Ensuring Integrity in the Global Gold Market: Strengthening Security and Regulatory Oversight

I was sent the video Black Market Dirty Gold listed below and it got me thinking about Gold and the Movement of Gold!

Thanks to the team at Martello Risk for the video

The video tells the enduring story involving NTR and Ohio Precious Metals, LLC (dba OPM Metals), which gained broader attention through Netflix's documentary series Dirty Money Netflix Dirty Money. Despite its age, the story has had a significant impact on the gold industry.

The Oval stamp centrally incorporating a mushroom on the OPM logo is clearly a metaphor for a nuclear explosion that went off in that refinery! Now lets get into the story...

Some history on OPM:

Ohio Precious Metals LLC (OPM), established in 2003, has been associated with precious metals refining in Jackson since 1974. It is a wholly owned subsidiary of Elemetal LLC, which was incorporated in Delaware in 2012.

In 2004, OPM Metals established a Brinks Vaulting Service within its refinery. This 800-square-foot facility allowed OPM customers to store materials securely under Brinks' management.

2011: In an email to The Honorable Mary L. Schapiro Chairman U.S. Securities and Exchange Commission on Conflict Minerals Disclosures they stated the following (this did not age well):

Collectors or aggregators of scrap should be exempt. They are the core of the environmentally friendly gold recycling industry, but do not possess the resources to comply. The burden of compliance should be with the primary refineries. Primary Refineries utilizing third party auditors to certify recycling content and responsible sourcing (reasonable country of origin inquiry) should also be exempt or considered compliant with all provisions of the act.

According to a press release dated December 27, 2013, OPM Metals achieved LBMA Good Delivery status for gold OPM Metals LBMA Good Delivery for Gold and and a Good Delivery Silver Refiner in 2014.

Elemetal Capital™, a related entity headquartered in Dallas, managed the majority of OPM's gold transactions.

OPM changed name to Elemetal Refining, LLC, LBMA changed Good Delivery status effective 1 June, 2015.

2017 in the wake of the news the LBMA reacts albeit it very quietly and removes the culprits from the Good Delivery Gold and Silver Lists on the Elemetal Refining LLC Removed 31/03/2017.

Fast forward to April 2017, when news broke about NTR Metals' involvement in the illegal acquisition of South American gold NTR Metals and Illegal South American Gold.

The Impact on the Gold Market

This news revelation led to the market exit of three companies: OPM, NTR, and Elemetal Capital™.

Clients holding OPM Gold and Silver Bars left stranded as LBMA Good Delivery refineries refused to accept them! Leaving them to sell as scrap which ultimately ends up back an LBMA Good Delivery Refinery anyway (welcome to the layer cake)!

In Singapore, significant quantities of OPM silver grain led to substantial tax issues. Initially declared tax-free under the LBMA certification, the subsequent removal of this certification resulted in local tax liabilities, prompting urgent export activities.

Global Security Companies for Precious Metals Delivery and Vaulting

Global security companies plays a crucial role in connecting buyers and sellers, but this raises questions about the level of due diligence they perform on their clients and the supply chain.

Given that the LBMA allows Good Delivery refineries to self-audit through third parties, why are security companies, responsible for transporting the metal, not held to the same due diligence standards?

The LBMA often emphasizes transparency. However, the security companies, which are integral to the global movement of gold and often members of the LBMA, should be subject to similar scrutiny as the gold refineries, ensuring they are aware of the buyers and sellers, at least for insurance purposes.

Brinks - The biggest player in the industry!?

Brink’s is a global leader in providing secure logistics and security solutions to businesses around the world. The company offers a wide range of services, such as cash management, aimed at improving efficiency and reducing costs for businesses that handle large volumes of cash.

Brinks are members of the LBMA and the Singapore Bullion Market Association and are even a listed company (BCO:NYQ) and so should have a bigger spot light on them from the traceability standpoint especially since they are responsible for doing the KYC on their clients!

Brinks typically comes under scrutiny only in the event of a robbery. This topic is worth exploring, as highlighted by a recent BBC program BBC Program on Brinks.

Additionally, The Gold TV Series is a must-watch, with an eagerly anticipated The Gold Part 2.

Will there be Part 3, focusing on the Toronto Gold Heist?

When major news outlets like Reuters , The Wall Street Journal , and Bloomberg News report on gold movements both good or bad, why is there a lack of investigation into the security companies involved?

Closing Remark on Actions for Regulators & Governing Bodies

To ensure the integrity of the global gold market, regulators must implement stricter oversight and due diligence requirements for all entities involved, including security companies responsible for the transport and storage of precious metals.

The LBMA's Responsible Gold Guidance (RGG), based on the OECD Due Diligence Guidance, as well as Swiss and US KYC, Anti-Money Laundering, and Combatting Terrorist Financing regulations, provides a robust framework for this purpose. Since January 2012, gold Good Delivery refiners have undergone annual audits against the LBMA’s Gold Guidance.

As the LBMA prepares to release version 10 of this guidance next year, it is an opportune moment to incorporate security companies into the program, ensuring they adhere to the same stringent due diligence practices. Extending these transparency and auditing standards to cover security firms will hold them accountable for knowing the buyers and sellers in their supply chains.

Furthermore, regulators like the SEC should establish a comprehensive framework mandating regular audits and enhanced reporting standards for all participants in the gold industry for any listed company involved in the industry and that includes the bank members of the LBMA. This framework should facilitate international collaboration to prevent illegal activities and maintain market confidence.

By taking these actions, regulators can enhance transparency, accountability, and security within the gold market, ultimately protecting investors and preserving the industry’s reputation.

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