Trafigura faces risk of USD 1.1 billion loss from misconduct in Mongolia

Global commodities trading firm Trafigura on Wednesday (30 November) said an internal review and an external forensic investigation have uncovered serious misconduct by individuals in Trafigura’s Mongolian petroleum products supply business.  

The Singapore-headquartered firm said the misconduct included manipulation of data and documents, resulting in inflated sums being paid by Trafigura, and deliberate concealment of overdue receivables. It involved a complex chain of transactions with a small number of local counterparties.  

“The external investigation remains ongoing but has confirmed a significant exposure for the Group, accumulated over approximately five years. A substantial proportion of the total exposure has been acknowledged as a debt owed to Trafigura by our principal counterparty in Mongolia. We intend to hold the counterparty to their repayment obligation,” it said in a statement on its website. 

Taking a conservative view of expected debt recovery, however, Trafigura expects to record a total provision of USD1.1 billion. While the accounting treatment under IFRS is subject to final audit, it is likely that Trafigura will be required to restate prior year comparative figures in its 2024 financial statements, in accordance with International Accounting Standard (IAS) 8.  

Jeremy Weir, Executive Chairman and CEO, said: “We are bitterly disappointed by the misconduct in our Mongolian oil business. There is no place in Trafigura for wrongdoing and we are taking appropriate disciplinary action against the small number of individuals involved.”

“Following in-depth reviews, 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.”

“I also want to recognise the increased internal scrutiny of our business introduced during 2023 and the conscientiousness of the Trafigura employees that helped us uncover these issues.  Their diligence reflects the culture of responsibility and ownership we aim to instil throughout our global business.”  

Following a comprehensive risk assessment of our global network of offices, in-depth reviews have been completed in higher-risk locations with no significant findings. Trafigura has identified and will continue to implement a range of further actions to strengthen credit control, risk management, operational and other controls. These actions will be subject to external assurance, reporting to the Audit Committee.  

Trafigura will report full-year results in December 2024 for the financial year ended 30 September 2024.  As at the balance sheet date, the Group maintained a strong liquidity position of USD 14.15 billion and expects to report shareholders’ equity in excess of USD 16 billion, subject to final audit. 

Photo credit: Trafigura
Published: 5 November, 2024