Last year Financially best record For major commodity traders who have made huge profits in the oil market using the storm caused by the coronavirus crisis.
The same is not true of efforts to abandon the reputation of the dubious business practices that have plagued the industry since the days of modern commodity the godfather Marc Rich.
In a recent incident that cast a shadow over the sector, Gunvor employees who represented the company in 2018 paid more than $ 22 million in bribes to win a business in Ecuador between 2012 and 2020. Pleaded guilty in a court in New York. Faced up to 20 years in prison.
The case highlights the challenge of overseeing risk-hungry traders and the dangers of using agencies and intermediaries to win business in resource-rich countries. It also highlights the growing interest in the sector by the Justice Department and other US regulators. This is expected to be even more severe under the Joe Biden administration.
Kim Zelnick, a partner at Freshfields Bruckhaus Delinger, said: “The Justice Department really means business. Fighting corruption is a priority and they will go looking for places where there are real risks and incentives for people to engage in fraud.”
Gunvor is one of a small group of companies, such as Vitol, Glencore and Trafigura, that help revitalize the global economy by linking supply and demand for raw materials. They have overcome the wave of globalization and emerging market growth and have built businesses that are more profitable than many banks.
Last year, Vitol, the world’s largest independent oil trader, announced Record Revenue of $ 140 billion and profit of about $ 3 billion. Trafigura, Gunvor and Glencore also enjoyed record trading results.
However, the business that connects oil producers and consumers is difficult to secure without a country that was a hotbed of corruption and an agent that works with government officials and networks to support land transactions. Often involves doing business in the country.
These relationships are causing recurring legal issues for the sector seeking to open and become more transparent.
Vitol will pay more than $ 160 million at the end of last year as part of a postponed prosecution agreement with the U.S. Department of Justice after approving bribery plans in Brazil, Ecuador and Mexico involving employees and agents I agreed.
Authorities are also investigating Glencore and Trafigura for similar allegations in Brazil. Glencore said it was cooperating with the investigation while Trafigura denied the allegations. Glencore is also facing a wider judicial investigation.
“Given the tremendous size and impact of the natural resources and energy industry, it’s no surprise that US regulators are paying more attention,” said Matthew Kluchenek of law firm Mayer Brown.
Others see US scrutiny as more cynical.
Former trade finance banker John McNamara, who runs a Carcharton Commodity consultancy, has paid tens of billions of dollars in fines and settlements from the banking sector for profits generated by major commodity exchanges. He said he was the target of the authorities. Over the last decade, we have been working with Libor, currencies and other markets.
“The wells are starting to run out as banks finally put together their actions, but the government’s demand for funding still remains,” he said. “So who’s their next target? Traders. Are they guilty? They’re probably guilty in the same sense that banks had many practices you didn’t want to write at home. ”
series Last year’s fraud case involving Singapore oil traders Banks are even more nervous about lending to companies that rely on access to large credit lines to buy and sell millions of barrels of crude oil.
“It makes us a little shy,” said one senior trade finance banker. “We cannot fully participate in these companies.” Bankers said his company was encouraged by the stranger headlines that emerged from the Justice Department and the Brazilian car wash investigation.
For Gunvor, the plans revealed by the Justice Department show a step back in efforts to move forward from previous investigations.Geneva-based company Paid $ 95 million in 2019 to resolve a long-term bribery case Includes payments to West African middlemen.
In the wake of the settlement, Gunvor co-founder and chairman Torbjorn Tornqvist said: Same position again, And the company announced it last year Stop working With agents for “entrepreneurship and development objectives”.
Rivals have also reduced the use of intermediaries or stopped their use altogether. Trafigura Glencore replaced intermediaries in some countries with its own staff working on contracts with the government, while ending the use of agents for business start-up and development in 2019.
Vitol said this month that it is working hard to “mitigate compliance risk” throughout its business.
However, anti-corruption activists say recent bribery and corruption cases cast “serious suspicion” on the credibility of such claims.
A court document in the Gunvor case states that Raymond Kouto, who turned from an employee to an agent, and two consultants to hide bribery and money laundering schemes from Gunvor compliance officers in late 2019 and early 2020. Explains how you planned.
“This isn’t a fraudulent employee issue, but these practices are the basis of how the sector has done business in the past,” said Natasha White of Global Witness. “We really welcome the fact that the United States is taking an increasingly strong stance and are calling on other jurisdictions to do the same.”
Gunvor said it had terminated its relationship with the “intermediary” for compliance reasons before being notified of the Judiciary’s investigation.
“Gunvor takes compliance very seriously and maintains a zero-tolerance approach, which is why Gunvor has been taking it ever since. Completely banned Use of agents for business development purposes. ” “Gunvor is fully cooperating with the Judiciary Ministry’s investigation and will continue to cooperate.”
Bankers say that while there is no doubt that business practices have improved significantly since the days of Marc Rich’s swashbuckler, lessons need to be learned.
“In emerging markets in the 1980s, we didn’t leave the airport unless we brought a brown envelope,” said Mac Namara. “I’ve been steadily moving away from it, but there are still challenges.”
Commodity traders in DoJ’s view as surveys hurt the boom era
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