Here we share our demands in the form of an epilogue

There are two ways for commodities traders operating in jurisdictions where the rule of law is weak to gain market share. Both are risky and rely on the fact that commodity trading is not regulated in Switzerland.

Strategy n°1

The traditional strategy involves outsourcing the risk by paying intermediaries. As soon as anti-corruption agreements have been signed, the intermediary is free to pay all or part of their commission to public officials tasked with awarding the desired contract. As Public Eye painstakingly exposed, this is the option chosen by Gunvor in Congo-Brazzaville – and that caused the Office of the Attorney General of Switzerland to initiate proceedings against the company for possible organisational shortcomings.

Strategy n°2

Just as adventurous, the second strategy involves association with politically exposed persons (PEPs) in a joint venture which can then enter into contracts. From 2003 onwards, Vitol opted for one such alliance in Kazakhstan, enabling the world’s biggest private oil trader to market huge volumes of Kazakh crude through Ingma Holding BV. From 2009 to 2016, this unknown company paid out at least US$1 billion in dividends to its shareholders, distributed between Vitol and its partners: firstly, to Arvind Tiku alone through Oilex, then as from 2010 onwards to Dias Suleimenov and probably Daniyar Abulgazin, through Omega. Our investigation also shows that even though his name does not appear on paper, the President’s son-in-law Timur Kulibayev indirectly benefitted from this partnership.

Has the risk really been covered?

Vitol recognises that it had a direct or indirect business relationship with the PEPs Arvind Tiku, Dias Suleimenov, Timur Kulibayev and Daniyar Abulgazin. The company does not believe that this breaches its code of conduct:

« It is appropriate and often necessary for companies to enter into business activities with PEPs. Enhanced due diligence checks are performed on any transaction involving a PEP. » Vitol's answer

Vitol vehemently denies that Timur Kulibayev is or ever has been the direct or indirect beneficiary of Ingma. The company claims that it cannot comment on the financial links between Arvind Tiku and the President’s son-in-law because it does not hold shares in either Oilex or the trust. Is this response satisfactory? In light of the context in Kazakhstan, where the ruling clan amasses huge wealth off the back of the oil industry, our answer is no. Careful due diligence would have uncovered the close relationship between Tiku and Kulibajew, in 2010 at the latest when the press began to report on the Swiss investigation into the two.

Right of Reply Arvind Tiku/Xena

A misleading argument

According to Vitol, the banks involved in Ingma’s commercial activities did not detect the presence of Kulibayev in the shadows of Arvind Tiku. Precisely this situation reveals the weakness of one of the main arguments put forward by the industry’s lobby and the Swiss federal authorities in opposition to any semblance of regulation; namely, that commodity trading is indirectly regulated by the banks that fund their activities.

In 2011 the Wolfsberg Group, which brings together 13 of the biggest international banks in an effort to prevent money laundering, stressed the limits of their supervisory powers, stating

« it is extremely rare for any one Bank to have the opportunity to review an overall trade financing process in complete detail given the premise of the trade business that banks deal only in documents »

Moreover, the traders themselves provide these documents.

Essential measures

The case of Vitol in Kazakhstan shows the need to apply binding provisions to the commodities trading sector at three levels:

Transparency of payments to governments

Transparency of beneficial ownership

A duty of due diligence regarding business partners

In light of the risky business model of companies like Vitol, the latter point is crucial. Traders must be obligated by law to apply heightened due diligence checks to reduce corruption risk when they enter into business relationships with PEPs. Introducing such a requirement would serve a dual purpose. Firstly, it would be preventive by obliging traders to ask themselves the right questions and to document their practices. Secondly, it would be repressive because it would provide the basis for sanctions in the event of non-compliance.

Although the Federal Council has recognised that Switzerland has a particular responsibility as the world’s biggest commodities trading hub, it still refuses to act to mitigate the risks. Instead of welcoming Kazakh oligarchs and their fortunes with open arms, Switzerland should finally establish a Commodity Market Supervisory Authority to regulate the sector in order to minimise Switzerland’s contribution to the ‘resource curse.’