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ASIC’s Flawed Bullion Investigation Under Scrutiny 

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At the May/June Senate Estimates, I queried ASIC about their investigation into allegations raised by several whistleblowers regarding a major bullion company charging for sales and storage of bullion it did not hold.

While ASIC did investigate, they allowed the company months to get their affairs in order and provided advanced notice of the audit date, enabling potential moving of bullion to defeat the audit, possibly resulting in multiple counting of the same bullion.  Furthermore, there are allegations that bullion not belonging to the audited investment scheme but belonging to another entity, was included in the audit.

Despite several sessions with ASIC on this matter, none of their responses have addressed the fundamental issues surrounding their flawed investigation. The case has now been referred to another agency and I await the outcome.

Transcript

Senator ROBERTS: It’s now been found that the bullion inspected was the property of three companies operating two investment schemes. Were you aware that your auditor was inspecting bullion belonging to two companies not under investigation?  

Ms Court: I’m unable to comment further on this issue of the bullion company. I haven’t got further information beyond that which—  

Senator ROBERTS: So you’re not saying that you won’t answer; you’re saying that you haven’t got it with you.  

Ms Court: I’m saying I—  

Senator ROBERTS: We’ll put it on notice.  

Ms Court: Perhaps—if you put questions in relation to this issue. I’m assuming that your questions relate to a continuing investigation that Mr Savundra referred to. In those circumstances, it would be appropriate to put those on notice to make sure that we can answer them comprehensively.  

Senator ROBERTS: I’m talking about the audit. I’ll continue with questions on the audit. What steps did your auditor take to ascertain ownership of the bullion being offered as theirs? What steps did the auditor take?  

Ms Court: I think it would be preferable to take those questions on notice. You’re asking for details of an investigation. We have given evidence previously that the matters raised in relation to the bullion company have been extensively investigated. 

Senator ROBERTS: So it should be easy to get answers. Was the theoretical stocking figure provided for the amount of bullion just for one scheme as compared to gold for two? My information is that it was.  

Ms Court: I will take that on notice.  

Senator ROBERTS: The facility that held the bulk of the bullion did not have council approval for secure storage and, in fact, was not a secure storage. Why wasn’t the company prosecuted for charging customers for secure storage that didn’t exist?  

Ms Court: I’ll take that on notice also.  

Senator ROBERTS: Can you answer that now? It’s Senate estimates. The guideline is that you will answer if you can answer it now.  

CHAIR: Senator Roberts, another ASIC inquiry is underway. In relation to operational matters, from time to time, ASIC provides information to senators in another forum where we can be very assured that appropriate structures are put around the information provided, so, when Ms Court says that she’s taking it on notice, that is appropriate in relation to this investigation.  

Senator ROBERTS: This one? Okay. Will you now please set aside your pride, open up the investigation and work out what was done wrong and what action should be taken for misleading ASIC.  

Ms Court: I’ve already said that I’d prefer not to answer further questions. Part of the challenge with answering the questions in the way that you’re putting them is that it assumes the correctness of the proposition in your question, which, of course, ASIC takes issue with. We reject that there has been any misconduct by ASIC in relation to this investigation. It has been conducted extensively over quite some time. As the chair has indicated, to the extent that you could wish us to address you on these issues in camera, then, of course, we would be willing to do that, if the committee seeks that briefing.  

Senator ROBERTS: Okay. Can we do that? I’ll finish with the last question on this issue. I have put in more detailed questions on notice and ASIC has received the information I mentioned today directly, so I look forward to further communication on this matter and will take you up on the offer for the in camera briefing. 

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ASIC and the Case of the Missing Gold

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ASIC received a significant, detailed complaint of misconduct concerning a company that sells gold, silver and palladium to the public, and then stores the bullion on behalf of their customers.

The complaint suggested the company was selling bullion it did not own, failed to purchase that bullion and had a storage vault incapable of holding the volume of bullion they were minding. Further, that customers are having trouble getting their purchased bullion and there are questions around council approvals and the suitability of their “vault”.

ASIC investigated and found nothing wrong, however there is doubt around the veracity of the audit.

ASIC offered to brief me on this matter, which I accepted.

Transcript

Senator ROBERTS: Thank you. I will move to another topic quickly. As per ASIC’s response to questions on notice, ASIC conducted an investigation involving a precious metals business in financial year 2022-23. This was in response to a complaint regarding the company not holding the precious metals it was supposedly charging storage for. The questions relate to that. Can ASIC describe the nature of the investigation? Was ASIC investigating whether the bullion was fake or missing? What was the purpose of your investigation?

Ms Court: Senator, that’s right. As you say, ASIC has had a complaint. I think as we’ve advised the committee previously, if I talk broadly in relation to gold bullion—

Senator ROBERTS: I thought it mentioned a company name. That’s fine.

Ms Court: Sitting here today, I’m not sure if we have mentioned that company name publicly or not. I’m certainly very familiar with the matter—

Senator ROBERTS: Okay, good.

Ms Court: that you are referring to.

Senator ROBERTS: Let’s assume we both know the name.

Ms Court: Yes. We received a report of misconduct in relation to that company in April last year, 2022. We have been investigating that carefully. We’ve done a very thorough—

Senator ROBERTS: What was the aim of the investigation? Was it to investigate whether the bullion was fake or whether it was missing?

Ms Court: At a high level, Senator, the aim of our investigation is to ascertain whether or not there has been a breach of the ASIC Act or the Corporations Act, which is—

Senator ROBERTS: So it was both, was it?

Ms Court: Which is what we administer. I’m cautious about how much I say publicly. We certainly took the allegations very seriously. We did ascertain the extent of the holdings, if I could put it in that broad term, to make sure—

Senator ROBERTS: How many clients it has and how much gold it is supposed to have?

Ms Court: Yes, indeed, we did. Indeed, part of the reason that it has taken us some time to conclude that investigation, Senator, is that we have engaged experts in that area to do a physical check, if you like, to ascertain those holdings. We had a significant detailed complaint. We’ve taken that complaint very seriously. We have expended considerable resources on that investigation over the course of the last 18 months.

Senator ROBERTS: How much advanced notice did ASIC provide the company before conducting a physical site inspection?

Ms Court: I would have to take that on notice.

Senator ROBERTS: Okay. I understand that ASIC gave the company sufficient time so that it created an opportunity to alter its business affairs before a physical site inspection was allowed—in other words, move gold in.

Ms Court: Senator, as I say, I will take that on notice. I should put on the record that I highly doubt that is the case.

Senator ROBERTS: Thank you. The complainant had reports that a large quantity of gold was moved into storage to perhaps make the books balance, a feat that was possible because of the long notice that was provided. Why didn’t you just get a search warrant and turn up for a surprise check?

Ms Court: Senator Roberts, I dispute that characterisation of what has taken place.

Senator ROBERTS: Did you get a search warrant?

Ms Court: I’m not going to comment on our investigatory process in relation to a particular company. Of course, we’re very happy to give you a briefing, Senator.

Senator ROBERTS: If you could, and a time line?

Ms Court: Yes, indeed. We can take that on notice, Senator.

CHAIR: Last question, Senator Roberts.

Senator ROBERTS: The company claims to have tens of thousands of storage clients. I would like to know whether you confirmed the clients as well as the amounts of gold that are supposed to be there? Why did ASIC use taxpayer money to test the authenticity of the physical bullion rather than charge the subject?

Ms Court: Senator, I will take all those questions on notice. They do involve a particular investigation. We are conscious that a range of allegations have been made and continue to be made about this matter. As I said earlier, we have focused significant resources in getting to the bottom of these issues. We will finalise our investigation shortly. I’m very happy to give you a briefing in relation to that and to take your questions on notice, Senator. Please be assured that we have treated this with the utmost seriousness.

Senator ROBERTS: Could your office contact my office to arrange a time for a briefing? We are going to be in Canberra quite a bit in the next couple of months?

Ms Court: Yes, indeed.

Senator ROBERTS: That would be good.

Ms Court: We’ll go through the appropriate processes and do that, Senator. We would be very pleased to assist you with that information.

Senator ROBERTS: Thank you very much. Thank you, Chair.

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Questioning Australian Prudential Regulation Authority – Debanking

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De-banking is the process of banks closing accounts for businesses or individuals. All the big banks are now de-banking clients and claiming that this is for Anti Money Laundering reasons, but it is just not true. At our Senate Estimates questions, APRA agreed they had authority in this area and also agreed they were doing nothing about this scandal.

The companies being de-banked are bullion dealers, bitcoin exchanges and cash handling companies working to keep ATMs in clubs and pubs full and so on. All of the companies that have been de-banked that my office has looked at are legitimate, long-established companies that are following the law.

The only explanation for de-banking is this – banks are shutting down their competitors. This is an abuse of their market power that will prevent competition in banking and reduce freedoms Australians enjoy as to the choice of what to do with their own money. This is bank greed and the supposed-regulator the Australian Prudential Regulation Authority are facilitating this by looking the other way.

The Cash Ban Bill produced by Treasury works with the banks by de-banking their rival businesses and then preventing those businesses to move over to cash payments. This effectively puts these banking rivals out of business.

Transcript

Senator ROBERTS: Moving onto the practice known as debanking, is the regulation of debanking practised by the banks your responsibility?

Mr Byres: I don’t know that I can talk about a regulation for debanking. The concern is that various customers no longer get banking services. It’s certainly not a primary issue for APRA. We understand the issue exists. In many cases, it relates to banks being able to comply with anti-money-laundering and counterterrorist-financing regulations.

Senator ROBERTS: That’s where I’d go. Commander Security is an Australian cash security company. It transits cash, and a large part of that is refilling third-party ATMs. So it’s a competitor to the banking cartel. Commander Security is fully AUSTRAC compliant and operates its accounts lawfully. On 14 October 2020, it received a notice from Westpac cancelling Commander Security’s banking accounts effective from 26 October. It has been refused accounts at other banks. Where is the protection of interests of depositors in this process?

Mr Byres: The depositors of the banks themselves are protected. I’m not aware of the specific case that you’re referring to. We’re happy to look at that.

Senator ROBERTS: Let’s look at another one then. Melbourne Gold Exchange sell bullion to retail investors. It is also AUSTRAC compliant and operates legally. It was debanked by Westpac, then the Commonwealth, then the NAB and now cannot get an account anywhere. Would you categorise bullion as a rival store of wealth to  cash in the bank?

Mr Byres: No, I wouldn’t actually. I think cash in the bank has a very stable value and bullion does not. But that’s a discussion about investment rather than safety.

Senator ROBERTS: Bullion’s not stable? Okay. The point of this question is simple: banks are debanking businesses that they have decided are an unacceptable risk. When my office looks at these businesses, they are bullion dealers, non-bank companies providing rival services to the banks, like Commander Security, and bitcoin exchanges. APRA appear to be turning a blind eye to Australian banks debanking their rivals. Can you explain that?

Mr Byres: I don’t think we’re turning a blind eye to it. We understand the issues there, but banks are making decisions based on their risk profile as to whether they want to take on the risk associated with some of these customers. Clearly what we have seen in recent times is that the penalties for getting it wrong are significant. That’s not to condone the banks but to simply make the point that they’re taking it very seriously.

Senator ROBERTS: When the Melbourne bullion company was debanked, Westpac debanked not only the accounts but also the private accounts of the owners and the private accounts of their employees. APRA is responsible for protecting the financial interests of depositors. Does APRA consider this acceptable behaviour?

Mr Byres: Just to be clear, our obligation to depositors is not a consumer protection obligation, it’s making sure that people get 100c in their dollar—

Senator ROBERTS: I think you’re also responsible for making sure that there’s adequate competition.

Mr Byres: We have to be mindful for competition, but we don’t have a mandate to promote or establish competition. We have to deliver safety and soundness having regard to a range of other factors: competition, efficiency, ability and competitive neutrality. But we’re not primarily a competition regulator.

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