By Robert Harvey, Brijesh Patel
(Reuters) -Trafigura will make provisions of $1.1 billion after an internal review discovered fraud by individuals in its Mongolian petroleum products supply business, the commodity trader said on Wednesday.
The revelation comes less than two years since Singapore-headquartered Trafigura revealed it lost over $500 million in an alleged nickel fraud.
“The misconduct included manipulation of data and documents, resulting in inflated sums being paid by Trafigura, and deliberate concealment of overdue receivables,” its statement said.
An external investigation followed the internal review and has confirmed the sum of the fraud was accumulated over five years, Trafigura said.
Mongolia is a minor consumer of oil, with its annual demand roughly amounting to just over 0.03% of the global total, according to U.S. Energy Information Administration data.
Trafigura’s $1.1-billion provision is equivalent to the approximate value of Mongolia’s oil-products consumption for an entire year, Reuters calculations show.
Trafigura said it would likely need to restate prior years’ financial statements when it reports its full-year results.
Global trading houses are facing lower profits after two years of bumper earnings from energy price spikes and volatility following Russia’s invasion of Ukraine.
Trafigura said a big chunk of the total exposure in Mongolia has been acknowledged as debt owed to Trafigura by its main counterparty in Mongolia.
“We intend to hold the counterparty to their repayment obligation,” Trafigura said. It did not name the counterparty.
“We are confident that this issue is isolated to a self-contained operation in Mongolia. Nonetheless, we are taking further actions to improve oversight and controls across the group,” Trafigura Executive Chair and CEO Jeremy Weir said.
Trafigura’s metals business in Mongolia, which is handled from outside the country, has not been affected and is continuing as usual, the firm told Reuters.
The announcement is the latest in a string of costly fraud and misconduct issues at the global commodity trading house.
Trafigura booked a $577-million charge in the first half of 2023 after discovering that some nickel cargoes it received did not contain the metal, in a case of “systemic fraud.”
In May, Trafigura agreed to pay a $55-million civil fine to settle U.S. Commodity Futures Trading Commission charges, while in March it agreed to pay $127 million to resolve a U.S. Department of Justice probe into Brazil.
(Reporting by Robert Harvey in London and Brijesh Patel in BengaluruEditing by Dmitry Zhdannikov, David Goodman, Emelia Sithole-Matarise and Rod Nickel)
