Resources | RegTrail Insights

DOJ Fines Trading House USD $126 million on Bribery Charges

DOJ Fines Trading House USD $126 million on Bribery Charges

What Is It About

The article discusses the US Department of Justice's (DOJ) announcement of a $126 million fine imposed on Trafigura Beheer B.V. for violating the Foreign Corrupt Practices Act (FCPA). The violation involved paying bribes to Brazilian officials to secure favorable deals with Petrobras. The article also highlights the company's response and the broader implications for compliance within the commodity trading sector.

Why It's Important

This case underscores the serious consequences of violating anti-bribery laws, particularly for companies operating in high-risk regions. The DOJ's actions emphasize the importance of robust compliance programmes and cooperation with authorities during investigations. The fines and penalties serve as a stark warning to other firms about the potential financial and reputational damage resulting from non-compliance.

Key Takeaways

Key takeaways include the need for companies to continually enhance their compliance frameworks, particularly in high-risk areas. The article also highlights the DOJ's expectations regarding third-party management and the importance of proactive cooperation during investigations. Firms are advised to review and strengthen their anti-corruption policies, ensuring thorough oversight of third-party relationships to avoid similar penalties.

Table of Contents
Introduction
Compliance Considerations

Introduction

This week the US Department of Justice (DOJ) announced (click here) that commodity trader Trafigura Beheer B.V. (Trafigura) was fined USD $126 million after pleading guilty to breaching anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA) in relation to the payment of bribes to Brazilian government officials to secure favourable business with Petrobras, Brazil’s state-owned and state-controlled oil company.

In an unrelated December 2023 criminal indictment filed by the Office of the Attorney General of Switzerland (click here), Trafigura was investigated in connection with an alleged bribery scheme in Angola.

Trafigura issued a press release in response to the DOJ fine (click here) with Jeremy Weir, Executive Chairman and CEO of Trafigura, stating:

"These historical incidents do not reflect Trafigura’s values nor the conduct we expect from every employee. They are particularly disappointing given our sustained efforts over many years to embed a culture of responsible conduct at Trafigura. We are pleased the DOJ recognised the steps we have taken to invest in our compliance function: enhancing our policies, procedures, processes and controls and from 2019, prohibiting the use of third parties for business origination. Continuous improvement of our compliance programme and high standards of ethical behaviour will remain priorities for the Group."

This follows on the back of an ongoing spate similar enforcement actions by the DOJ in this region. Trafigura purportedly made over USD $61 million in ill-gotten profits from the scheme.

The announcement outlines the following details concerning the case (the final court order was not available at the time of publication):

  • Between approximately 2003 and 2014 Trafigura and its co-conspirators paid bribes to company officials in order to obtain and retain business with Petrobras;
  • Starting in 2009 Trafigura and its co-conspirators agreed to make bribery payments of up to 20 cents per barrel of oil products bought from or sold to Petrobras by Trafigura and to conceal the bribe payments through the use of shell companies;
  • The bribes were paid by funnelling payments through intermediaries using offshore bank accounts;
  • The DOJ’s resolution was reached considering several factors including the nature and seriousness of the offense but it is noted that Trafigura received credit for its cooperation with the investigation and their acceptance of responsibility which included:
  1. Providing timely updates on facts learned during its internal investigation;
  2. Making factual presentations to the department;
  3. Facilitating the interviews of employees and agents, including an employee located outside the United States, and arranging for counsel for employees where appropriate;
  4. Producing relevant non-privileged documents and data to the department, including documents located outside the US in ways that navigated foreign data privacy laws, accompanied by translations of certain documents; and
  5. Providing all relevant facts known to them, including information about individuals involved in the conduct.
  • However, it is also noted that during the early phases of the investigation Trafigura failed to preserve or produce certain documents and evidence in a timely manner and sometimes took positions that were “inconsistent with full cooperation”;
  • The announcement notes that Trafigura had taken the following remediation steps:
  1. Developed and implemented enhanced, risk-based policies and procedures relating to anti-corruption, use of intermediaries and consultants, third party payments, and joint venture and equity investment risk assessment;
  2. Enhanced processes and controls around high-risk transactions;
  3. Invested additional resources in employee training and compliance testing;
  4. Enhanced ongoing compliance monitoring and controls testing processes; and
  5. Proactively discontinued the use of third-party agents for business origination.
  • However, it is also noted that Trafigura was slow to exercise disciplinary and remedial measures for certain employees whose conduct violated company policy:

"Trafigura’s corrupt practices violated the FCPA, and today’s resolution demonstrates that there are steep penalties for any company that tries to bribe government officials - Assistant Director of the FBI’s Criminal Investigative Division"

  • The DOJ notes that Trafigura’s early defensive posture in resolution negotiations caused significant delays and additional work for the DOJ before constructive re-engagement by Trafigura for a negotiated resolution;
  • The final negotiated resolution in the case was for Trafigura to plead guilty to one count of conspiracy to violate the FCPA;
  • Trafigura was ordered to pay the following:
  1. Criminal fine of USD $80,488,040;
  2. Forfeiture of USD $46,510,257;
  • The DOJ agreed to offset up to USD $26,829,346 from the criminal fine against amounts Trafigura needs to pay in a parallel case undertaken by the Brazilian authorities;
  • The regulatory authorities in Brazil, Switzerland and Uruguay were credited in providing assistance to the DOJ in the investigation.

icon_target RegTrail Insights

It is noteworthy that the DOJ highlights ongoing resistance by Trafigura during the early phases of the investigation as well as during the resolution process. The expectation of acquiescence by the DOJ may, to some, conflict with an organisation’s right to a robust defence and to due process. Compliance professionals involved in such investigations are advised to be sensitive to such pronouncements given they appear to have some bearing on both final penalties issued and public messaging by the DOJ. Giving the DOJ “the run-around” should be avoided. It is also noteworthy that the announcement does not mention the imposition of a monitor on Trafigura.

This week the DOJ also published (click here) a retrospective on their spate of FCPA-related enforcement actions against commodity firms since 2017 noting total fines, forfeitures and other penalties against six firms totalling more than USD $1.7 billion. 

It is not clear whether this announcement draws a line under this series of enforcement actions. Regardless, firms that have not already done so are strongly advised to remain vigilant and ensure that their internal governance and control frameworks are robust and subject to regular review, particularly in high-risk regions with less fastidious anti-bribery and corruption business cultures. 

Thanks for your interest in our content.
Enjoy the read!

Table of Contents
Introduction
Compliance Considerations

Introduction

This week the US Department of Justice (DOJ) announced (click here) that commodity trader Trafigura Beheer B.V. (Trafigura) was fined USD $126 million after pleading guilty to breaching anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA) in relation to the payment of bribes to Brazilian government officials to secure favourable business with Petrobras, Brazil’s state-owned and state-controlled oil company.

In an unrelated December 2023 criminal indictment filed by the Office of the Attorney General of Switzerland (click here), Trafigura was investigated in connection with an alleged bribery scheme in Angola.

Trafigura issued a press release in response to the DOJ fine (click here) with Jeremy Weir, Executive Chairman and CEO of Trafigura, stating:

"These historical incidents do not reflect Trafigura’s values nor the conduct we expect from every employee. They are particularly disappointing given our sustained efforts over many years to embed a culture of responsible conduct at Trafigura. We are pleased the DOJ recognised the steps we have taken to invest in our compliance function: enhancing our policies, procedures, processes and controls and from 2019, prohibiting the use of third parties for business origination. Continuous improvement of our compliance programme and high standards of ethical behaviour will remain priorities for the Group."

This follows on the back of an ongoing spate similar enforcement actions by the DOJ in this region. Trafigura purportedly made over USD $61 million in ill-gotten profits from the scheme.

The announcement outlines the following details concerning the case (the final court order was not available at the time of publication):

  • Between approximately 2003 and 2014 Trafigura and its co-conspirators paid bribes to company officials in order to obtain and retain business with Petrobras;
  • Starting in 2009 Trafigura and its co-conspirators agreed to make bribery payments of up to 20 cents per barrel of oil products bought from or sold to Petrobras by Trafigura and to conceal the bribe payments through the use of shell companies;
  • The bribes were paid by funnelling payments through intermediaries using offshore bank accounts;
  • The DOJ’s resolution was reached considering several factors including the nature and seriousness of the offense but it is noted that Trafigura received credit for its cooperation with the investigation and their acceptance of responsibility which included:
  1. Providing timely updates on facts learned during its internal investigation;
  2. Making factual presentations to the department;
  3. Facilitating the interviews of employees and agents, including an employee located outside the United States, and arranging for counsel for employees where appropriate;
  4. Producing relevant non-privileged documents and data to the department, including documents located outside the US in ways that navigated foreign data privacy laws, accompanied by translations of certain documents; and
  5. Providing all relevant facts known to them, including information about individuals involved in the conduct.
  • However, it is also noted that during the early phases of the investigation Trafigura failed to preserve or produce certain documents and evidence in a timely manner and sometimes took positions that were “inconsistent with full cooperation”;
  • The announcement notes that Trafigura had taken the following remediation steps:
  1. Developed and implemented enhanced, risk-based policies and procedures relating to anti-corruption, use of intermediaries and consultants, third party payments, and joint venture and equity investment risk assessment;
  2. Enhanced processes and controls around high-risk transactions;
  3. Invested additional resources in employee training and compliance testing;
  4. Enhanced ongoing compliance monitoring and controls testing processes; and
  5. Proactively discontinued the use of third-party agents for business origination.
  • However, it is also noted that Trafigura was slow to exercise disciplinary and remedial measures for certain employees whose conduct violated company policy:

"Trafigura’s corrupt practices violated the FCPA, and today’s resolution demonstrates that there are steep penalties for any company that tries to bribe government officials - Assistant Director of the FBI’s Criminal Investigative Division"

  • The DOJ notes that Trafigura’s early defensive posture in resolution negotiations caused significant delays and additional work for the DOJ before constructive re-engagement by Trafigura for a negotiated resolution;
  • The final negotiated resolution in the case was for Trafigura to plead guilty to one count of conspiracy to violate the FCPA;
  • Trafigura was ordered to pay the following:
  1. Criminal fine of USD $80,488,040;
  2. Forfeiture of USD $46,510,257;
  • The DOJ agreed to offset up to USD $26,829,346 from the criminal fine against amounts Trafigura needs to pay in a parallel case undertaken by the Brazilian authorities;
  • The regulatory authorities in Brazil, Switzerland and Uruguay were credited in providing assistance to the DOJ in the investigation.

icon_target RegTrail Insights

It is noteworthy that the DOJ highlights ongoing resistance by Trafigura during the early phases of the investigation as well as during the resolution process. The expectation of acquiescence by the DOJ may, to some, conflict with an organisation’s right to a robust defence and to due process. Compliance professionals involved in such investigations are advised to be sensitive to such pronouncements given they appear to have some bearing on both final penalties issued and public messaging by the DOJ. Giving the DOJ “the run-around” should be avoided. It is also noteworthy that the announcement does not mention the imposition of a monitor on Trafigura.

This week the DOJ also published (click here) a retrospective on their spate of FCPA-related enforcement actions against commodity firms since 2017 noting total fines, forfeitures and other penalties against six firms totalling more than USD $1.7 billion. 

It is not clear whether this announcement draws a line under this series of enforcement actions. Regardless, firms that have not already done so are strongly advised to remain vigilant and ensure that their internal governance and control frameworks are robust and subject to regular review, particularly in high-risk regions with less fastidious anti-bribery and corruption business cultures. 

Compliance Considerations

Several lessons can be drawn from this fine which commodity firms can, where appropriate, leverage within their own Compliance Functions.

[1] Code of Conduct Policy Review + Updated Training to Staff

Trafigura provides a copy of its Code of Conduct Policy (drafted as of Oct 2022 - click here) on its public website. It is not clear whether this policy is an up to date policy or will be updated in due course as a result of the fine.

Nonetheless, given the significant fines issued to Glencore, Vitol, and Trafigura in recent times, commodity firms may use this opportunity to perform a self-initiated review of their current Code of Conduct policies to ensure they are up to date. In addition, firms have the opportunity to deliver updated training to staff of said policies in part to emphasise the seriousness of violating such policies.

The following employee obligation themes are included in the Code of Conduct and provide a foundation for other firms to compare and contrast against.

  1. Political contributions and activities
  2. Charitable donations
  3. Engaging with the media
  4. Proprietary and confidential information
  5. Money laundering and terrorist financing
  6. Sanctions and trade restrictions
  7. Bribery and corruption including gifts, hospitality and entertainment and use of consultants and intermediaries
  8. Anti-trust and competition law compliance
  9. Market behaviour: business communications and conflicts of interests including personal account dealing, conflicts of interest, business communications, and communicating with exchanges, price reporting agencies and regulators
  10. True and accurate records
  11. Reporting violations and raising concerns
  12. Protection for those who follow the Code

[2] Anti-Corruption Compliance Programme enhancements. 

Based on the recent spate of fines issued by the DOJ to commodity firms, Compliance teams have the opportunity to review their anti-corruption programmes. Below are several observations for firms, where appropriate, to:

  • Conduct a self-review of operations associated with high-risk commodity trading activities.
  • Review current third-party intermediaries.
  1. Develop and implement appropriate monitoring, testing, and review procedures for high-risk third-party business transactions.
  2. Analyse all payments made to high-risk third parties and document justification for such payments.
  3. Build robust monitoring review and testing procedures (post onboarding) to identify those third parties that require additional scrutiny.
  4. Ensure Compliance follows up with inquiries to third parties in a timely manner. Should there be delays in receiving information from third parties in a timely manner, include a policy that allows Compliance to potentially halt business activity.

 

[3] Third-Party Management – DOJ expectations. 

It is clear that third parties played a significant role in several of the FCPA enforcement actions and this area represents a key risk for firms. In March 2023 the DOJ issued an updated guidance note ‘Evaluation of Corporate Compliance Programs’ (ECCP) (click here) which is intended to assist prosecutors in making informed decisions as to whether, and to what extent, a corporation’s compliance programme was effective at the time of the offence, and is effective at the time of a charging decision or resolution, for the purposes of determining any prosecution and related monetary penalty.

Within the document, the DOJ provides guidance for managing third party risks. Below is a high-level summary and checklist which firms can use to benchmark against their current policies and controls and which the DOJ expects firms to have in place.

  1. Company has an understanding of the qualifications and associations of third-party partners, including the agents, consultants, and distributors that are commonly used to conceal misconduct, such as the payment of bribes to foreign officials in international business transactions.
  2. Company knows the business rationale for needing the third party in the transaction, and the risks posed by third-party partners, including the third-party partners’ reputations and relationships, if any, with foreign officials.
  3. Company ensures that contract terms with third parties specifically describe the services to be performed, that the third party is actually performing the work, and that its compensation is commensurate with the work being provided in that industry and geographical region.
  4. Company engages in ongoing monitoring of the third-party relationships, be it through updated due diligence, training, audits, and/or annual compliance certifications by the third party.

In addition, the DOJ provides a set of themes/questions firms can benchmark when developing / reviewing their current third-party risk management programmes as follows:

[A] Risk-Based and Integrated Processes 

  • How has the company’s third-party management process corresponded to the nature and level of the enterprise risk identified by the company?
  • How has this process been integrated into the relevant procurement and vendor management processes?

[B] Appropriate Controls

  • How does the company ensure there is an appropriate business rationale for the use of third parties?
  • If third parties were involved in the underlying misconduct, what was the business rationale for using those third parties?
  • What mechanisms exist to ensure that the contract terms specifically describe the services to be performed, that the payment terms are appropriate, that the described contractual work is performed, and that compensation is commensurate with the services rendered?

[C] Management of Relationships

  • How has the company considered and analysed the compensation and incentive structures for third parties against compliance risks?
  • How does the company monitor its third parties?
  • Does the company have audit rights to analyse the books and accounts of third parties, and has the company exercised those rights in the past?
  • How does the company train its third-party relationship managers about compliance risks and how to manage them?
  • How does the company incentivize compliance and ethical behaviour by third parties?
  • Does the company engage in risk management of third parties throughout the lifespan of the relationship, or primarily during the onboarding process?

[D] Real Actions and Consequences

  • Does the company track red flags that are identified from due diligence of third parties and how those red flags are addressed?
  • Does the company keep track of third parties that do not pass the company’s due diligence or that are terminated, and does the company take steps to ensure that those third parties are not hired or re-hired at a later date?
  • If third parties were involved in the misconduct at issue in the investigation, were red flags identified from the due diligence or after hiring the third party, and how were they resolved?
  • Has a similar third party been suspended, terminated, or audited as a result of compliance issues?

Want to read more?

Request a Demo

Take a short tour of the RegTrail Insights Platform with a free trial for a limited time.

Try it for free