The turmoil in WA has worsened following reports the Perth Mint may have routinely breached US commodities laws for more than 25 years.
The Perth Mint has faced a wave of scandal in recent weeks with reporting concerning ‘gold doping’ and an alleged failure to perform appropriate background checks when selling gold dominating headlines.
The controversy has continued this week with the revelation the Perth Mint was warned in 2022 that it was potentially breaching commodities laws in the US by holding gold for customers in its depositary.
“In September 2022, the mint publicly acknowledged it was addressing ‘historic non-compliance issues; with the US laws and had self-reported the issue to US regulators,” the ABC reports.
“But what it failed to mention was that those potential breaches dated back nearly 25 years and covered around 1,500 accounts holding $US254 million ($AU380 million) worth of precious metals on behalf of clients.”
In May of 2022, the Perth Mint reportedly received external legal advice about these potential breaches and was told that even if the issues were rectified, the mint may still be liable for penalties.
Current WA Premier Mark McGowan was the minister responsible for the mint between 2017 and 2021 and said the government awarded $34 million to upgrade computer systems and employ additional staff to fix these issues.
“As I understand, when they identified these issues they self-reported themselves and these issues have been in place under successive governments, Liberal governments, Labor governments, all the way back to the 1990s,” he said.
In order to prevent fraud, the Model State Commodity Code (MSCC) was implemented in the US in 1985.
The MSCC is used in 23 US states and requires anyone purchasing gold receives a physical delivery of that gold within 28 days unless the seller is an ‘exempt person’.
The Perth Mint allows internationals to purchase gold and store it via a Depository Service. Approximately six per cent of the mint’s customers are based in MSCC-compliant US states.
The Perth Mint is not considered an ‘exempt person’ under the MSCC and thus, could be in breach of commodities laws.
Documents obtained by the ABC reveal that the Perth Mint was encouraged to continue with ‘business as usual’ despite concerns over the legality of trade with US customers.
“[The] recommendation is that Depository continues dealing with all US-based customers as normal as it is not prudent to reject opening of accounts from Model Code states, as the historic liability to Model Code already persists,” the report reads.
“Closing down the 1,500 accounts holding $US242m in custody, which are currently deemed to be non-compliant with Model Code, would present significant challenges, including from a reputational perspective, as liquidation of the accounts could have material tax consequences for customers.”
A spokesperson for the Perth Mint said that a review of regulatory requirements in the US jurisdictions where it offers depository services was recently completed.
“The Perth Mint self-reported the issue and has been proactively engaging with relevant regulators in the applicable US states to remedy any unintended breaches of the MSCC,” they said.
“Once we became aware there was an issue, we took steps to limit the ability for customers in MSCC states to open new accounts. We have also been closing down dormant, zero-balance accounts held by customers in MSCC states.
“Importantly, the Perth Mint is confident that no US investors have been harmed by this oversight.”
The Perth Mint is the largest processor of newly mined gold in the world. Gold Corporation is the parent company of the Perth Mint. The mint was established in 1899 and is owned by the Government of Western Australia.
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