Corporate Crime: The Perth Mint and the Regulators

The Perth Mint is owned and operated by the Gold Corporation, which is a statutory body established pursuant to the Gold Corporation Act 1987 (WA) (Gold Corporation Act).

The Perth Mint is the world’s only government-owned and guaranteed precious metals enterprise.  It is in the business of refining and processing gold, silver, and platinum products.  Perth Mint is a large player in the resources sector and refines almost 75% of Australia’s newly mined gold and close to 10% of the world’s gold.

The Gold Corporation is a statutory body and the Gold Corporation Act itself prescribes duties for Gold Corporation’s directors that are equivalent to those found in the Corporations Act 2001 (Cth) such as:

• a duty to act honestly: (s 71)(1) of the Gold Corporation Act;
• a duty to exercise a reasonable degree of care and diligence: (s 71)(2) of the Gold Corporation Act;
• a duty not to make an improper use of one’s position: (s 72) of the Gold Corporation Act; etc.

For several years, the Perth Mint has been the subject of negative media attention for various reasons, largely dealing with allegations that it has failed to meet and manage its compliance obligations.  This has resulted in a recent announcement by Western Australia’s Mines and Petroleum Minister Bill Johnston announcing a strategic review of Gold Corporation, where the object of the review will be to consider the State of Western Australia’s options to manage the risks associated with the ownership of Gold Corporation.  One option that is subject of the review includes whether the State of Western Australia should continue to own and operate the Perth Mint.

Recent Gold Doping Allegations and Four Corners Investigation

The Perth Mint has recently received global attention after ABC current affairs program, Four Corners, recently aired an episode about its investigation into the affairs of Perth Mint, in which it says the Perth Mint sold gold to the Shanghai Gold Exchange which did not meet the required purity standards following the implementation of a dilution program designed to improve the Perth Mint’s profit margins.  This program also alleged significant failings in Perth Mint’s compliance regime, with ABC noting that authorities suspect that Perth Mint has been likely used by money launderers to move funds.

As a result of the program, some members of the Western Australian parliament have demanded that a royal commission be conducted into the affairs of the Perth Mint.  The Western Australian government have rejected the proposal.

London Bullion Market Association Investigation

Multiple agencies have also called for an investigation into the operations of Perth Mint, including the London Bullion Market Association (LBMA) who have recently commenced an Incident Review Process to consider the allegations against the Perth Mint. 

The LBMA is an international trade association representing the London market for gold and silver bullion, of which the Perth Mint is a member.  The LBMA is also the custodian of the ‘Good Delivery List’, being a list of entities that adhere to LBMA’s strict rules in relation to the production of gold and silver bars.  If an entity is struck off from the Good Delivery List, it will no longer be able to sell its product on the London market, may not be able to sell its gold on any other commodity exchanges, and will lose interest in its product from large institutional investors.

On a positive note, on 4 April 2023, the LMBA announced that it had completed its incident review process, and has since confirmed that the Perth Mint should be maintained on the Good Delivery List as ‘LBMA did not find any instances of zero-tolerance non-conformance’.

Australian Transaction Reports and Analysis Centre Investigation and Audit

The Australian Transaction Reports and Analysis Centre (AUSTRAC) is the government financial intelligence agency responsible for monitoring financial transactions to identify money laundering, organised crime, tax evasion, welfare fraud, and terrorism financing.  AUSTRAC is also involved where large amounts of money are transferred internationally, as such transactions typically must be reported to AUSTRAC.

Last year, in September 2022, AUSTRAC began an investigation into Perth Mint’s operating company, Gold Corporation, due to concerns regarding Gold Corporation’s compliance standards. 

AUSTRAC is required to have "reasonable grounds to suspect" that an entity has breached or may breach a provision of the Anti-Money Laundering and Counter Terrorism Financing Act 2006 (Cth) (AML/CTF Act) before it may order an audit of any entity pursuant to section 162 of the AML/CTF Act. 

On 30 August 2022, AUSTRAC found that it did have reasonable grounds to suspect a contravention of the AML/CTF Act, and therefore ordered that Gold Corporation appoint an external auditor who would examine the Gold Corporation’s:

• requirement to have an Anti-Money Laundering and Counter Terrorism Financing program and comply with Part A of that program;
• requirement to have an ongoing customer due diligence program;
• suspicious matter reporting obligations; and
• maintenance of its enrolment details within required timeframes.

Grounds on which AUSTRAC Suspects a Contravention and Timing of Audit

AUSTRAC has stated that there is a reasonable ground to suspect that Gold Corporation has contravened or is contravening the following sections of the AML/CTF Act:

• section 32, being the section that states that a reporting entity must not provide designated services to a customer unless it has carried out the applicable customer identification procedure in respect of the customer;
• section 36, being the section that states that a reporting entity must have an ongoing customer due diligence program to identify, mitigate, and manage the risk of the entity facilitating money laundering or financing of terrorism;
• section 37B, being the section that states that if a reporting entity enters into an agreement with a third-party entity where it relies on that third-party entity’s Anti-Money Laundering and Counter Terrorism Financing customer identification procedures, then it must carry out assessments to ensure that the requirements in the AML/CTF Rules are satisfied;
• section 45, being the section that outlines a reporting entity’s obligation to provide a report to the AUSTRAC Chief Executive Officer in relation to certain international funds transfer instructions;
• section 51F, being the section that requires a reporting entity to inform the AUSTRAC Chief Executive Officer of any changes in the entity’s enrolment details or of any change in the enrolment details that are of a kind specified in the AML/CTF Rules;
• section 74, being the section that is in relation to the provision of certain remittance services to a person who is not a registered remittance affiliate, or where a person provides remittance services while not being registered as a registered remittance network provider;
• section 81, being the section that states that a reporting entity must not commence providing designated services unless it has adopted and maintains an anti-money laundering and counter-terrorism financing program (AML/CTF program); and
• section 82, being the section that states that if a reporting entity has adopted a AML/CTF program, then it must comply with Part A of that program, being the part of the program that includes processes and procedures to help identify, mitigate, and manage money laundering and terrorism financing risks that the reporting entity may reasonably face.

On 8 March 2023, addressing the AUSRAC audit, Perth Mint published a media announcement stating:

The independent audit ordered by the regulator AUSTRAC is expected to be completed later this year. The Perth Mint welcomes the audit, which will support and inform its ongoing efforts to maintain strong AML/CTF measures, and continues to actively engage with the auditor.

Possible investigation by the Corruption and Crime Commission?

The Western Australian Corruption and Crime Commission (CCC) is a statutory body established pursuant to the Corruption, Crime and Misconduct Act 2003 (WA) (CCC Act), tasked with assessing and investigating allegations of “serious misconduct” in the public sector and in relation to “public authorities”.

The CCC Act defines public authorities as:

“an authority, board, corporation, commission, council, committee, local government, regional local government, regional subsidiary or similar body established under a written law;”

Because the Gold Corporation is a statutory corporation established under a written law, it falls within the purview of the CCC.  Reports in 2020 suggested that in 2020, the CCC began inquiries into the Perth Mint due to allegations of nepotism and related-party dealings where allegations were raised of "extreme" pressure being put on senior staff members regarding hiring decisions and efforts to have the Perth Mint give contracts to favoured parties.

It is not yet known whether the CCC will investigate the latest allegations about the operation of the Perth Mint and Gold Corporation.

Lavan Comment

The Perth Mint is a complex organisation that falls within the scope of various pieces of compliance and anti-corruption legislation. It is essential for directors and officers of corporations or employed by similar statutory bodies to be aware of their duties and discharge the same.  For advice on matters relating to corporate crime and regulatory investigations, please contact, Partner, Cinzia Donald.