Monday, April 19, 2021

Commodities cleanup Trafigura ends use of middlemen after corruption probes


Trafigura, one of the world’s biggest commodity traders, is to stop using intermediaries – the well-connected individuals who help set up contracts in resource-rich countries.

The privately owned company, which trades more than 5.5 million barrels of oil per day, will end all of its “business development” agreements with agents by October, although it will continue to use security advisers, risk analysts and other specialist service providers such as port agents.

The move by Trafigura follows a series of corruption investigations and allegations involving intermediaries and middlemen that have caused alarm at the highest levels of the commodity trading industry.

- Advertisement -

Top executives and bankers are worried that the sector, which has been trying to improve transparency, could face onerous rules and regulation if it does not address the issue.

“Trafigura continues to grow its own presence in many markets. Building on earlier statements that we are reducing the number of third parties, we have decided that all agreements with third parties providing business development services will be ended by October 2019,” the company’s executive chairman and chief executive Jeremy Weir said in a statement.

Read MoreTrafigura refuses to hand over emails in Brazil bribery case

Large-scale physical commodity trading often involves operating in countries that have been hotbeds of corruption, or where it is difficult to secure business without well-connected intermediaries.

Some of these relationships have become a focus of investigations by the US Department of Justice, the country’s commodities regulator, as well as prosecutors in Switzerland and Brazil.

- Advertisement -

Dan Gertler, for example, Glencore’s former business partner in the Democratic Republic of Congo, has been placed under US sanctions for corrupt and opaque mining deals in the country. Glencore was subpoenaed by the DoJ last year as part of an investigation into possible bribery and corruption in Nigeria, Venezuela and the Democratic Republic of Congo.

In Brazil, intermediaries used by Trafigura, Glencore and Vitol — the top three independent oil traders — are under investigation on suspicion of making improper payments to employees of state-controlled oil company Petrobras in exchange for contracts. Trafigura, Glencore and Vitol have said they have a zero-tolerance policy on bribery and corruption.

Heightened due diligence

The problems with agents extend beyond the commodity trading industry. Anglo-Australian miner Rio Tinto has reported a payment it made to a former Lazard banker, François Polge de Combret, who helped the company win rights to an iron deposit in Guinea, to law enforcement agencies in the US and UK.

Big commodity traders have said they are already subject to the US Foreign Corrupt Practices Act and the UK Bribery Act and operate heightened due diligence processes when retaining the services of agents.

Nevertheless, many of them have been moving away from the use of agents. Glencore now directly employs more than 20 people in the DRC working on government contracts, while Geneva-based Gunvor, another major trader, has reduced the number of agents it uses by a third since 2018.

Read MoreTrafigura involved in money laundering while transacting businesses in Nigeria – WItness

Founded more than a quarter of a century ago, Trafigura is one of the world’s biggest traders of oil and industrial metals such as zinc and copper.

- Advertisement -

The company, which is based in Singapore but run from Geneva, recently reported a large rebound in profitability helped by oil market volatility with net income in the six months to the end of March rising 92% to $426 million (CHF419 million) on revenues of $86 billion.

However, Trafigura decided to reduce its dividend payout to 35% of net income this year from 59% in 2018 to strengthen its equity base as it prepares to take control of Nyrstar, the second largest zinc smelting group in the world.


Get our daily notification on the latest financial crimes news around the World


- Affiliate Products -


This Week

Enable Notifications    OK No thanks