Reserve Bank of Australia & The Missing Bar Numbers

Early in 2014 I lodged a Freedom of Information (FOI) Request with the Reserve Bank of Australia (RBA) to release the list of Gold bars that make up Australia's official reserves. After initial rejection, an appeal with The Office of the Australian Information Commissioner resulted in the RBA providing the list (melter/assayer, gross weight, assay and fine weight), but without revealing the serial numbers.

With 99.9% of Australia's Gold reserves being stored with the Bank of England (BoE) it pleased me to see that in 2014 the RBA had performed an audit on Australia's Gold reserves. I wrote another FOI Request to gather more information on the audit as the single line of text in the Annual Report was lacking in detail, "During the year in review, the Bank audited its gold holdings, including that portion held in safe custody at the Bank of England."

The result of the second FOI Request was a small cache of emails including communications with the BoE prior to the audit.

Something I had read, but overlooked the importance of, when the Gold bar list was originally provided was the difference between the BoE's bar number and the refiner bar number (I'd initially assumed that they were one and the same).

"The only information we will withhold from release are the individual bar numbers, as this information remains confidential (in the opinion of both the Bank of England and the Reserve Bank of Australia). The Bank of England (as our custodian) use their own numbering system to uniquely identify each bar and have reaffirmed to us that these numbers should not be disclosed to third parties as the information is confidential." RBA

Though an anonymous comment on my post had picked up on the difference.

"What a joke from BoE and RBA re serial numbers. Each bar has it own number from the refiner, that is what should have been disclosed and could have without any confidentiality breach. The BoE special internal numbers did not have to be disclosed and are useless anyway in terms of ensuring the validity of the bar list.

Is the RBA saying that it and the BoE do not know the refiner bar numbers or have never recorded it? I find that hard to believe and if true is damning on their vault management."

Warren James at Screwtape Files followed up with an article on the emails from the audit. Amongst the humour (audio conversation between the RBA & BoE is a must listen) he highlights that the email communication mentions the BoE number.

"Each bar is marked with a unique BoE number" Maybe that was what BoE & RBA got confused with and why they didn't supply the serial numbers. If that were the case then the mixup would be gross incompetence in the whole matter. Definitely the BoE should not disclose their own internal tracking number since it would reveal detail about how the bank functions.

To clarify there was a difference between the two numbers (and if so to question why the refiner number couldn't be released) I wrote to the RBA again. If the BoE catalogues and tracks their Gold bars using an internal number, then what legitimate reason does the RBA have for withholding the refiner bar number following the original FOI Request? I received a response to my questions last week (questions in bold, RBA response in italics):

Is the unique Bank of England bar number different to the refiner bar number? It is our understanding that the Bank of England bar numbers are different to any markings that are placed on bars by the bar manufacturers. All bar lists relating to the RBA’s gold holdings show only one serial number per bar, the BoE serial number.

If so, why was the refiner bar number withheld from publication (oversight, on purpose or not present on the bar list)? N/A, for the reason detailed in answer to question 1.

If so and the refiner bar number is not used internally by the BoE (as a unique identifier, which their internal bar number acts as), can these be released as an extension of RBAFOI-131418 or would I need to submit a new request?  This question is based on the assumption that there are two unique numbers on each bar, being the Bank of England bar number and a ‘refiner bar number’. As noted above, all documentation provided to the RBA has only one unique serial number per bar, which we understand to be the Bank of England’s own numbering system.

When I discussed the above response with Warren James via email he suggested that it could be seen as the BoE intentionally withholding key information. I disagreed at the time, pointing out that there are benefits to having a unique BoE number such as no chance of duplicating serial numbers (something Warren highlighted occurs with some refiners restarting a number sequence) and providing multiple bar numbers may result in confusion or errors. At my request Warren provided some interesting stats from his bullion bars database indicating that for 248,063 Gold bars, there was only 206,403 unique serial numbers, so it can be estimated that roughly one in five bars could share a serial number with another. In my eyes this highlights the need for a BoE internal number that can be unique to each bar they manage, but Warren wrote further:

"The serial number is specifically named by LBMA as one of the marks required to be London Good Delivery, so I had always counted it as part of the 'standard' - at least it has been since year 2000 (ref. p44 of 'The London Good Delivery List, building a global brand 1750-2010 by Timothy Green').. it's just one of those key bits of metadata which cannot not be casually discounted. 

From a data design perspective ... 

•Even for their own internal systems they would still be capturing every marking on the bar, and for most London Good Delivery bars it will be there. 

•Bar Serial number is definitely stored in their database (or spreadsheet?), because it's a part of the LGD System they would need it on their inter-transfers. 

•In terms of data extraction, it's a trivial matter to include an extra column of data. 

•They weren't just culling redundant information > otherwise it is possible to remove GrossWeight or FineWeight, since Assay can be used to determine one or the other.

The absence of the serial number is deliberate, the only question is why? There shouldn't be an issue if it is actually allocated.

I think the BoE just decided they didn't want the detail out in the wild, because it allows the bars to be traced with high accuracy."

In a comment on Screwtape Files he concludes:

"So the industry standard for LBMA good delivery is Serial+Refiner+Weight+Assay, and the BoE leave out the serial number. Not only that, but the RBA don't question the omission. Without that key bit of differentiating information it isn't possible to track or trace the bars in any meaningful way. This appears to be the intent of BoE.

Definitely they store the information > Serial Number is always present in any other industry 'weight list'. Makes you wonder about the quality of the audit which was conducted - open for abuse since the key information is controlled by Bank Of England."

I think Warren raises some solid points and after giving it further thought I do agree that the refiner bar number should be provided to the RBA (and any other central bank or party that the BoE is custodian for) and don't see why it shouldn't also be available to the public given that it differs to the unique internal number that BoE uses to identify and manage each of the bars they store.

It does cast doubt on the veracity of the RBA's audit of Australia's Gold. Can you think of any other audit scenario where an internal reference number is accepted (by an external auditor) in place of the manufacturers own (which doesn't get checked at all)? One might hope that if they take the opportunity to audit Australia's Gold again (something they were invited to do), that they do so more thoroughly. I think the likelihood of them finding a discrepancy (such as a missing bar) is slim, but a half-baked audit negates the rationale for performing one in the first place.

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Reserve Bank of Australia Audits Our Gold Reserves

Gold Bars Stored at the Bank of England

Two years ago the news was publicly broken on this site that 99.9% of Australia's Gold reserves are stored by the Bank of England in the United Kingdom. Attempts by another blogger, interested in the whereabouts of Australia's Gold, had been rejected by the RBA only several months earlier, "The Bank does not publish the location of its gold reserves."

Decisions like this don't happen in a black hole. Something changed the RBA's mind, between August 2012 and December 2012, on making the location of Australia's Gold reserves public.

From my observation, the RBA tends to follow the lead of other Central Banks, so the decision to release information on the location of Australia's Gold may have been a result of Germany's Central Bank (Deutsche Bundesbank) deciding to do so in October 2012 (interview containing the information originally released is no longer published on the site, but available via Web Archive). Only a month later, in November 2012, the Austrian Central Bank released the location of their Gold reserves, revealing that 80% resided in the UK, 3% in Switzerland and 17% in Austria. Cue the RBA feeling comfortable to release the location details of Australia's Gold around 1 month later.

A recent experience of mine with the RBA further highlighted their desire to follow in the footsteps of other Central Banks rather than to think for themselves. An FOI request I made for the Gold bar list was initially rejected, but after lodging an appeal with the OAIC, highlighting that the United States published a list of their Gold bars details (sans the serial number), the RBA decided to follow suit (Reserve Bank of Australia Releases Gold Bar Details).

Earlier this year I spotted a line in the RBA's annual report indicating an audit had been performed (not something I have seen mentioned in previous years):

A question posed by email to the RBA earlier in the year suggested that RBA officials had performed the audit themselves.

I decided to lodge another FOI request.

"I request that a copy of the following documents be provided to me: All documents pertaining to the audit of the RBA's gold holdings performed during the 2013/14 financial year, as was specified in the 'Operations in Financial Markets' section of the Reserve Bank of Australia Annual Report 2014 ("During the year in review, the Bank audited its gold holdings")."

Two months later (decision on the documents was delayed due to consultation with the Bank of England) I received the following list of documents that would be provided (on payment of fees, which were reduced from an original quote due to the small number of documents that could be released):

And today the documents arrived. Here's what we know...

In February 2013, the Assistant Governor (Financial Markets) requested Audit Department include in its audit program a review of the Bank’s gold holdings at the Bank of England (BoE). The Chief Representative in EU approached the BoE to facilitate this review and in late May 2013 initial planning discussions were held with BoE staff with tentative agreement that the review would take place in September 2013.

The audit included:

• An on-site physical verification commencing 23 September 2013, which will take 4-5 days to complete, assuming two RBA auditors are involved given the proposed scope.
• Inspecting a sample of RBA Gold bars (list to be provided in advance), including checking the details of these bars against the Bank’s inventory list and weighing of the bars by BoE staff using their equipment.
• Randomly selecting additional Gold bars from the inventory list and observing these bars being located and retrieved from their vault (plus verifying the details and weighing them).
• Obtain a high level understanding of the BoE gold safe custody service.
• Continuing discussions for a comprehensive safe custody agreement between the RBA and BoE.

As the above document list shows, those relating to final audit results were not provided. I would assume the audit was successful, but no doubt that would be a highly contested opinion in the Gold blogosphere. The following reason was provided for denying access to the report:

Documents 10, 11 and 12 are drafts of the report prepared by the RBA’s Audit Department detailing the findings of the audit and document 13 is the final of that report.

Denial of access to these four documents in terms of s33(a)(iii) is appropriate because release of the information (which relates to procedures for the conduct of the audit with the BoE and the subsequent results) ‘would, or could reasonably be expected to, cause damage to’ the relationship between the RBA and the BoE.  This belief is soundly held by us on the basis that we are aware that the BoE provides safe custody services not only to the RBA, but also to other central banks around the world.  Disclosure of the information in these documents could damage the relationship between the BoE and its other central bank clients, and by extension (as the source of the information), the relationship between the BoE and RBA.  As foreshadowed to you in earlier correspondence, we consulted with the BoE in relation to these documents and they affirmed the views we held regarding the damage that would be done to the relationship between the BoE and RBA if the redacted information were disclosed.

Denial of access to these four documents is also appropriate in terms of s47E(a) (‘disclosure would, or could be reasonably expected to, prejudice the effectiveness of procedures or methods for the conduct of tests, examinations or audits’ by the Bank) and (b) (‘disclosure would, or could be reasonably expected to, prejudice the attainment of the objects of particular tests, examinations or audits conducted, or to be conducted’, by the Bank).  The documents in question concern the ‘procedures and methods’ within both the RBA and the BoE regarding the conduct of the physical check of a sample of gold bars (for the purpose of conducting the audit).  Disclosure of this information would, of course, reveal those procedures and methods, and by logical extension render them less effective. Also, the ability of the Bank to attain the objects of the audit (which is to reveal whether the Bank’s arrangements are robust and secure) would be prejudiced. These considerations apply to both the audit currently the subject of your FOI request and also any other audits undertaken by the RBA. A key requirement for undertaking a successful audit (of any aspect of the RBA’s work) is that there is as little opportunity as possible for individuals to take steps to predict what an auditor may choose to focus on, and/or how they will conduct the audit. It is self-evident that if such procedures and methods are revealed, then the opportunity to circumvent them is greatly increased.  As s47E is a public interest conditional exemption, I must take into account whether the giving of access is in the general public interest (in terms of s11A(5)).  When deciding whether access is in the public interest, I must take into account the following from s11B(3) and have noted my views in each case:

Section 11B(3) factors favouring access to the document in the public interest include whether access to the document would do any of the following:

(a) promote the objects of this Act (including all the matters set out in sections 3 and 3A); release would be contrary to some sections, particularly sections 2(a) and 3(3)

(b) inform debate on a matter of public importance; the Bank’s gold holdings, while important and of interest to some, are not a matter of public importance generating any level of debate

(c) promote effective oversight of public expenditure; release of the information would not do this

(d) allow a person to access his or her own personal information; the request is not seeking personal information.

Taking into account these factors, and the implications release of the information would have on the Bank’s audit processes, I have decided that it is clearly not in the public interest to disclose the information in these four documents (10, 11, 12 and 13).  Disclosure of these documents would manifestly harm the public interest by way of reducing the ability of the RBA to successfully conduct audits and tests of its operations going forward.

The released documents (mostly a chain of various emails) also suggested the RBA have been invited back for another review in 12 months.

One interesting point from the documents, the Bank of England was emailing clients in June 2013 (those for whom they're providing custodial services) inviting them to audit samples of their Gold:

Click Above Text To Enlarge

However discussions on the RBA audit were already well advanced at that time.

Given that the RBA has followed the lead of other countries to release reserve location details, perform audits and release (some) bar list details, it will be interesting to see whether they go further and follow the lead of the many countries now deciding to repatriate some or all of their Gold reserves...

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