A new investigative report by The Sentry—the result of a three-year investigation into a loan deal between a local company and a regional bank, with the backing of the South Sudan government—has uncovered red flags for illicit business practices, including bribery, tax evasion, and trade-based money laundering.
According to the Sentry, the investigation exposes how laws were broken in South Sudan, sanctions may have been breached, and powerful individuals were enabled to benefit from the manipulation of business worth hundreds of millions of dollars.
The report released on Tuesday, “Crude Dealings: How Oil-Backed Loans Raise Red Flags for Illegal Activity in South Sudan” spotlights a 2018 deal in which South Sudan’s Trinity Energy Limited entered into a trade finance facility with Cairo-based African Export-Import Bank (Afreximbank) for a series of $30 million loans to purchase diesel and gasoline to sell to the South Sudan market.
“As part of the deal, the government of South Sudan committed to award cargoes of crude oil to Trinity Energy. The deal skirted legislation on oversight, transparency, and competition and facilitated off-book government spending,” The Sentry said. “The loan deal also perpetuated a damaging reliance on future oil production to finance current spending, a pattern that has locked the country in a spiral of debt. Oil is South Sudan’s most valuable resource and the source of the vast majority of its national wealth. This deal contributed to mortgaging the future prosperity of the country and its citizens.”
The Sentry’s report reveals that the arrangements between Trinity Energy, Afreximbank, and the government of South Sudan were contrary to South Sudanese law, and their implementation by Trinity Energy raises red flags for bribery, tax evasion, and trade-based money laundering.
The in-depth investigation by The Sentry included interviews with a former Trinity Energy employee and reviews of the trade finance facility, bank statements, emails, internal memos, and ministerial correspondence.
“The arrangement gave Trinity Energy—a company that had never before traded crude—privileged access to the market for South Sudan’s oil. The company was awarded more than 40% of crude cargoes contracted by the government from June 2018 to May 2019,” the report highlighted. “The government paid a premium to Trinity Energy for the sale of fuel to the South Sudanese army. Trinity Energy was given a dominant role in the market for petroleum and diesel imports, a position that facilitated its secretive provision of fuel to the South Sudanese army at a time when government forces were involved in ongoing civil conflict. South Sudan’s army has been accused of war crimes and human rights abuses.”
The report also found that the trade finance facility gave Glencore Singapore Pte Ltd, a subsidiary of Geneva-based oil trader Glencore PLC, privileged access to crude contracts. The agreement designated the firm as the “original offtaker,” meaning that it bought and shipped the cargoes of oil awarded by the government to Trinity Energy.
“Glencore shipped South Sudanese crude worth $376 million in 2019, all of it through deals with Trinity Energy,” the report said. “Trinity Energy spent millions of dollars on “facilitation” and “business acquisition” costs for the deal, including 18.7 million South Sudanese pounds (SSP) ($125,000) in payments to the government committee responsible for approving the deal.”
According to The Sentry, during the implementation of the trade finance deal, Trinity Energy changed millions of US dollars on the black market, paid fake invoices overseas to disguise the black market exchange of hundreds of thousands of dollars, and engaged in behaviors indicative of tax fraud.
“At the time of the trade finance deal and during the period of its negotiation, the owners and directors of Trinity Energy had business and family ties with politically exposed persons (PEPs) in senior government positions. These included two former ministers of finance, the head of the state customs agency, and a senior general in the South Sudanese army,” the report says. “According to incorporation documents on file with the Ministry of Justice, the company’s directors also had ties to two colonels in the National Security Service, both of whom were connected to President Salva Kiir.”
The report says that the South Sudanese government’s guarantees to award crude cargoes each worth tens of millions of dollars to Trinity Energy may have broken laws on procurement, competition, and transparency.
The Sentry recommended that the United States, European Union, United Kingdom, Canada, and Australia investigate and, if appropriate, sanction individuals and entities involved in corrupt oil deals.
“Global and regional financial institutions should take measures to identify accounts held or beneficially owned by those with business dealings in South Sudan’s oil sector and senior South Sudanese PEPs, carry out a comprehensive assessment to identify their broader international networks, and determine measures needed to mitigate the risks involved in such accounts and customer relationships,” The Sentry recommended. “Afreximbank should initiate an independent investigation into its relationships and transactions with Trinity Energy and the government of South Sudan.”
The investigative organization also recommended that the UN Panel of Experts on South Sudan investigate Trinity Energy’s support—via monetary payments and fuel supplies—for political and military leaders and entities.
“Kenya and Uganda should investigate and prosecute illicit money flows. Authorities in Kenya and Uganda should investigate the transactions identified in this report in which money sent to company accounts in the two countries raised red flags for trade-based money laundering,” The Sentry urged. “South Sudan should ratify and implement the African Union Convention on Preventing and Combating Corruption, which South Sudan signed in 2013. The country should also implement Chapter IV of the Revitalised Agreement on the Resolution of the Conflict in the Republic of South Sudan (R-ARCSS) to address the crippling cycle of debt, economic mismanagement, and corruption undermining economic prosperity and fuelling conflict.”