KEY POINTS
- Trafigura faces a $1.1 billion loss in Mongolia from employee fraud.
- Mongolia’s oil market contributes less than 0.3% of Trafigura’s revenue.
- Trafigura has set aside $1.1 billion while investigating the incident.
The world leader in commodity trading, Trafigura Group, has revealed that it could lose up to $1.1 billion in Mongolia as a result of suspected employee theft.Â
Trafigura reveals major losses due to employee fraud in Mongolia
According to the corporation, employees disguised past-due bills and manipulated payments, allowing financial vulnerability to increase unchecked for years.
The disclosure was unexpected, especially considering how little Mongolia’s oil market is. Less than 0.3 percent of Trafigura’s oil trading revenue comes from Mongolia’s daily consumption of about 35,000 barrels of oil, which is valued at nearly $1 billion yearly. The magnitude of the possible loss is astounding, even with its small footprint.
Jeremy Weir, the CEO of Trafigura, voiced his dissatisfaction with the state of affairs, saying that it appears to be restricted to the company’s activities in Mongolia. Although Trafigura has opened an internal inquiry, this occurrence comes after it was discovered last year that the corporation was also the victim of a significant nickel scam.
The event has sparked questions about the company’s internal controls, specifically the length of time it took for the issue to become apparent. Nonetheless, some bankers stated that it is doubtful that Trafigura’s capacity to borrow funds will be impacted.
Historically, Trafigura’s operations in Mongolia have been a lucrative niche, providing almost one-third of the nation’s oil products. The company, which usually makes tens of millions of dollars a year, is in competition with Rosneft PJSC and Gunvor Group in this market.
Financial controls under scrutiny as Trafigura sets aside $1.1 billion
Mining.com added when there was a fuel scarcity in Mongolia at the end of 2023, the situation became apparent. Trafigura had given the business credit by depending on local distributor Lex Oil LLC to provide its goods. However, when past-due payments continued to go unreported, the company’s financial exposure increased over time.
According to Trafigura, staff members falsified financial numbers by manipulating data and papers. The corporation has not publicly named any of the suspended employees, but among them is Jononbayar Erdenesuren, the biggest oil trader in Mongolia.
Mining.com added that although Trafigura is hopeful that some of the money may be recovered, the company has subsequently set aside $1.1 billion in reserves to cover the losses. The inquiry is still in progress.
