Swiss brands are not the only ones to have been pirated, but are the most targeted due to their global reach, executives said. Switzerland’s four largest refineries – Valcambi, PAMP, Argor-Heraeus and Metalor – process about 2,000-2,500 tonnes of gold a year, worth approximately $100bn.
Their trademarks are among the most common and trusted in the industry. PAMP and Metalor declined to comment on the record; Argor said there was always a risk brands would be counterfeited and recommended people buy bars only from trusted distributors.
