This is how to stop a repeat of the biggest gold fraud in history
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Special Report: The largest gold fraud in history might have been stopped had the industry implemented mine-to-marketplace tracking tech, like Security Matters’.
The largest gold fraud in history, uncovered this week, could have been stopped if mine-to-marketplace tracking technology was the industry norm, says the CEO of one such company, Security Matters (ASX:SMX).
This week Wuhan-based, Nasdaq-listed Kingold Jewellery, which is one of China’s largest jewellery manufacturers, was accused of using 83 tonnes of fake gold bars as collateral for 20 billion yuan ($4.1bn) in loans.
It is alleged to have used what turned out to be gilded copper bars to secure loans from at least 14 Chinese institutions, according to mainland China news service Caixin.
Two law firms in New York are investigating Kingold on behalf of investors, and Caixin reports that “authorities” are looking into the company in China.
Kingold strongly denies any wrongdoing.
All of these, and past scandals such as the bullion-for-scrap swap tax avoidance scam in Australia in 2016, could have been avoided if certified gold was possible through mine-to-marketplace tracking, says Haggai Alon, the chief of supply chain integrity company Security Matters.
“Globally, the gold industry acknowledges the need for standards of market practice and conduct to be clearly and consistently applied. Last year, the World Gold Council launched its Responsible Gold Mining Principles that sets out clear expectations for consumers, investors and the downstream gold supply chain as to what constitutes responsible gold mining,” he said.
“The London Bullion Market Association (LBMA) sets standards from the level of purity, form and provenance of the bars to the way in which they are traded. The LBMA maintains a Good Delivery List for all accredited gold refiners who refine and supply gold according to its specifications such as the level of purity and size of the bars.”
But the upstream quality assurance by markets and regulators does not flow downstream, where there is no industry-mandated way to track the substance through the supply chain.
“It is apparent that what is missing is a system like Security Matters’ True Gold, which offers a transparent information sharing platform that is linked to the physical gold itself,” Alon says.
“Our product allows industry regulators, brokerages, banks and customers to track and authenticate that the gold has been ethically mined, legally sourced and refined accordingly to reinforce trust in gold and the gold industry as a whole.”
Earlier this year Security Matters announced a major collaboration with the Perth Mint to create the world’s first transparent mine-to-marketplace ethical gold supply chain assurance solution.
It is focused on providing transparency and accountability for all gold industry stakeholders.
The technological solution is based on Security Matters’ scientifically proven molecular markers, a chemical-based hidden “barcode” system, which are teamed with a unique “reader” to identify these codes and a blockchain record to store and protect the data.
“In addition, we created a consortium with participation from major gold industry players to encompass the whole value chain of gold production from mine to end consumer,” Alon said.
“These partnerships have enabled us to have full transparency of the production chain by marking the physical gold and recording its digital twin on an independent blockchain ledger. This digital platform is managed by major tech providers R3 Corda and Quantum Cloud.”