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Trafigura chief executive Richard Holtum says the commodity trading giant has undertaken a “significant governance and controls project” after suffering a US$1bn loss in a fraud scandal within its Mongolian oil business. 

Holtum says the review has been overseen by the company’s chief risk officer and chief operating officer, and has examined “what went wrong [and] how we can make sure it doesn’t happen again”, he told the Financial Times Global Commodities Summit in Lausanne this week. 

“It was indeed a humbling experience,” he said. “We have learned a huge amount from it, and we’re in a much better place for it.” 

Trafigura revealed in October last year it had uncovered “serious misconduct” by individuals in its Mongolia-based petroleum products business, related to a complex chain of transactions with local counterparties. 

Perpetrators manipulated data and documents, resulting in the company paying inflated sums to counterparties and overdue receivables being concealed, the company said at the time. 

Former chief executive Jeremy Weir wrote in Trafigura’s 2024 annual report that the trader had recorded a total loss of US$1.1bn as a result, of which US$358mn was reflected in its results for last financial year. 

“An external investigation remains ongoing,” Weir wrote. “We have reviewed other higher-risk offices and lines of business, and we are confident that these issues are isolated to a self-contained operation in Mongolia.” 

Asked how the scandal came about, Holtum told attendees at this week’s event: “Mongolia was an isolated office. It was one of the very few offices at Trafigura where traders and operators are co-located with no additional management. 

“In addition… we didn’t have a large number of Mongolian speakers outside of Mongolia. And the fraud happened during Covid, so travel and additional oversight was extremely challenging. 

“That in no way is to excuse what happened, but that is essentially how it happened.” 

Holtum said the losses were borne entirely by Trafigura’s shareholders, and that no bank suffered any exposure. That proved an “enormous catalyst for change internally, because people felt the pain in their pockets”, he said. 

In response, the company has done “a significant amount of work in upgrading what I call our plumbing”, Holtum said. 

“Our growth over the last decade has been astonishing,” he added.  

“But I think what we have to work really hard on, and what the governance and controls team have spent a huge amount of work on doing, is to make sure that we’ve also had the same growth in the capabilities and size of our middle and back office teams.” 

Holtum added that the company is encouraging employees to speak out if they have doubts about a certain activity, or to question business they do not understand. 

Referring to both the Mongolia fraud and a nickel trading scandal exposed in 2023, which left Trafigura facing losses of as much as US$577mn, he said the company “would have perhaps caught both of those… much earlier” with a more open culture. 

His comments came shortly after Reuters reported that the local head of Trafigura’s Mongolia petroleum business, who is currently suspended, loaned more than US$500mn of the trader’s money to an oil company owned by his aunt. 

Trafigura declined to comment on the report when contacted by GTR.