After a sequence of scandals on the peak of the Covid-19 pandemic, Singapore’s efforts to rein in its commodity buying and selling sector have culminated in a prolonged jail sentence for a former oil dealer now in his 80s.
Lim Oon Kuin — referred to as OK Lim, and as soon as certainly one of Singapore’s richest males — was discovered responsible in Might of defrauding HSBC and abetting forgery. The 82-year-old was sentenced in November to 17 and a half years in jail in a ruling the decide stated was designed to behave as a “deterrent”. Lim’s defence lawyer has appealed, citing his wheelchair-bound shopper’s age and poor well being.
The powerful sentencing exemplifies how Singapore has tried to crack down on dodgy dealing in its commodities market. It has launched initiatives aimed toward digitising the documentation that’s the spine of the commodities market, whereas encouraging wider data sharing amongst market gamers to forestall fraud.
“Singapore has realised they should step up and rebuild some credibility,” stated Jean-François Lambert, founding accomplice of Lambert Commodities, a consultancy. “They’re taking these scandals extra critically.”
Singapore owes its repute as a worldwide commodities hub to its place on sea lanes that join China with world markets, together with its authorities’s business-friendly strategy.
World buying and selling homes together with Trafigura, Vitol Group, Gunvor and Mercuria all have bases within the metropolis, which is Asia’s largest oil buying and selling hub and one of many largest on the earth for buying and selling agricultural commodities. The town state has additionally set its sights on changing into a hub for quickly rising carbon buying and selling.
Its must set itself aside has change into extra acute after Dubai’s speedy rise as a commodities buying and selling hub, particularly for Russian items beneath sanctions by western governments.
“The lengthy arc of worldwide historical past is stuffed with tales of ports which have flourished and thrived for many years, solely to say no amidst altering circumstances,” stated Prime Minister Lawrence Wong throughout an occasion at Singapore’s mega Tuas Port challenge in October. “The lesson is that we can’t be complacent.”
The Lim case, together with a number of others in Singapore, got here to mild in 2020, when commodity costs slumped on the outbreak of the pandemic. Lim’s firm, Hin Leong, collapsed in April 2020 and he admitted hiding $800mn in losses from collectors, which included among the world’s largest banks.
His was the most important of a number of buying and selling homes within the metropolis state that imploded that 12 months. Others included the oil seller ZenRock and Agritrade Worldwide, a dealer accused of fraud by its lenders. Hontop Vitality, the buying and selling arm of a Shandong-based refiner, went into receivership and was accused by its largest lender of “suspicious transactions”.
A standard theme of the scandals was doubtful paperwork, used to safe credit score from monetary establishments with the intention to disguise losses and make leveraged bets on commodity costs. Banks had been keen to lend to the merchants in expectation of chunky charges.
“Paper paperwork have at all times been the Achilles heel of worldwide commerce,” stated Baldev Bhinder, managing director of Blackstone & Gold, a specialist vitality and commodities legislation agency in Singapore.
Lim was discovered responsible of encouraging his executives to forge two paperwork that presupposed to be oil gross sales contracts, which led to HSBC disbursing almost $112mn to the corporate.
On the time of its collapse, Hin Leong owed $3.85bn. HSBC had the largest publicity at $600mn, adopted by ABN Amro at $300mn, whereas French lender Société Générale had lent the corporate $240mn. Singaporean banks — DBS Group, OCBC Financial institution and United Abroad Financial institution — had exposures price $680mn.
HSBC additionally lent $49mn to ZenRock, however reported the collapsed dealer to Singaporean police over what it described as “dishonest practices”.
Agritrade was discovered to have been granted $1.5bn of credit score from 26 lenders. Its collectors accused the enterprise of fraud by issuing duplicate payments of lading — the authorized paperwork issued by transportation firms to shippers — to a number of banks as safety towards loans.
“Prosecutors are taking a extra proactive strategy,” stated Equipment Smith, a UK-based lawyer specialising in world fraud and commerce disputes at Keidan Harrison. “There’s a push to be extra stringent on big-ticket frauds and make examples of the perpetrators.”
Enterprise Singapore, the federal government company charged with selling enterprise, stated there was “zero tolerance for fraudulent actions in Singapore”.
“The fraud circumstances seen within the commodities buying and selling sector previously have been attributed to weak disclosure practices and inner controls amongst a minority of the buying and selling firms,” it stated in an announcement to the Monetary Occasions.
“When Singapore authorities uncover monetary fraud within the buying and selling sector, we are going to take instant motion to carry perpetrators to activity as seen within the case of Hin Leong.”
The federal government has additionally launched a sequence of initiatives lately aimed toward impeding fraudsters’ capacity to rip-off collectors.
Amongst them is a commerce finance registry to forestall the identical asset being pledged as a safety for a couple of mortgage to completely different establishments. The federal government has additionally tried to encourage merchants to maneuver away from paper documentation, as a substitute exchanging digital information on a public blockchain to scale back forgeries.
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Whereas Lambert stated Singapore was “elevating the stakes when it comes to compliance and regulatory necessities”, he added that regulators ought to have been firmer in earlier accounting scandals.
The scandals have additionally pressured banks to take a way more stringent strategy to lending to commodity merchants. A number of lenders introduced they had been pulling out of the market in 2020.
“Banks are approaching their clients with an important deal extra vigilance now, which is an efficient factor, however it has meant smaller merchants are discovering it more durable to draw financing,” stated Bhinder.
“Lim’s sentencing closes a chapter for Singapore and the commodities buying and selling market — it has been a studying expertise for everybody.”
