Fake-branded bars slip dirty gold into world markets | Hacker News Reader

Fake-branded bars slip dirty gold into world markets

reuters.com

95 pointsaazaa156 comments

According to the article, the gold bars are actually high-purity real gold. Then the difference in price must be the small markup that branded stamped gold bars get. This seems very different from the normal forgery I would expect where the forger gets a large fraction of the bar's value.

If the bar is actually real gold, the nature of the damage is different. It's less about undermining gold than it is about undermining the brand of the stamp.

I think it's not only that, it's allowing smuggling of gold that isn't sourced ethically, which is quite important to some people -- and also does, as you say, undermine the brand as well.

It's about money laundering. The stamps give a sense of authenticity, that the gold came from legitimate sources.

By faking the stamp, gold from other sources (e.g. conflict zones) can be passed off as being from Swiss refineries, and thus used to launder money.

Sorry, but as a layman I don’t get it. How does putting a fake stamp on a real commodity item help me to launder money? Is it like shoes where an identical product with the right logo costs more? This wouldn’t seem to affect anyone except the refinery who wanted to charge more for a logo, and I don’t see how it ties in with money laundering.

The way I see it:

Say you've got a source of gold that no one else will touch (illegal mine, sanctioned country, slave labour, stolen gold, etc). It costs you way below market price, but no one will buy it from you.

You pour it into bars, stamp it with fake brands and sell it at market price to anyone you want.

Instant profit and your hands/money are clean.

Certain parties operating in the UAE will touch it. This is just one further step away from selling it as jewlery.

https://www.hrw.org/news/2016/04/12/dispatches-child-labor-d...

I tend to think the article is trying to inject some shadow over gold market, like in "careful with buying gold, you'll probably end up buying a bar of rusty iron". You have to read four paragraphs to read the first explanation that there's no problem with the gold quality.

Gold may be the dirtiest commodity out there. There are plenty of people that buys gold without worrying about its origins, to immediately melt it into something else. People that doesn't care where a meth head got this 24k gold necklace, will trade it for about 10% its value and melt it into jewelry again.

I'm sure the last worry of people buying gold bars is the source of them, specially if you can get them at a small discount. "Hey, look: I'm getting rich selling tobacco to children, weapons to both sides of a war, paying doctors to prescribe my drugs, flooding the oceans with crude oil... but that gold origin is what worries me at the end of the day."

So, like Die Another Day, where that villain takes blood diamonds into Iceland to obscure their origin and sell them like they came from there?

Some unsavory regimes are in control of natural resource mines (like gold or diamond). In an attempt to withhold funds from these regimes, it’s common to not buy gold or diamonds that came from these places, despite them being the same physical product.

By counterfeiting the stamp, gold from these places can be passed off as being from one of the acceptable regions of the world. This is effectively smuggling items through a metaphorical blockade.

The stamp lends a level of surety about the product both in origin and quality. If I'm buying a bar and I know it comes from refinery X with a long reputation I don't have to worry as much about the bar being gold/silver/platinum at the stated quality. It's not perfect but with other documentation about the source that matches what the bar is telling me it provides a level of certainty. I worked in my family's pawn shop as a kid and the rare chance to buy a bar (I only ever bought a silver bar so it wasn't as big a deal) was always stressful because there's no good way to check the quality of the whole bar (this was before the advent of the handheld devices but even with those you have to worry about it being say lead with a thick layer of gold around it).

Actually it's not _that_ difficult to do transmission X-Ray diffraction measurements. Or for gold, just measuring density. You do need to do the latter to like 5 significant digits, but that's not hard per se.

Density isn't hard in a technical sense it's just a pain and you have to have the resources to do it. Namely a way to accurately measure the displacement which wasn't something we had.

A majority of our gold testing was designed for jewelry and used a rough glass square and an acid blend for the different major carats of gold we would see. It worked by rubbing off a small part of the gold onto the glass then adding some acid and watching it's reaction, if it wasn't gold or was lower purity it would dissolve and disappear quickly. It was rudimentary but it worked well enough, there were some subtleties with exactly how it should react that you learned over time.

Try walking into your local bank/gold dealer and selling a Swiss marked bar of gold or one that has the the markings of a drug cartel and see which you would prefer to sell...

As others indicate the problem isn’t the gold, the problem is the provenance of the gold. It’s used to launder money.

Sure. But if you’re accidentally in possession of one of these bars, it’s not like you’ve been scammed into buying lead with gold paint. You still own the amount of gold you thought you owned.

If one replaces gold with crude oil then the gravity of this becomes clear.

What if Venezuela is smuggling its camouflaged crude oil inside Norwegian oil tankers?

Big deal. There's a glut of oil and a dearth of gold.

I hear rumors that there are exactly as many units of oil sold as units of oil bought, and the same holds true for gold. I honestly have no idea what you could mean by saying that there's a glut of one and a dearth of the other.

By that logic, you could never have an excess or dearth of anything.

That isn't true, something being bought at the rate it is produced means that demand outstrips or meets supply. No excess, possible dearth.

Let's say I manufacture a million widgets and can only sell one of them. HUGE excess.

Now let's say someone wants to buy a million widgets, but it takes me 3 weeks to build one. HUGE dearth.

I agree with you, but that's not what gp wrote:

> I hear rumors that there are exactly as many units of oil sold as units of oil bought

Gp compared the number of items sold with the number bought, not taking into consideration the number manufactured.

And then you adjust your prices until supply and demand are back in balance. The excess/dearth, by that overly simplistic definition, becomes roughly 0. Even though the underlying issues haven't gone anywhere.

Seems like the other way around to me. Most oil gets used pretty quickly after it’s produced. Most gold sits in vaults doing absolutely nothing.

Sitting in vaults is what gold does. It's being "used" as a store of value.

Just because it isn't being burnt up doesn't mean it's providing no utility.

No particular quantity is needed to fulfill that function. If the gold supply were half as big, then each bit would store twice as much value and nothing would change other than the vaults being smaller. We have way more gold than is needed to do what it’s used for.

You're being reductive. If supply is the only thing that matters, then why has the price of gold continued to rise even though we mine thousands of tons each year?

Saying that there’s a glut of oil and a dearth of gold based on their prices is pretty reductive too.

It’s a simple thought experiment: what would the world look like if there were twice as much X, or half as much X, than there actually is?

For X=oil, there would be profound changes. Half as much would require a totally different looking economy. Twice as much would enable big changes.

For X=oil, nothing much changes. The industrial and decorative uses continue as they do now. The “store of wealth” uses just have a ~2x difference in $/kg compared to now.

Why does the price of gold continue to rise? Because enough people think they’ll be able to sell it for a good price later.

The top 15 countries with the largest oil reserves together have over 1.5 trillion barrels of oil remaining. There's more in the remaining countries. [1]

Edit: Annual world consumption of oil is about 100 million, so we have about 15000 years of reserves left. [2] That seems to me to be a glut.

1. https://www.visualcapitalist.com/map-countries-most-oil-rese...

2. https://ycharts.com/indicators/world_oil_consumption

According to your links, worldwide consumption of oil is 100 million per day. That’s 40 years of supply if consumption stays steady.

How long will current gold reserves last?

Look again:

"World Oil Consumption measures the number of barrels that are consumed worldwide on an annual basis. It is an indicator released by BP. This metric tends to trend upwards except for a small dip in the 1980s and 2010. Interestingly enough, 2010 was also the time that Crude Oil prices plummeted because of supply and demand concerns."

15000 years. GLUT.

“World Oil Consumption:99.84M bbl/d for 2018“

That /d means “per day.”

Your other link has the same figure. Or search “world oil consumption” and find a bazillion other sources all saying it’s per day.

This doesn’t even pass a basic smell test. That’s about 3 billion gallons. That’s about 10 gallons per American with the rest of the world getting nothing. Do you really think worldwide oil consumption is 10 gallons per American per year? The average American driver drives twelve thousand miles a year!

Ah, you are correct with the daily usage amount. I figure in about 10-15 years, that will drop to maybe 1/4 of the daily use with the solar->battery->car upgrade that society will engage in. So, I'd stretch it out quite a bit further than 40 years.

The oil's being burned and there's a finite supply. The gold will still exist in some form after the oil runs out.

Big deal for Maduro.

In their personal capacity, the vast majority of people would not care if their oil was sourced from Venezuela.

How could any country be worse than Saudi Arabia?

North Korea.

>In their personal capacity, the vast majority of people would not care if their oil was sourced from Venezuela.

To add to this, oil is a bit different in the simple fact that you need some level of skill to work in that industry and you're generally getting a livable wage (if not a very nice one) whereas gold mining in some countries is still done by what are effectively slaves (even by children).

Ignoring the moral problems of all these countries ...

Oil is very different depending on the origin. Some oils have more Sulphur, some oils have more tar-like parts. Some oil is very dark and some is almost transparent-yellow.

All these differences are fixed in distillation that separates the parts and removes the impurities, but not all distillation plants an handle all the types of oil.

Anyway, after distillation most people care only about the price.

https://en.wikipedia.org/wiki/Sour_crude_oil

https://en.wikipedia.org/wiki/Sweet_crude_oil

True enough but the gold we are talking about is real gold and basically as-advertised; the fake part is the branding. So if we care about oil source because of the quality of the oil the original analogy isn't relevant here - it was meant to indicate that there was a moral reason to track the source.

But with oil that doesn't make sense because everyone is happy to buy from the Saudis, whose last scandal involved bone saws and acid vats.

It isn't helpful to the conversation to replace gold with oil.

Also, everyone can buy from the Saudis because their oil makeup actually varies quite a bit depending on where it’s from in SA.

The only people talking purity are the ones that read the headline and not the article- please don't comment if you didn't even skim it. This is purely about the branding of the gold, not the quality. It's like if someone sells a fake Gucci bag that's actually the exact same quality, materials, and even production process as a real bag. The branding is the lie, not the product.

Don't worry, I had read the article.

Gold is extracted and usually refined locally, perhaps it is exported as an alloy with Silver or Platinum or other metal. After more refinement it can be converted to gold bars.

Oil has more variety, it's a mix of a hundred (thousand?) similar compound and it's exported (almost?) raw. So the composition and the level of the impurities vary a lot from the different sources. You can't ignore the source of the oil because your refinery may not be able to use it.

A better comparison is gasoline. The difference of gasoline with a bar of gold is that gasoline is still a mix of somewhat similar substances, but the variation is small. There are many variants, with different octane rating and different additives. It's not 100% true, but gasoline is somewhat fungible and you don't care too much about the origin if it has the quality you are looking for.

you can also identify where oil has come from based on a sample of it. Oils have unique signatures for different regions.

I'd like to apologize and say my "read the article" self-righteousness was directed at the OP, not you- I replied to the wrong part of the thread and the sub-par reader I'm stuck with using doesn't allow editing/deleting. I also agree that gasoline would be a better comparison than oil.

(No problem. Let's hope your comment get's back to black soon.)

You do realize that most of "fake Gucci bags" are made on the same factories as the "real Gucci bags" typically on the same line except that they are FOB <location of the factory in China or Vietnam> rather than FOB a distribution facility?

That's EXACTLY my point, Mr. notyourday. Why else do you think I said that bit about same materials and same manufacturing process? The problem with the gold discussed in the article is the exact same issue with the bags in this context.

But gold’s value is not based on the brand, where as I suspect the opposite of handbags. Gold’s value is in the material itself. It’s fungible. It’s a pure element. Brand is relatively meaningless. As it should be.

So then it is not a valid comparison to substitute gold and oil as an analogue.

The Gold in this case is the exact same as the other gold it is reporting to be

I would have assumed that someone buying a $10M tanker load of oil would do some basic analysis to check the quality? Presumably even if it came from the purported country of origin, it could still have variations in quality that the buyer would want to confirm upon delivery?

That would be bad for a oil refinery as different crude oil sources have different contents. Some refinery must corrosion resistant metals or the crude will corrode them quickly, others can use cheap iron pipes.

This assumes the refinery isn't in on the fraud. If they are in on it they know what they are getting and there won't be a problem.

Of course I don't know the grades of oil from either place. (if I did know enough I'd probably not be allowed to talk about it...) It could be this substitution is fine for the refineries.

There is blending that takes place before counterfeit/smuggled oil is used so it meets the API/spec of the refinery.

You can be sure refiners are testing before anything runs through the plant...

Different wells produce very characteristic product that's hard and expensive to mask. You could tell it from API gravity and sulphur content, among other things.

See: https://en.wikipedia.org/wiki/List_of_crude_oil_products

So I don't see how you could economically camouflage crude oil from relatively simple chemical tests.

The question is are governments/companies checking and monitoring that actively enough to catch it or do they only check when they have suspicions about the provenance of some oil already.

>This seems very different from the normal forgery I would expect where the forger gets a large fraction of the bar's value.

The only way to make passable fake gold bullion based on weight is to use tungsten clad with gold, and even that is trivial to detect with any proper equipment (which can be hard commercially starting around the cost of an ounce of gold) if the cladding isn't sufficiently thick.

Silver is faked way, way, way more wildly.

I'm a mod of /r/silverbugs and I've been compiling a list of fakes members of the sub have found over the years, there's some really fake gold in there too https://www.ryanmercer.com/ryansthoughts/2014/8/22/fake-silv...

> The only way to make passable fake gold bullion based on weight is to use tungsten clad with gold

<hat scientist="mad"> Couldn't you, say, mix plutonium with a small amount of lead to dial in the weight you need? </hat>

Metallic plutonium is far rarer and more tightly controlled than gold. There is no civilian market for it. Building a new plutonium separation-and-metallization facility for processing spent civil nuclear fuel is more expensive than a new gold mine. Plutonium is also easy to detect by its radioactivity.

Yes, I know all of that, was just asking why this would be detectible by weight. Picked plutonium for the lulz.

It looks like osmium or platinum would be cost effective, at today's gold prices.

I see, you were challenging the "The only way" part of the statement. Yes, any metal alloy or hollow body with a density matching gold could be used to pass density based tests. The natural choice is the cheapest metal of sufficient density -- tungsten.

Platinum was historically used to dilute gold by alloying before it became valuable in its own right and chemical tests improved.

"Gone Platinum: Contraband and Chemistry in Eighteenth-Century Colombia"

https://www.vianolavie.org/wp-content/uploads/sites/5/2015/0...

Platinum being cheaper than gold is one of those random facts that makes the world seem seriously off-kilter to me these days. It used to be much more expensive.

Would depleted uranium be cost effective?

For some weird reason, uranium is not as dense as gold.

I did some research. While uranium atoms are heavier then gold atoms they are also bigger so they don’t pack as tightly.

I am really interested in learning how to validate that any gold I buy is legitimate. I didn't realize that was possible for "just a normal guy." Do you have more information about this? Like, is there a guide?

Obviously the first thing to do would be to get the equipment you mention to detect tungsten. But what about the "if the cladding isn't sufficiently think" issue? How do you deal with that possibility? Would you have to drill into the gold, or something?

>I am really interested in learning how to validate that any gold I buy is legitimate. I didn't realize that was possible for "just a normal guy." Do you have more information about this? Like, is there a guide?

Nitric acid and 'touchstone' are an ok start, but if you have a larger specimen it could just be clad.

https://www.wikiwand.com/en/Touchstone_(assaying_tool)

You can buy that kinda stuff at sites like https://www.goldfeverprospecting.com/goteki.html which have the black stone/touchstone, test needles, acid etc.

You can also do electronic testing, this used the conductivity of the specimen to give you a (generally accurate) idea of what purity of gold you are dealing with, this is usually used for jewellery. It's alright if you are familiar with gold jewellery, have a kt stamping and just want to do a quick non-destructive test.

You can do a specific gravity test via water displacement.

You can do XRF testing (if you've ever watched Cody's Lab he has one of these handhelds they vary in price and quality).

But if you really want to know for sure you have to do destructive testing like fire assay. If something is decently thick you'll need to drill it too, you'll even see this with silver once you start to get to the 100 troy ounce range sometimes.

Thank you for taking the time to write this up!

Yeah, Cody's Lab is great.

Would buying gold coins as opposed to bars avoid this issue? I mean, I'd still want to test using the chemical and electric kits you mentioned. But is it safe to say that you can't hide tungsten inside a coin, and/or is there a foolproof way to detect that---without drilling it---since coins are thin? I really don't want to have to use a destructive test.

Since this is a startup site, if the answer to my question about coins is negative, I wonder if there could be a market for gold that is shaped in such a way that it can be easily verified? I did run across an outfit selling tiny gold "squares" that you could break off and give to people, but can't find it now. So maybe the idea of gold that you can 100% verify at home has already been done, though I don't think that was spiel.

Totally agree. This is more akin to "conflict diamonds" - where the provenance is important.

Ultimately, the powers that be want to control the money supply and dollar flows. If gold is coming from an "unauthorized source" this disrupts the stability of the system.

I know this sounds a bit "conspiracy theory"-ish but I've come to view the global banking system in such a light: there are a few powerful players (namely the US) that need to know where money is flowing at all times.

That's not the case : people like to say that it is the case but "conflict diamonds" are used all the time, all over. It is the open secret in diamond district in NYC and among the dealers to the stars in LA and European capitals.

> Then the difference in price must be the small markup that branded stamped gold bars get.

The bid/ask spread on the gold bars at the same dealer is close to 30%. The other markup is peanuts.

That's why it gold as the "investment" is mostly sold via day time infomercial on second rate TV networks ( the ones that currently broadcast in 480i ) and second rate cable channels as well as promoted by the likes of Glenn Beck right next to "have your own seed bank so you can plant your own garden for food when the economy collapses".

JPM made a lot of money serving those outfits but for it gold bar is just a blob of a certain weight and certain purity.

Someone else suggesting gold as an investment is Ray Dalio, who runs the world's largest hedge fund. As part of a portfolio, it helps because it's a largely uncorrelated asset that tends to do well when everything else is crashing.

Of course, if you're doing that you're probably going to buying GLD or IAU, which closely track the spot price of gold. Or maybe you'll use an outfit like BullionVault, which has a spread comparable to large stocks, nowhere near 30%.

> Or maybe you'll use an outfit like BullionVault, which has a spread comparable to large stocks, nowhere near 30%.

Which does not provide delivery of the gold bars.

In a negative-interest-rate environment, gold is also more attractive, since 0% interest is better than -X% interest.

You are looking at the wrong dealers, the non "scam" dealers for say 1 ounce gold coins have a 3-5% difference between their buy and sell prices. https://www.providentmetals.com/1-oz-us-american-gold-eagle-...

These are not gold bars.

This graph comparing 20 year total returns suggests another reason gold is considered by some to be a worthwhile “investment”:

https://twitter.com/charliebilello/status/116655914552655052...

I asked a discount broker about buying physical gold back in the 90s and was told it would cost about 10%.

"about 10%" becomes about 15% to buy. That's from spot price up.

When you want to sell it, it will become "about 10%" from the spot price down aka about 15% in reality.

Now do the algebra.

The scale of this article seems to not be 'crisis' worthy.

Criminal organizations, governments or oligarchs laundering 50 million dollars is nothing new or noteworthy.

I'd agree - it's not crisis-worthy, but it is at least technically interesting, which makes it alright to be here, IMHO. I've seen a lot of posts on the front page the last few days that seem to be losing technical relevance, or, straight-up just don't even pique my curiosity.

I should find another aggregator and try to submit some quality technical stuff the next couple days. :) No point in complaining about something you can help fix.

Yep. If you do want to hear some 'crisis' worthy numbers in a similar vein as this article I highly recommend giving "Moneyland" a chance. That's where the money laundering gets bumped up into the professional level. I am glad I listen to the audiobook but man is it disheartening to hear how bad it is globally.

https://www.npr.org/2019/05/01/719001286/moneyland-reveals-h...

Is it just 50 million or could there be more that hasn't been reported? Is the money used to bribe officials, pay for espionage efforts worth $10b? Is a crisis based on the base value or the overall cost that comes from it?

What the heck does the world need gold bars for if these are not allowed to be traded freely without being legitimately stamped with the logos of major refineries? If gold still has to be controlled this way, why not just issue some kind of global money instead and stop drilling Earth for this? Also, what distinguishes a warlord from an ordinary dictator which still is allowed to use gold?

Would it be feasible to make signed gold bars, verifiable with some kind of public key?

Or by inserting all gold bars and their journey on a (perhaps blockchain-like) database verifiable by anyone?

So anyone would be able to know if you have 2 gold bars on your backyard?

1. Without giving it much thought, it's probably impossible to prevent "replay" attacks. If I have listed tens of valid signatures, I can use them on my new fake bars on the other side of the world, hoping my fake bar with good signature never meets its genuine alter-ego.

2. This sounds sane and feasible, but I'm not sure how anyone would deal with a bar leaving and then re-entering the system. If I'm a jeweller, I might buy a kilobar and melt it for rings, etc. It's inscribed as having left my seller's stock, just as the bar I bought as a random individual. One bar is meant to reenter the market, the other one not so much... how would you deal with that?

The originator of the bar/signature could track each one and disavow the ones they lost track of.

Not a great solution, but it would reduce replay attacks.

The jeweler could notify the originator that they destroyed a bar.

> disavow the ones they lost track of

So as an individual, I have to trust the originator to keep the whereabouts of my kilobar private?... This is most probably a very bad idea.

Sure, it wouldn't serve all purposes. But for a jeweler that wanted an auditable supply chain, it would be fine.

For buyers wanting privacy, the could have a mechanism for the seller to tell them to discard the signature. It makes it useless for future transactions of course, but it would prevent replay up until point.

Why would you melt marked gold to make jewlery and diminish its value? You can use regular gold for that.

At that point why use gold at all? If the value is in the marking, not the gold itself, then there are much better ways to create hard to duplicate markings than stamping them into gold bars...

You can view it as certified gold, where the certificate is stamped directly on the item by the CA (refinery). There is a certain added value in the marking because the marked piece is standardised in purity and weight, so one used to be sure they were getting the real deal. Well, not anymore. That's exactly what the forgers are speculating: the market price difference between regular and marked gold.

That’s not speculation. That’s arbitrage.

But it’s also not traditional arbitrage. The producers of these counterfeit bars would likely be delighted to have the real gold minting houses certify and stamp their gold for a reasonable price. But they can’t because of sanctions or possibly capital controls. This counterfeiting is about bypassing market controls to trade illicit gold.

They are not looking to actually obtain any exposure on the stamped gold or illicit gold. The goal here is to arbitrage between these two prices and while doing so convert dirty money into clean money. Speculation is the last thing these people are doing or want.

> One bar is meant to reenter the market, the other one not so much... how would you deal with that?

I'm not super knowledgeable about blockchain, but couldn't we arrange for jewelers and such to gift it to a special individual called dev_null, whose wallet keys have been intentionally lost?

The jeweler could be able to mark his bar as destroyed in the chain, perhaps registering the rings in a separate chain?

That way, if every entity that handles or processes gold did the same, you could have a good idea of where each piece of gold comes from.

https://verisart.com/ is a blockchain thing for real-world artifacts.

Ah, the site where somebody proved himself to be Leonardo da Vinci, I remember. [0]

Another great victory for Blockchain.

[0] https://shkspr.mobi/blog/2018/06/how-i-became-leonardo-da-vi...

That would defeat the purpose of owning physical gold. Most physical gold owners do not want any third party dependancy, or couterparty risk. They would stronly prefer discretion.

I make the distinction with physical ownership over a gold-linked fund or future contract, sometimes refered to as paper gold.

To fully validate your gold holdings yourself, you must determine that the metal is actually gold at the purity stamped on the coin/bar. Or you must trust the authority whose image appears stamped in the object.

Obviously most gold holders do not have metallurgical laboratories in their homes, so your assertion is half-wrong. Yes, there is no counterparty risk to the transaction: you hold the gold. But there is third-party trust that what you have is indeed gold.

Of course, I would be a bad Bitcoiner if I didn't mention that Bitcoin solves both of these problems. You can fully validate the quantity and validity of your bitcoin with your copy of the blockchain.

Unlike "blockchain people" though, I do not believe gold -- or any other physical object -- can be realistically tracked in a digital system. So I reject the "put gold on the blockchain" idea as a non-starter.

>most gold holders do not have metallurgical laboratories in their homes,

https://www.amazon.com/slp/gold-testing-kit/25dkrbmt9yxy6dd

Thanks, I was not aware of these. I'll have to research. I suspect they're somewhat desctructive, but could be justified with more than 1000USD worth of metal.

Will those be able to differentiate between 99.99% and 99.90%? Because that's the difference in purity for these fakes.

It’s not like individuals are going to care. In fact the only people who would care are the government and the refineries who’s brand is being stolen.

Yes, there is trust when purchasing precious metals. The idea to to deviersify. A little gold, some silver, and perhaps some digital currency.

We cannot eliminate risk, but we can reduce and mitigate.

Don't gold bars get serial numbers already? That should be enough to allow for track & trace purposes, and if the bar is found at multiple places at once, one of them is a fake.

Who keeps the regsitry of serial numbers?

The refinery seems to keep a registry of what they have produced (in the case of the Swiss refinery in the article). As a a result, the forged bars ended up having a duplicate serial number which is how they found out they were getting high-quality gold in with forged refinery stamps.

Yes. This is how JPMorgan found the counterfeit bar in the article.

https://en.wikipedia.org/wiki/Physical_unclonable_function

This is the same question you can ask about any counterfeit good. I think the general problem space is very interesting.

You can embed a chip which itself is hard to copy, or which tries to protect an internal private key used to attest to the authenticity of the item. Then you have to be sure these chips are themselves secure from cloning, and possibly worry about them being recycled off discarded genuine items and reused.

If you want to make an attempt with some sort of passive shared secret or serial number (e.g. QR code), then you probably have to rely on that number being tied to where the item was being sold (Lot 174351 was sold on Date X and Retailer Y) and being able to lookup that number to track the history of the item. This is probably good enough for verifying "First Sale".

Once the item is being resold, it becomes harder to verify that a static value has not been cloned onto a counterfeit item, unless you are registering the item to each successive owner, and explicitly handing off the registration (like how it is done with cars and VINs).

I do not know of a solution that uses a static value that isn't protected by some sort of HSM, that also maintains the privacy of the person holding the item - e.g. does not require some sort of registry.

Dooglius mentions PUFs - this is type of HSM which uses micro-imperfections in a physical structure to essentially implement a hashing function, which can be used to implement a challenge-response protocol. The challenge with PUFs is that by relying on an uncontrollable aspect of the manufacturing process, these same performance variations may not be stable across environmental changes (temperature, humidity, voltage, time, etc.). The more error correction you add to ensure the function is repeatable, the less truly unclonable the function may become.

If you had a modern gold bar with a secure ID chip, wouldn't you transfer the ID chip to a gold-plated-tungsten replica [1] and recast the old bar into a pre-ID-chip-era bar?

[1] https://www.alibaba.com/showroom/tungsten-gold-bar.html

Gold bars aren't pure gold. There are small amount of impurities [1]. I wonder if you could make gold bars where you vary the ratios of those impurities along the length of the bar to encode a number?

I have no idea if there would be a way to read such a number non-destructively.

[1] https://link.springer.com/content/pdf/10.1007/BF03214762.pdf

I’m actually not sure how much money I have, but I do know how many pounds of money I have. In saying that, anything that requires electricity to track a bar of gold is not going to catch on. What if I want to remint it into smaller 50 gram bars? Reconstitute it into a larger XX gram denomination? Is someone really willing to go out and buy a widget to do that?

No. After all, a gold atom is indistinguishable from any other gold atom.

Not too surprised by this. I have always been curious though about folks who came across gold in one form (like a sunken treasure, or pillaging a museum in a war zone) and wanted to turn it into cash, what prevents them from just melting it down into bars and selling it that way. Saving themselves the step of actually going to a refinery which is going to ask uncomfortable questions seems like a logical step to me.

Nothing stops them, it's just that it will be harder to convert into cash than if the gold was stamped.

For example, if I take a couple of Canadian Maple Leaf coins to any local "We Buy Gold" shop, I'll get very close to spot price in cash with no questions asked. The fact that they clearly came from the Canadian mint tells the dealer that they can trust they are indeed made of 99.99 pure gold.

If I come to the same dealer with a bar of gold I melted and poured myself, they may need to send it out to a lab for analysis to determine the purity, actual weight, if I'm ripping them off, etc.

The damage is more about criminals getting money laundered and hurting crime fighters and also sanctions

The coolest solution I've read about to note the producer is to emboss a hologram in the metal, though perhaps with enough care this too could be faked or copied:

https://en.m.wikipedia.org/wiki/Kinebar

There are other methods like this, Sunshine Minting for example has a 'decoding lens' for their products that contain the 'MintMark SI security feature'.

http://www.sunshinemint.com/TechnologyEnhancements.aspx

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Geiger Edelmetalle , on their Geiger branded stuff, uses a a UV safety coating but it will rub off with enough handling (which is why many of us do not remove the shrink wrap they put on their bars), they also individually assign serial numbers that can be tracked online for gold and silver bars starting at 1 gram

https://www.geiger-edelmetalle.de/en/about-geiger/news/geige...

The coolest solution I heard was to look at a well defined spot of the gold bar and register the impurities/bubbles/structure that naturally happen while casting. This is very difficult to reproduce (because there is no legitimate need to do so) and is already present.

Edit: And of course put the info on block chain.

This entire thing is silly.

Gold is a commodity. A gold bar is simply a unit of trade in a specific sub market. There's not enough volume for gold bar trade to be liquid. So gold bar market is a market of mattresses before the ship in a tube mattresses showed up.

Dealers that trade gold pretend that Gold Bar X is More Valuable Than A Gold Bar Y which is why it is priced higher. The real reason is that dealer feels the dealer can extract more money from a customer and the dealer happens to have Gold Bar X.

Customers of the sucker variety think that by paying for Gold Bar Brand Y more than equivalent Gold Bar Brand X they are getting "more value".

The thing is that the spread between bid/ask of a single gold bar is much higher than the delta in price of a Gold Bar X and a Gold Bar Y.

This has been the case for at least last twenty years.

If the fake bars still don't meet the purity standard but are getting close (in the article: 99.90, 99.97 or just short of 99.99), maybe up the standard? Jump to 99.995 if technology allows.

For banknotes, regular rollout of new formats (shape and shade) helps break counterfeit printers. [0] Maybe push for a new, somewhat different format?

[0] https://www.ecb.europa.eu/press/pr/date/2014/html/pr141219.e... https://www.ecb.europa.eu/press/pr/date/2019/html/ecb.pr1905...

They do meet the purity standards, that’s the point.

A better idea would to put a public key on each gold bar so that anyone can verify the authenticity. The producers could then compile a list of all the current locations of the gold and if someone tries to report a new inconsistent location, flag it as a fake.

I didn't understand that from the article. I understand that while counterfeits are getting better, they are still not perfect imitations.

> “The level of counterfeit is becoming really good. Even for us it is hard to tell,” said a Swiss refinery executive who spoke on condition of anonymity. “They are, however, slightly less pure because the people doing the counterfeits don’t have the equipment we have.”

For point 2, that's not going to work (copy-paste that key on another bar + zero anonymity or privacy protection + no protection if fake bar is introduced when real bar is out in the wild (in my backpack for example)).

> A better idea would to put a public key on each gold bar so that anyone can verify the authenticity

Specifically:

- Each gold bar has a unique ID, on the bar

- A digital signature is made with the private key

- The digital signature is placed on the bar

- Everyone has to "know" which public key belongs to who

(If you put the public key on the bar, then the criminals will just generate their own keys or copy someone else's key.)

Pecunia non olet.

Gold has no smell.

If the bars are genuinely made of gold, and of the advertised weight and purity, they are not counterfeit. The quantity of metal is the only thing that matters.

If anything, the problem is the attempt to shoehorn provenance information into what is clearly a money commodity, and one that loses its individual identity every time it gets re-melted. Just let it go, man. You can't track all the money on the planet all the time.

If this is a problem, the only solution is to demonetize gold and replace it with a trackable, traceable substitute. And good luck with that. You'd be replacing trust in chemistry and physics with trust in the money-tracers.

> "The fakes are hard to detect, making them an ideal fund-runner for narcotics dealers or warlords."

Or human-traffickers. Or just about any nefarious agent. At some point, we need to look beyond the Hollywood cliches.

Indeed sounds here that the main use is avoiding capital controls in China and similar. I'm not sure that's even breaking the law once the things are outside China.

How do they know that these bars don't have 10% tungsten content deep inside? Have they drilled them?

Why is that an issue?

I am sure I will get downvoted to hell here because HN is full of Authoritarians, but money "laundering" should not even need to be done, I should not have to have a Special stamp to trade gold, or report money transfers to the government, etc

It is a prime example of government creating a problem (a black market) for things that should not be illegal in the first place (drugs and other items), then having new laws that infringe further on peoples freedom to "solve" the problem which itself creates even more problems

Would you agree that money laundering is an issue when politicians have to conceal bribery?

Political Bribery is a symptom of too much consolidation of power, and/or too much power in government in general

Systems of distributed power, with robust checks and balances are the solution to political corruption, not authoritarian money laundering laws

Im not sure that’s a hard rule. China strong power consolidation, India is more distributed and the central gov is relative to China weaker, but while both suffer forms of corruption, India is above and beyond what you’d experience in China, from talking to folks familiar with both places.

I am not really familiar with India's government but I suspect they suffer from the same problem that hard core "States Rights" people in the US Suffer from

When I say Distributed power, with Checks and balances, that does not simply mean small regional Fifedom's with unlimited power. I suspect India's weak central government has limited power over the local regional governments making them very corruptible.

"Distributed power" is not synonymous with "small regional power"

One of the things the US gets right is neither that state nor the federal government is "more powerful" than the other, each have their place, and both can in different circumstances overrule each other, this has the benifiet of ensuring States do not go crazy with power and corruption, and that the feds do not go crazy with power and corruption

Over the last 200 years however we have consolidated ALOT of power into the Federal government, this is making things very very bad if you enjoy and prefer an individualist society with personal liberty

Obviously if nothing is illegal than we don't need "authoritarian money laundering laws". But I'm sure we can agree on at least some things that should be illegal. Should hitmen be able to launder money?

And I need to point out that it would be extremely difficult to decentralize authority so much that bribery is completely impractical without it being illegal. In such a society where there is no legal friction associated with bribery, what's to stop rich people from bribing police officers?

> what’s to stop rich people from bribing police officers?

In white collar crime such bribery is extremely common.

Not sure why this got downvoted. The college admissions scandal is about something that has been going on for years with no consequences, and most insider traders get away with it at will, not to mention all sorts of tax evasion, payroll fraud, etc.

Notably, an employer committing payroll fraud was recently brought to justice in Michigan by the new AG. It made headlines because such crimes are virtually never subject to law enforcement attention.

The context of the discussion was whether or not bribery should be illegal, I think it was already generally accepted that bribery is a problem that exists. I didn't personally see the relevance of your initial comment.

> It made headlines because such crimes are virtually never subject to law enforcement attention.

This is the sort of claim that needs citation. I'm not trying to argue with you, but the only support for this statement is your authority on the subject, and since you speak anonymously your authority is very limited. This also applies to your initial comment.

I didn't downvote you, and I actually agree with you that corruption often goes unpunished, but since you asked I thought I might point it out. In my experience, my comments on the internet that lack support don't get a good reception.

Agreed. Those who write and enforce the laws will always know how to circumvent them. Given the endless list of examples, I'm not sure why the rest of continue to have so much (blind) faith in what boils down to (the failure of) self-policing.

Because:

Money from illegal activities (drug trade, human trafficking, etc.) is used to buy gold mined illegally which entails a few questionable practices and effects (difficult and hazardous conditions, enviro concerns, cartel involvement, etc.). The gold is then refined and made to look like legit mined gold and thus “launders” the dirty money.

Not downvoting you, but free untraceable and non-blockable money transactions enable some dangerous criminal business models in a large scale. Uber-like assassinations, heavy drug dealing, organ harvesting, cp, human trafficking, etc.

Pablo Escobar was making billions, but had to bury them in ground to rot, because he couldn't move them into assets efficiently.

> free untraceable and non-blockable money transactions enable some dangerous criminal business models

> Pablo Escobar was making billions, but had to bury them in ground to rot, because he couldn't move them into assets efficiently.

Doesn't that highlight the ultimate pointlessness of anti-laundering laws? Despite Esboar's inability to store his assets in a bank, his activities weren't actually stopped.

What benefit do the laws actively provide?

> What benefit do the laws actively provide?

Just like a government can distort a market through intervention, so can cartels distort a government through corruption. Unlike gang members, most operatives in a government or political campaign need tons of clean money for ad spending, transportation, and paying for venues, campaigners, etc. Most of the individuals and businesses involved will not take dirty money for liability reasons (at least in the US).

The purpose is to prevent some of the most violent organizations from getting a foothold in politics that makes their underlying activities even harder to stop.

No, not at all. Escobar is a really good case on why money laundering laws are good. Escobar had BILLIONS of dollars that he could not easily move around and this limited his ability to influence elections and politicians and straight outright control whole countries. Not having the ability to easily drop thousands of dollars into the pockets of thousands of politicians saved whole countries from be swallowed up by people like Escobar. Yes, he could it on a limited scale but if he had not been hindered by anti-money laundering, Escobar would have been much worse.

Yeah, only the CIA and other secretive government orgs are allowed to launder money! For the good of the nation.

In terms of total dollars, the biggest money launderer is the US government. Imagine if we could trace all those funds transfers to warlords, arms dealers, terrorist groups, etc.

> HN is full of Authoritarians

That's...definitely not how I'd stereotype HN posters in general.

He didn't stereotype HN posters.

He just said there's a lot of authoritarians on HN, which I believe to be factually correct: most libertarian-oriented comments on HN get downvoted into the ground.

It doesn't take even a majority to do that, just a large enough rabid mob.

> most libertarian-oriented comments on HN get downvoted into the ground

Speaking of rabid mobs, most anti-capitalism-oriented comments get voted into the ground too. It's almost as if HN has a large group of people who are trying to discourage political fights.

See, I would have said that the "rabid mob" on HN is biased towards free-market libertarianism. The Silicon Valley crowd loves it.

From experience, there are fare less libertarians in the "Silicon valley crowd" than many believe. Silicon Valley average tech. employees crowd is largely made of left-wingers, most of which are as far away from classical liberalism as one can be without being a card-carrying communist.

As a life long libertarian and many many years reading HN, HN is in no way a libertarian community,

If you believe HN is libertarian you would be in for an extreme shock if you encountered a real libertarian community

Nor is Silicon Valley anywhere CLOSE to libertarianism, Silicon Valley is extreme left Authoritarian

While HN does love markets (though nor really free markets) most of HN is Socially Authoritarian left

Endangered species. Blood diamonds. Child labor. Sex slaves. Chemical weapons. Just some of the "other items" off the top of my mind that people profit from and which are helped by money laundering.

Please don't downvote-bait or call names in arguments or take HN into ideological flamewar (edit: or on generic tangents). All three (edit: four) of those things are in the site guidelines, so if you wouldn't mind reviewing https://news.ycombinator.com/newsguidelines.html and following them from now on, we'd appreciate it.

We detached this subthread from https://news.ycombinator.com/item?id=20819642.

Outside of maybe "naming calling" by referring to the majority of the commenters as "Authoritarian" which seems to be a factually accurate statement not really name-calling, how is my comment a violation of the rules.

I enjoy commenting here, and I have no intention on taking HN into an ideological flamewar, it is my honest take on that status of Money Laundering laws, and I would love to have an honest and frank conversation on why Money Laundering laws are bad for society,

Why is that type of conversation prohibited on this site? And if it is why was the thread allowed at all where Pro-Money Laundering laws (an objective authoritarian position) is allowed to be freely discussed without censor, but my counter position is not.

Yes, "HN is full of Authoritarians" is name-calling, and the site guidelines ask you not to do that.

Generic ideological tangents are moderated on this site because they're off topic. They're off topic because they don't gratify intellectual curiosity (see https://news.ycombinator.com/newsguidelines.html). Why don't they do that? Because they're tedious and predictable, and usually end up being nasty.

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