Jake Miller
The Bank of Nova Scotia, also known as Scotiabank, was a major player in the precious metals industry. Scotiabank's involvement in the industry dates back to 1997 when it acquired Mocatta Bullion, a company with a 340-year history in the gold and silver trade. In 2009, Scotiabank launched the ScotiaMocatta eStore, a full-service online precious metals delivery channel, making it the first bank in Canada to offer such a service. However, as of early 2021, Scotiabank no longer offers any precious metal products or services. The decision to exit the metals business came after a series of scandals and lawsuits, including accusations of manipulating the gold and silver markets. Scotiabank continues to settle gold trades and provide liquidity in the London market, but it no longer sells gold or other precious metals directly to customers.
| Characteristics | Values |
|---|---|
| Does the Bank of Nova Scotia sell gold? | As of early 2021, Scotiabank no longer offers any precious metal products or services. |
| Reason | The bank was a target of lawsuits in Canada and the United States for allegedly manipulating the gold and silver markets. |
| Previous involvement with gold | Scotiabank became a big player in metals trading in 1997 when it bought Mocatta Bullion, a company founded in 1684. |
| Other banks that sell gold in Canada | BMO, CIBC, RBC, and TD Canada Trust |
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What You'll Learn
- Scotiabank no longer sells gold
- Scotiabank's precious metals operation was targeted by lawsuits
- Scotiabank was a participant in the London Gold Fixing
- Scotiabank was a lender to Elemetal, a company corrupted by Peruvian narco-traffickers
- Scotiabank's gold department offered gold loans to mining companies
Scotiabank no longer sells gold
Scotiabank, one of the five largest financial institutions in Canada, has a long history in the precious metals industry. In 1997, Scotiabank acquired Mocatta Bullion, a company that traded gold, silver, and diamonds since its founding in 1684. This acquisition marked the beginning of Scotiabank's prominence in the market, and it continued to grow and even chaired the London Gold Fixing in 2004.
However, in recent years, Scotiabank's metals business has faced several challenges. The bank was involved in lawsuits in Canada and the United States, accused of manipulating the gold and silver markets. In 2018, Scotiabank attempted to sell its metals business but failed to find a buyer. As a result, the bank sharply downsized its operations in this sector.
As of early 2021, Scotiabank no longer offers any precious metal products or services. This includes the sale of gold, which was once a significant part of its business. The decision to exit the metals business was likely influenced by the lawsuits, a desire to focus on other areas, and the difficulty in finding a buyer.
While Scotiabank no longer sells gold directly to customers, it remains one of the banks that settle gold trades and provide liquidity in the London market. It also participates in daily auctions that set a globally used gold benchmark price. However, its direct involvement in the buying and selling of gold has come to an end.
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Scotiabank's precious metals operation was targeted by lawsuits
Scotiabank, a Toronto-based global banking and financial services firm, was involved in a precious metals operation that was targeted by lawsuits and faced regulatory scrutiny for its trading practices. The bank's metals trading division, ScotiaMocatta, was a significant player in the industry, with a history dating back to 1684. However, in January 2019, Scotiabank announced it would shut down its metals business, marking the end of one of the most established names in precious metals trading.
The precious metals operation of Scotiabank was marred by controversies and legal issues. The bank faced criminal charges related to a price manipulation scheme involving thousands of instances of unlawful trading activity. Four traders were implicated in manipulating the prices of precious metals futures contracts, including gold, silver, platinum, and palladium. This illegal trading strategy, known as "spoofing," involved placing orders with the intent to cancel them before execution, thereby sending artificial price signals to the market and deceiving other market participants.
The United States Department of Justice (DOJ) and the Commodity Futures Trading Commission (CFTC) took action against Scotiabank, resulting in significant financial penalties. Scotiabank agreed to pay over $60.4 million in a criminal monetary penalty, criminal disgorgement, and victim compensation under a deferred prosecution agreement (DPA). Additionally, the bank faced a separate settlement of US$127.5 million to resolve criminal and civil charges related to price manipulation and misleading regulators. The CFTC also fined Scotiabank $800,000 in 2018 for its failure to act on suspicious activity by one of the traders, Corey Flaum.
The scandal led to personnel changes within Scotiabank. Two managing bankers of ScotiaMocatta parted ways with the bank in May 2018, and several other senior staff members and traders left the company. The bank also underwent significant improvements to its compliance and ethics programs, nearly doubling its annual compliance budget and adding over 200 new full-time compliance positions. However, an independent compliance monitor was deemed necessary by the DOJ to ensure the effectiveness of these remedial measures in preventing future misconduct.
Scotiabank's decision to close its metals business drew attention to the impact of the lawsuits and regulatory actions. The bank's downsizing of the metals division began in 2018, and by April 2020, the division had only 15 team members remaining, a significant decrease from 140 members five years prior. The bank's announcement to shut down its metals business entirely by the beginning of 2021 signaled an end to its involvement in the industry.
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Scotiabank was a participant in the London Gold Fixing
Scotiabank, one of Canada's five largest financial institutions, was a participant in the London Gold Fixing through its metals trading division, ScotiaMocatta. ScotiaMocatta was a precious metal and base metal trading company that operated as a part of Scotiabank from 1997 until January 2019. With a history dating back to the 17th century, ScotiaMocatta was one of the ten market-making members of the London Bullion Market Association (LBMA) and played a significant role in the London Gold Fixing.
The London Gold Fixing is a process where representatives from prominent gold-trading institutions gather twice daily, at 10:30 a.m. and 3:00 p.m. London time, to determine the price of gold. During these fixing sessions, representatives share information about their clients' buying and selling interests, including orders to execute trades at specific prices. The process involves a series of bids and offers until a consensus is reached on a price that balances supply and demand, establishing the "fix" for that moment.
ScotiaMocatta, with its extensive experience and global presence, actively contributed to setting the benchmark gold price. They provided valuable market insights, including client orders and trading activity, to ensure a fair and transparent pricing mechanism. In 2004, Scotiabank became the first non-British bank to chair the London Gold Fixing, highlighting its prominence in the precious metals market.
However, in recent years, Scotiabank's precious metals operations have faced legal and reputational challenges. The bank was implicated in a gold price-fixing scandal and lawsuits, which led to a strategic review and an unsuccessful attempt to sell the business. By June 2018, Scotiabank had reduced its external loan commitments to ScotiaMocatta and terminated relationships with standalone clients. In January 2019, Scotiabank stopped supplying gold to the Italian and Indian jewelry industries, and by early 2021, it no longer offered any precious metal products or services.
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Scotiabank was a lender to Elemetal, a company corrupted by Peruvian narco-traffickers
Scotiabank, one of Canada's five largest financial institutions, has been involved in the precious metals trade for many years. The bank's involvement in this sector was primarily through its metals trading division, ScotiaMocatta, which was acquired by Scotiabank in 1997. ScotiaMocatta was a precious metal and base metal trading company with a long history, dating back to 1684.
ScotiaMocatta was a significant player in the global bullion market, particularly as one of the ten market-making members of the London Bullion Market Association. However, in January 2019, Scotiabank dissolved ScotiaMocatta, and by early 2021, the bank had stopped offering any precious metal products or services. This decision was influenced by various factors, including a gold price-fixing scandal and lawsuits in 2016, as well as the departure of several traders to a rival bank.
Scotiabank's involvement with Elemetal, a company corrupted by Peruvian narco-traffickers, occurred during the time when ScotiaMocatta was still operational. On October 18, 2017, The Financial Times of London reported that ScotiaMocatta was an instrumental lender to Elemetal or its subsidiaries. One of Elemetal's gold refinery subsidiaries was corrupted by Peruvian drug traffickers, resulting in the laundering of approximately US$3.6 billion. As a result of this scandal, the managing bankers of ScotiaMocatta attempted to sell the business through JPMorgan, but they were unable to find a buyer.
The fallout from the Elemetal scandal had significant consequences for ScotiaMocatta and Scotiabank. In May 2018, two of the managing bankers of ScotiaMocatta parted ways with Scotiabank. Additionally, the parent company reduced the funds available for ScotiaMocatta's external loans, which were valued at US$8 billion at the time. The managing bankers also terminated relationships with standalone clients, and several other staff members left the company.
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Scotiabank's gold department offered gold loans to mining companies
Scotiabank's gold department, also known as ScotiaMocatta, has a long history in the precious metals field. The bank first began offering gold loans to mining companies in Canada and around the world in 1893, during a period of financial panic. In the aftermath of World War II, Scotiabank introduced a unique gold certificate, which served as a transferable receipt for gold stored in the bank's vaults. This initiative, along with becoming the first Canadian bank to provide daily gold quotations, solidified Scotiabank's position as Canada's largest gold trader in both certificates and bullion.
Scotiabank's expertise in the precious metals market is further demonstrated by its acquisition of Mocatta Bullion and Base Metals from the Standard Chartered Bank in 1997. This acquisition added to Scotiabank's global reach and established it as a prominent player in the industry. ScotiaMocatta, as the metals trading division of Scotiabank, played a crucial role in the bank's success.
In 2009, Scotiabank launched the ScotiaMocatta eStore, a full-service online platform for Canadians to browse, purchase, and arrange deliveries of gold and silver products from the comfort of their homes. This innovative service reinforced ScotiaMocatta's global leadership in the industry and demonstrated its commitment to meeting the evolving needs of its customers.
However, in 2019, Scotiabank underwent a reorganization that led to the dissolution of ScotiaMocatta. As a result, Scotiabank stopped supplying gold to the Italian and Indian jewelry industries and ceased offering precious metal products and services as of early 2021. The impetus for this change was the departure of several New York-based traders to a rival bank. Despite these developments, Scotiabank continues to hold memberships in prominent associations related to the precious metals industry.
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Frequently asked questions
No, as of early 2021, Scotiabank no longer offers any precious metal products or services.
Yes, Scotiabank became a big player in metals trading in 1997 when it bought Mocatta Bullion, a company founded in 1684. Scotiabank's prominence in the market segment continued to rise, and in 2004 it became the first non-British bank to chair the London Gold Fixing.
Scotiabank's precious metals operation became a target of lawsuits in Canada and the United States. The bank was accused of manipulating the gold and silver markets. The gold price-fixing scandal and lawsuits of 2016 were deemed responsible for Scotiabank's review of its metals business.
Scotiabank has a long history with gold and other precious metals. The bank was, in 1893, the first bank in Chicago to relieve the stringency caused by the financial panic of that year. Scotiabank also offered gold loans to mining companies in Canada and around the world. In 2009, Scotiabank launched the ScotiaMocatta eStore in Canada, a full-service online precious metals delivery channel.
