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Counterfeit-stamped gold entering the market: Oswald

By Jennifer Brown, AdvocateDaily.com Senior Editor

Illegally mined and smuggled gold is making its way into the financial market under cover of gold bars with forged stamps that claim the precious metal is coming from major refineries and mints, says Toronto forensic accountant and investigator Dave Oswald.

Oswald tells AdvocateDaily.com that syndicates are buying up illegal gold, putting it through a process that refines it to 99.99 per cent pure and then casting it to 1 kg bars worth about $500,000.

“They have a counterfeit stamp that is identical to those made by the major refineries or mints, and then they imprint the illegal gold with a serial number. Once that’s done, the gold can be sold anywhere in the world,” explains Oswald, founder and owner of Forensic Restitution, an Oakville-based white-collar crime investigation boutique.

He says about 40 per cent of the gold mined in Africa is illegal and ends up in the system.

“In the past, it was traded on the black market, but that gets a lower price compared to legal gold,” Oswald says.

As reported by Reuters, in the last three years, bars worth at least $50 million stamped with Swiss refinery logos, but not produced at their facilities, have been identified by four of Switzerland’s gold refiners and discovered in the vaults of JPMorgan Chase & Co.

“There is no other way of telling the gold bars are fake — it’s quite an ingenious way of laundering money,” says Oswald. “It makes it a really interesting problem in that how do you sort out a counterfeit when it’s so good you cannot tell the difference?”

Black-market traders would typically get $600 an ounce instead of the true market rate of about $1,500 an ounce, but with them now taking it through a process of refining it to 99.99 per cent pure, together with a fraudulent refinery or mint stamp, they are getting the full value.

“You can see how the margins are huge, and it could fuel the black-market industry in gold,” Oswald says.

In the past, fake bars would contain lead and other minerals that made it easy to detect as counterfeit, but these more refined gold bars are so close to pure it’s virtually undetectable, he says.

“It’s impossible to tell where the gold has come from because there are so few other elements within these bars. You can’t work out from the deleterious elements where the gold was mined. For each gold bar they produce they are able to launder half a million dollars and put it into the system,” Oswald says.

Black market gold also ends up in China and India and is made into jewelry — the rest is finding its way into the United States Bullion Depository and other banking institutions that hold gold by way of counterfeit gold bars.

“They started noticing duplicate serial numbers coming through which alerted them to the fact that this is actually taking place,” says Oswald.

This development means if you are investing in gold, you never know if you are actually aiding and abetting the illegal gold market, he says.

“If someone needs to launder money, it’s an ideal way of getting it into the system without going through all the hurdles. The amount of money washed in Canada is huge, and it is something we could see coming up here in the future,” Oswald says. “Because the bars are so good it’s hard to work out that it’s a fake and that you’re assisting someone in laundering money.”

To try and stop the problem, he says major gold refineries are now looking to create a database of all the gold bars they have produced with the actual weight and serial number.

“The refineries currently keep their own database of gold bar numbers, but no one has access to it from the outside, now what they’re saying is there will be a joint database of all gold bars produced and that it be made available to everyone,” Oswald says.

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