Senators continue to probe the investigation into ABC Bullion by ASIC and auditors Deloitte, querying the methods used and why whistleblower evidence seems to have been ignored. Kim Wingerei with the story.
Australian bullion companies have had a rough ride lately. Last year, Perth Mint operators, the Gold Corporation, accepted an ‘Enforceable Undertaking‘ after a lengthy investigation by AUSTRAC found that the company had failed to comply with anti-money laundering and counter-terrorism financing (AML/CTF) laws. East Coast competitor ABC Bullion was cleared by ASIC earlier this year after an investigation into its bullion storage practices, while its parent, Pallion Group is in ATOs crosshairs.
ASIC engaged ‘Big 4’ auditor Deloitte to conduct an audit of ABC Bullion. Economist and bullion dealer John Adams, who instigated the ASIC inquiry, believes the audit process was inadequate, a sentiment echoed by Senator Roberts.
On September 10, Malcolm Roberts asked why “ASIC did not physically inspect any ABC Bullion or Pallion group facility for 9½ months.” He went on to state that “a mere 3½ weeks after the ASIC investigators tipped off ABC Bullion that it was under investigation, ABC Bullion moved an undisclosed quantity of physical bullion from a tiny room in the Sydney CBD to an industrial building located in Marrickville.”
ABC Bullion is a subsidiary of the Pallion Group, which is under investigation by the ATO, chasing $200 million in unpaid GST.
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Audit report questions
ASIC commenced the investigation into ABC Bullion in July 2022. However, Deloitte was not formally appointed until February 2023. Their role was to audit the physical storage and movement of bullion between ABC’s facilities following the initial report of alleged misconduct from Adams submitted in April 2022.
Adams questions both the length of time it took to commence the audit and its methodology.
In response to parliamentary questions put on notice by Senator Roberts, ASIC revealed to Parliament on 23 October last year that ASIC “engaged an external consulting firm to carry out an assurance of physical stock based on randomised selection.”
Adams suggested to MWM that “randomly counting physical gold and silver bars when the allegation was that physical gold and silver bars are missing is a puzzling audit methodology.”
When confronted by Senator Roberts on 19 March 2024 in a private briefing held in Federal Parliament as to why didn’t ASIC count all the physical bullion that ABC Bullion was required to contractually hold, ASIC Deputy Chair Sarah Court stated that ASIC “didn’t have the financial budget.”
Deloitte was paid approx. $300,000 for the audit.
Audit process
Adams has told MWM that having created an assurance plan in January 2023, ASIC investigators met with ABC Bullion on multiple occasions in January, February and March 2023 after informing them that an audit would take place.
These meetings occurred partly because ASIC was not willing to seek a court-approved search warrant and instead required the permission of ABC Bullion and its parent company, Pallion Group, to access its physical premises.
While the contents of meetings are unknown, one email obtained via a Freedom of Information request suggests that ASIC investigators provided a redacted copy of the assurance plan to ABC Bullion in or around late January or early February 2023.
Beyond this, ASIC acquiesced to ABC Bullion’s demand of having ASIC officials and Deloitte employees obtain new police checks (which ASIC paid for).
ASIC also actually paid for Deloitte employees to receive training to use equipment capable of testing the purity of physical gold and silver bars (which took several weeks to organise) rather than find a market operator who could perform this function immediately.
According to Adams, the most troubling part of the audit process was that it appears
ASIC went out of its way to guarantee that ABC Bullion knew precisely when to be fully prepared for the audit.
They did so when ASIC provided ABC Bullion with ten days’ notice prior to the first site inspection, which occurred on Friday, 28 April 2023, in Marrickville, NSW.
Subsequent site inspections occurred on Tuesday, 2 May and Thursday, 4 May 2023, in the Sydney region with only 24 hours’ notice and on Thursday, 11 May 2023, in Perth with six days’ notice.
Again, when confronted by Senator Roberts as to why ASIC didn’t conduct physical site inspections across multiple locations on a single day, Deputy Chair Court cited financial constraints.
Whistleblower claims
After ASIC initially cleared ABC Bullion of any wrongdoing, Adams submitted a follow-up ‘Critical Review” to ASIC, which was dismissed in August this year.
During this review, Adams was able to find a new whistleblower (the second in two years) with intimate details of ABC Bullion’s operations, especially in the April – May 2023 period.
Working with Adams, this whistleblower agreed to a 23-page statement in which they stated that while having no knowledge that ABC Bullion was under criminal investigation by ASIC, they had heard rumours out of Sydney in April 2023 that the company was about to be subjected to a major and very serious audit.
The whistleblower also states that in late April 2023, within the ten-day notice period provided by ASIC (approximately 2 – 3 weeks prior to the 11 May 2023 site inspection in Perth), he was told to drop everything and ship approximately one metric tonne of physical gold and silver bullion from Perth to Sydney within 24 hours – an unprecedented and uncommercial instruction which they had never received before.
Such instructions to urgently ship physical bullion back to Sydney were also issued to ABC Bullion’s Brisbane and Melbourne offices.
MWM understands that none of these retail stores ever performed client storage services, meaning that the physical bullion that was shipped back to Sydney was company inventory.
During the same period of time of mid to late April 2023, the whistleblower also heard that Pallion Group’s refinery arm – ABC Refinery – had shifted its production schedule to urgently manufacture a large quantity of physical bullion for ABC Bullion while delaying production for other clients.
These actions, according to the whistleblower, coincided with rumours out of Sydney that there were concerns that ABC Bullion held insufficient physical bullion for clients and that the deficit required to be backfilled prior to the audit commencing.
The whistleblower also contends that once the audit was over, a significant portion of the bullion that was shipped from Perth to Sydney in April 2023 was shipped back to Perth after 11 May 2023.
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ASIC response
Given the whistleblower revelations, Adams expected ASIC “to take a keen interest as the integrity of the audit and its results put into question.”
Upon receiving Adams’ Critical Review Report on 3 June 2024, ASIC was eager to interview the new whistleblower on a voluntary basis.
However, as soon as the whistleblower requested that ASIC produce a record of the conversation or transcript of the voluntary interview, ASIC refused without any justification.
When the whistleblower then subsequently requested a section 19 legal notice to participate in a formal examination where a transcript would be produced by law, ASIC refused again with no justification.
Instead, ASIC informed the whistleblower that they would solely consider their witness statement. The whistleblower never heard back from ASIC.
ABC Bullion has previously denied any wrongdoing in a statement to MWM.
MWM put questions regarding the audit process to Deloitte but has received no reply. ASIC has also declined to comment on the investigation or the audit process.
This post was originally published on Michael West.