And this is where the scourge of gold rehypothecation emerged, as in the scandal surrounding Elemetal, it became impossible for holders of Elemetal gold to sell the gold bars on, leaving them sitting in bank vaults, according to traders quoted by the FT. Buyers are reluctant to take the gold, given the investigations.

This means that hundreds of millions in loans made to Elemetal by ScotiaMocatta are suddenly stuck in limbo. It also means that one of five bullion banks that settle gold trades in the London market, the world’s largest, has effectively been blackballed. It was built on the 1997 purchase by Scotiabank of Mocatta Bullion, which traces its roots back to 1671. And with Mocatta crippled, Scotiabank, which has the biggest foreign presence of any Canadian bank, is focusing its international strategy on the Pacific Alliance, a Latin American trade bloc comprising Mexico, Peru, Chile and Colombia. It will also hope to find a willing Chinese buyer for the gold trading operation.

Mocatta's exit will be good news for HSBC and JPMorgan, which dominate the London market; their large balance sheets enable them to provide credit to clients and refiners around the world. Additionally, and unlike Scotiabank, they also have vaults in London. Gold trading in London is estimated to be worth more than $5tn a year, although as the FT notes, there are no precise figures on how much gold is traded there every day.

ScotiaMocatta Put For Sale After Multibillion Money-Laundering Scandal