Bullion Vault

Report on BullionVault’s DAILY AUDIT

24 March 2014

Contents

Report by the Directors

The control objective of the Daily Audit

The control procedure of the Daily Audit

Reporting accountants’ report on the ‘Daily Audit’ procedure

Description of work performed by Reporting Accountants

Reporting Accountants’ Engagement Letter

Independent Inspection and Audit Reports (PDF Downloads) (You will need Adobe Reader to open the Documents)


Report by the Directors

Definitions

Brink’s means Brink’s Global Services Ltd.

BullionVault means the service offered by Galmarley Ltd through website domains under BullionVault.com, and potentially other websites, whereby BullionVault Clients are able to buy, own, store and sell gold or silver bullion.

BullionVault Clients means clients of Galmarley Ltd who have an account at BullionVault held open under the prevailing Terms and Conditions of the BullionVault service.

Galmarley Ltd means company 04943684 registered in England and Wales.

Lloyds means Lloyds Bank plc.

Owners means both Galmarley itself and all BullionVault Clients who own gold or silver through the BullionVault service.

ViaMat means ViaMat International Ltd.

Responsibilities of Directors

As the Directors of Galmarley Ltd we are responsible for the identification of control objectives relating to customer property and related transactions in the provision of custody services and the design, implementation and maintenance of control procedures to provide reasonable assurance on an ongoing basis that the control objectives are achieved.

We set out in this report a description of the control procedure known as the DAILY AUDIT on the BullionVault website – which operated during the period 1-November-2012 to 31-October-2013.

We confirm that

  • the report specifies the control objective of the DAILY AUDIT
  • the report describes fairly the control procedures of the DAILY AUDIT
  • the control procedures described were operating with sufficient effectiveness to provide reasonable assurance that the related control objective of the DAILY AUDIT was achieved during the specified period.

Paul Tustain

For and on behalf of the Board of Directors

24 March 2014.

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The Daily Audit

The control objective of the Daily Audit

The control objective of the DAILY AUDIT is to verify the aggregate of client-by-client property records within BullionVault to third party documents.

The third party documents are provided by ViaMat and Brink’s, who hold BullionVault Clients’ gold and silver, and Lloyds, who hold BullionVault Clients’ money.

The control procedure of the Daily Audit

ViaMat and Brink’s provide bar lists which detail the gold and silver bullion held on behalf of BullionVault. These are re-issued the day after any change in the amount of gold or silver stored.

Similarly Lloyds provides daily end-of-day bank statements with regard to BullionVault Client money.

BullionVault maintains all the client-by-client records of gold, silver and money ownership. These are modified by trading activity. At all times the BullionVault accounting records should be in a position where the total amount of Owners’ gold equates exactly to the sum of gold on the ViaMat and Brink’s bar lists, the total amount of Owners’ silver equates exactly to the sum of silver on the ViaMat and Brink’s bar lists, and the total amount of Owners’ money equates exactly to the sum of money on the bank statements for the Client accounts.

The DAILY AUDIT procedure verifies this and posts the result on-line for public inspection. However it disguises the identity of individual BullionVault Clients by listing their holdings of gold, silver and money against an alias, which is known only to BullionVault and the client.

The DAILY AUDIT produces three important elements of verification:-

  • It shows that the total of the BullionVault client records match exactly to the balance evidenced by the statement or bar list
  • It shows that the client holdings contain no negative holdings.
  • It shows that each client’s personal holdings are included in the BullionVault records and form part of the totals.

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Reporting accountants’ report on the ‘Daily Audit’ procedure

To the directors of Galmarley Limited

Use of report

This report is made solely for use of the Directors of Galmarley Ltd, and solely for the purpose of reporting on the procedure known as the ‘Daily Audit’ as described in your report on page 1, in accordance with the terms of our engagement letter dated 21 January 2014 and attached at page 5.

Our work has been undertaken so that we might report to the Directors those matters that we have agreed to state to them in this report and for no other purpose. Our report must not be recited or referred to in whole or in part in any other document nor made available, copied or recited to any other party, in any circumstances, without our express prior written permission.

We permit the disclosure of this report, in full only, by the Directors at their discretion to clients of Galmarley Ltd using the BullionVault service and to the auditors of such clients, to enable clients and their auditors to verify that a report by Reporting Accountants has been commissioned by the Directors of Galmarley Ltd and issued in connection with the ‘Daily Audit’ procedure, and without assuming or accepting any responsibility or liability to clients or their auditors on our part.

To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Directors and Galmarley Ltd for our work, for this report or for the conclusions we have formed.

Subject matter

This report covers solely:

  • the operation of the ‘Daily Audit’ procedure of Galmarley Ltd as described in your report of 24 March 2014.
  • The Independent Inspection and Audit Reports issued by Alex Stewart (International) Corporation on 5 December 2013, 8 December 2013, 9 December 2013 and 18 December 2013.

Respective responsibilities

The Directors’ responsibilities are set out on page 1 of your report. Our responsibility is to form an independent conclusion, based on the work carried out in relation to the operation of the ‘Daily Audit’ procedure of the company as described in your report for the period from 1 November 2012 to 31 October 2013 and report this to you as Directors of Galmarley Ltd. Our responsibility is to report on whether the ‘Daily Audit’ procedure operated as described in your report and does not include any responsibility to evaluate the design and effectiveness of the procedure.

Criteria and scope

Our work was based on obtaining an understanding of the ‘Daily Audit’ procedure as described on page 2 of the report by the Directors, and included specific tests of the ‘Daily Audit’ procedure, to obtain evidence about the operation of this procedure. The nature, timing and extent of the tests we applied are detailed on page 4.

We also obtained confirmation in respect of the Independent Inspection and Audit Reports issued by Alex Stewart (International) on 5 December 2013, 8 December 2013, 9 December 2013 and 18 December 2013 as detailed on the attached PDFs.

Our tests are related to Galmarley Ltd as a whole rather than planned to meet the needs of any particular client.

Inherent limitations

Control procedures designed to address specified control objectives are subject to inherent limitations and, accordingly, errors or irregularities may occur and not be detected. Such control procedures cannot guarantee protection against (among other things) fraudulent collusion especially on the part of those holding positions of authority or trust. Furthermore, our conclusion is based on historical information and the projection of any information or conclusions in the attached report to any future periods would be inappropriate.

Conclusion

In our opinion:

  • In all material respects, the accompanying report by the Directors describes fairly the ‘Daily Audit’ procedure which was in place as at 31 October 2013.
  • In all material respects, the ‘Daily Audit’ procedure tested, as set out in the attachment to this report, was operating as described during the period 1 November 2012 to 31 October 2013.
  • The attached reports by Alex Stewart (International) Corporation are as originally issued by them.

Albert Goodman LLP

Chartered Accountants

Mary Street House

Mary Street

Taunton

Somerset

TA1 3NW

24 March 2014.

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Description of work performed by Reporting Accountants

In the following report, we have used the same definitions as set out on page 1 of the report by the Directors, when explaining the tests conducted and the outcomes reached.

We have obtained confirmation from ViaMat that for the period 1 November 2012 to 31 October 2013, vaulting services were being supplied to Galmarley Ltd as detailed in the contract between ViaMat and Galmarley Ltd and that no notice had been given to Galmarley Ltd to terminate the contract as at 23 December 2013.

We have obtained confirmation from Brink’s that for the period 1 November 2012 to 31 October 2013, vaulting services were being supplied to Galmarley Ltd as detailed in the contract between Brink’s and Galmarley Ltd and that no notice had been given to Galmarley Ltd to terminate the contract as at 18 December 2013.

We have obtained confirmation from ViaMat on a sample basis, that the bar lists supplied to us by the company as used in completion of the Daily Audit procedure are in accordance with their records for the period 1 November 2012 to 31 October 2013.

We have obtained confirmation from Brink’s on a sample basis, that the bar lists supplied to us by the company as used in completion of the Daily Audit procedure are in accordance with their records for the period 1 November 2012 to 31 October 2013.

We have obtained confirmation from Lloyds that the client account bank statements for the three currencies operated by the company supplied to us by the company as used in completion of the Daily Audit procedure are in accordance with their records for three dates selected at random by us from the period 1 November 2012 to 31 October 2013.

For all published dates during the period 1 November 2012 to 31 October 2013 we have obtained a copy of the Daily Audit directly from the website of the company and we have:

  • For a sample of these dates, for each vault location agreed the amount listed as ‘Gold vaults’ and ‘Silver vaults’ to the bar lists retained by the company and obtained confirmation of these balances for a sample of dates from ViaMat and Brink’s (see points 4 and 5).
  • For a sample of these dates, for each currency agreed that the amounts listed as ‘Lloyds current’, ‘Lloyds treasury’ and ‘Unpresented’ in total are consistent with bank statements from Lloyds, allowing for any valid reconciling items.
  • For a sample of letters and numbers, for each vault location and currency, agreed the total amounts shown on the Daily Audit for those letters and numbers to the accounting records of the company for that day, obtaining explanations for any reconciling items. We have undertaken steps as we considered necessary in order to conclude that any reconciling items were valid reconciling items.
  • For a sample of letters and numbers, confirmed that the total of the Owners balances listed, for each currency and vault location, agrees to the total listed on the summary page of the Daily Audit.
  • Confirmed that the total shown at the bottom of the summary page of the Daily Audit is a true sum of the balances listed for that date.
  • Confirmed that there are no clients showing overdrawn or negative holdings of either currency or bullion.

For a sample of 30 aliases extracted from the listing of aliases we have confirmed that identification documentation was held.

We have obtained written confirmation from Alex Stewart (International) Corporation that the attached Independent Inspection and Audit Reports 5 December 2013, 8 December 2013, 9 December 2013 and 18 December 2013 are as issued by them.

We obtained confirmation from Marsh Ltd on 12 March 2014 that the Insurance policy for valuables stored with ViaMat by BullionVault was in place at that date, and would continue to be so until at least 31 December 2014.

We obtained confirmation from Brink’s on 18 December 2013 that the Insurance policy for valuable stored by Brink’s by BullionVault (policy operated by Willis Limited and Willis Canada Inc.) was in place at that date, and would continue to be so until at least 31 December 2014.

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Reporting Accountants Engagement Letter

21 January 2014

The Directors

Galmarley Limited

12th Floor

Landmark House

Blacks Road

LONDON

W6 9DP

 

Dear Sirs,

Following our discussions when you invited us to report on your Report on the BullionVault Daily Audit procedure (“Daily Audit”) which covers this specific procedure of Galmarley Limited for the period from 1 November 2012 to 31 October 2013 we are writing to set out our proposed responsibilities, our understanding of the work to be performed and the terms and conditions upon which we offer to perform such work.

You have asked us to attach to our report the Independent Inspection and Audit Report to be issued by Alex Stewart (International) Corporation following their visits undertaken during 2013 and to obtain confirmation from Alex Stewart (International) Corporation that the Independent Inspection and Audit Reports attached to our report are as issued by them.

You have also asked us to obtain confirmation from Marsh Ltd that the Evidence of Insurance (ref QR040213) is as issued by Marsh Ltd, and to obtain confirmation that Certificates of Insurance (refs 11293W14//CAN et al/, 11113W14/AP/SIN et al, 11113W14/EU/UNI et al, 11113W14/NA/INT et al and 11113W14/EU/SWIT et al) are as issued by Brink’s Global Services Ltd.

Responsibilities of the Directors

As the Directors of Galmarley Limited you are and shall be responsible for the design, implementation and operation of control procedures that provide adequate level of control over customers’ assets and related transactions.

In relation to this specific engagement the Directors’ responsibilities are and shall include:

  • acceptance of responsibility for the operation of the Daily Audit;
  • evaluation of the operation and effectiveness of the Daily Audit procedure using suitable criteria;
  • supporting the evaluation with sufficient evidence, including documentation; and
  • providing a written report (“Directors’ Report”) on the operation and effectiveness of the Daily Audit for the period from 1 November 2012 to 31 October 2013.

Responsibility of Reporting Accountants

It is our responsibility to form an independent conclusion, based on work carried out, in relation to the operation of the Daily Audit procedure of the company for the period from 1 November 2012 to 31 October 2013 as described in the Directors’ report and report this to the Directors. Our responsibility is limited to reporting on whether the procedure operates as described in the ‘Report on BullionVault’s Daily Audit’ issued by the Directors and does not include any evaluation of the design and effectiveness of the procedure.

Scope of the Reporting Accountants work

Our work will include enquiries of management, together with certain specific tests of documentation and requesting confirmation of specific matters from Via Mat International Ltd and Brink’s Global Services Limited in relation to the operation of the Daily Audit, which will be set out in an appendix to our report.

Our work will not include any evaluation of the internal control objectives relating to the Daily Audit procedure or any evaluation of the effectiveness of the Daily Audit procedure at meeting the internal control objectives.

Any work already performed in connection with this engagement before the date of this letter will also be governed by the terms and conditions of this letter.

We may seek written representations from the directors in relation to matters on which independent corroboration is not available. We shall seek confirmation from the Directors that any significant matters of which we should be aware have been brought to our attention.

Inherent limitations

The Directors acknowledge that control procedures designed to address specified control objectives are subject to inherent limitations and, accordingly, errors or irregularities may occur and not be detected. Such procedures cannot guarantee protection against fraudulent collusion especially on the part of those holding positions of authority or trust. Furthermore, the opinion set out in our report will be based on historical information and the projection of any information or conclusions in our report to any future periods will be inappropriate.

Use of our report

Our report will, subject to the permitted disclosures set out in this letter, be made solely for use of the Directors of the company, and solely for the purpose of reporting on the Daily Audit of the company, in accordance with these terms of engagement.

Our work will be undertaken so that we might report to the Directors those matters that we have agreed to state to them in our report and for no other purpose.

Our report will be issued on the basis that it must not be recited or referred to or disclosed, in whole or in part, in any other document to any other party, without express prior written permission of the Reporting Accountants. We permit the disclosure of our report, in full only, to customers of the company and to the auditors of such customers, to enable customers and their auditors to verify that a report by Reporting Accountants has been commissioned by the Directors of the company and issued in accordance with the internal controls of the company without assuming or accepting any responsibility or liability to them on our part.

To the fullest extent permitted by law, we do not and will not accept or assume responsibility to anyone other than the Directors and the company for our work, for our report or for the opinions we will have formed.

Liability provisions

We will perform the engagement with reasonable skill and care and acknowledge that we will be liable to the Directors and the company for losses, damages, costs or expenses (“losses”) suffered by the Directors and the company as a result of our breach of contract, negligence, fraud or other deliberate breach of duty. Our liability shall be subject to the following provisions:

  • We will not be so liable if such losses are due to the provision of false, misleading or incomplete information or documentation or due to the acts of omissions of any person other than us, except where, on the basis of the enquiries normally undertaken by us within the scope set out in these terms of engagement, it would have been reasonable for us to discover such defects;
  • We accept liability without limit for the consequences of our own fraud or other deliberate breach of duty and for any other liability, which it is not permitted by law to limit or exclude.
  • Subject to the previous provisions of this Liability paragraph, our total aggregate liability whether in contract, tort (including negligence) or otherwise, to the directors and the company, arising from or in connection with the work which is subject to these terms (including any addition or variation to the work), shall not exceed the amount of £750,000.

To the fullest extent permitted by law, the company agrees to indemnify and hold harmless Albert Goodman LLP and its partners and staff against all actions, proceedings and claims brought or threatened against Albert Goodman LLP or against any of it partners and staff by any persons other than the Directors and the company, and all loss, damage and expense (including legal expenses) relating thereto, where any such action, proceeding or claim in any way relates to or concerns or is connected with any of Albert Goodman LLP’s work under this engagement letter.

The Directors and the company agree that they will not bring any claims or proceedings against any of our individual partners, members, directors or employees. This clause is intended to benefit such partners, members, directors and employees who may enforce this clause pursuant to the Contracts (Rights of Third Parties) Act 1999 (“the Act”). Notwithstanding any benefits or rights conferred by this agreement on such partners, members, directors or employees by virtue of the Act, we and the Directors may together agree in writing to vary or rescind the agreement set out in this letter without the consent of any such partners, members, directors or employees. Other than as expressly provided in this paragraph, the provisions of the Act are excluded.

Any claims, whether in contract, negligence or otherwise, must be formally commenced within one year after the party bringing the claim becomes aware (or ought reasonably to have become aware) of the facts which give rise to the action and in any event no later than two years after any alleged breach of contract, negligence or other cause of action. This expressly overrides any statutory provision, which would otherwise apply.

This engagement is separate from, and unrelated to, our audit work on the financial statements of the company for the purposes of the Companies Act 2006 (or its successor) or other legislation and nothing herein creates obligations or liabilities regarding our statutory audit work, which would not otherwise exist.

Applicable law

This engagement letter shall be governed by, and construed in accordance with, English law. The courts of England shall have exclusive jurisdiction in relation to any claim, dispute or difference concerning the engagement and any matter arising from it. Each party irrevocably waives any right it may have to object to an action being brought in those Courts, to claim that the action has been brought in an inconvenient forum, or to claim that those courts do not have jurisdiction.

Internet and e-mail communication

Internet communications are capable of data corruption and therefore we do not accept any responsibility for changes made to such communications after their despatch. It may therefore be inappropriate to rely on advice contained in an e-mail without obtaining written confirmation of it. We do not accept responsibility for any errors or problems that may arise through the use of internet communication and all risks connected with sending commercially sensitive information relating to your business are borne by you. If you do not agree to accept this risk, you should notify us in writing that e-mail is not an acceptable means of communication.

It is the responsibility of the recipient to carry out a virus check on any attachments received.

Data Protection Act 1998

We may obtain, use, process and disclose personal data about you in order that we may discharge the services agreed under this engagement letter, and for other related purposes including updating and enhancing client records, analysis for management purposes and statutory returns, crime prevention and legal and regulatory compliance. You have a right of access, under data protection legislation, to the personal data that we hold about you. We confirm that when processing data on your behalf we will comply with the provisions of the Data Protection Act 1988.

Contracts (Rights of Third Parties) Act 1999

Persons who are not party to this agreement shall have no rights under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this agreement. This clause does not affect any right or remedy of any person, which exists or is available otherwise than pursuant to that Act.

Acknowledgement and acceptance

We shall be grateful if you could confirm your agreement to these terms by signing the enclosed copy of this letter and returning it to us immediately.

Yours faithfully

Signed: ALBERT GOODMAN LLP

We confirm that we have read and understood the contents of this letter and agree that they accurately reflect the services that we have instructed you to provide.

Signed: P TUSTAIN

For and on behalf of the Board of Directors.

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