Scotiabank puts its gold business up for sale
Scotiabank of Canada has put its gold business up for sale following a multibillion-dollar money laundering scandal centered on an American refinery that involved smuggled gold from South America.
ScotiaMocatta is one of London’s leading gold trading banks and is sold by JPMorgan, according to people familiar with the process.
Chinese buyers are said to be the main targets for the sale, according to market people. Scotiabank declined to comment on the sale or scandal of the refinery.
The “straw that broke the camel’s back” in prompting the sale, market people said, was the Scotiabank loan to Elemetal, a precious metals refinery in Dallas. Scotiabank was one of its biggest lenders, they said.
In March, US prosecutors charged workers at Elemetal subsidiary NTR Metals in Florida with a money laundering program using “billions of dollars in criminally sourced gold,” mostly from Peru. .
Elemetal did not respond to a request for comment. Scotiabank and ScotiaMocatta have not been charged with any wrongdoing.
According to court documents filed in Florida, workers at NTR Metals “knowingly conspired to buy gold with the intention of promoting the prosecution of organized criminal activity, including illegal gold mining, smuggling of gold and the entry of goods into the United States by false means. and US Customs Declarations and Drug Trafficking ”.
NTR imported more than $ 3.6 billion in gold from Latin America between 2012 and 2015, according to court documents. Two of the defendants, Samer Barrage and Juan Granda, pleaded guilty last month to a charge of money laundering under plea deals.
After the story came to light in March, Elemetal was banned from the London Bullion Market Association’s “Good Delivery List” of gold refiners; buyers will, in almost all cases, only purchase gold from a listed refiner.
That same month, New York’s Comex futures exchange said it was no longer taking Elemetal gold for delivery against futures contracts on the world’s largest gold futures market.
The scandal surrounding Elemetal made it difficult for Elemetal gold holders to sell the gold bars, leaving them sitting in bank vaults, traders said. Buyers are reluctant to take the gold, given the surveys.
Scotiabank is one of five investment banks that settle gold transactions on the London market, the largest in the world. It was built following the 1997 purchase by Scotiabank of Mocatta Bullion, whose roots date back to 1671.
Trading in gold has become increasingly expensive for banks due to the stricter rules in place since the financial crisis that aim to reduce market risks.
HSBC and JPMorgan dominate the London market; their large balance sheets allow them to extend credit to customers and refiners around the world. Unlike Scotiabank, they also have safes in London.
The gold trade in London is estimated at over $ 5 billion a year, although there are no precise figures on how much gold is traded there each day.
Additional reporting by Gregory Meyer in New York