Trafigura announced it will make provisions of $1.1 billion following an internal review that uncovered fraud within its Mongolian petroleum products supply business. Key points include:
Fraud Discovery: The internal review revealed manipulation of data and documents, leading to inflated payments and concealment of overdue receivables over five years.
External Investigation: An external investigation confirmed the findings of the internal review, solidifying the total fraud amount.
Financial Impact: The $1.1 billion provision is roughly equivalent to Mongolia’s annual oil-products consumption, highlighting the significant financial repercussions for Trafigura.
Restatement of Financials: Trafigura indicated that it may need to restate prior years’ financial statements when reporting its full-year results.
Background Context: This incident follows a previous loss of over $500 million due to an alleged nickel fraud less than two years ago.
Market Conditions: Global trading houses, including Trafigura, are experiencing lower profits after a period of high earnings driven by energy price volatility post-Russia’s invasion of Ukraine.
Counterparty Relations: Trafigura stated that a substantial portion of the exposure in Mongolia is recognized as debt owed to them by their main counterparty, which they intend to hold accountable for repayment.
Operational Integrity: The company emphasized that this issue appears to be isolated to its Mongolian operations, and it is taking steps to enhance oversight and controls across the organization.
Ongoing Operations: Trafigura’s metals business in Mongolia remains unaffected and continues to operate as usual.