A three-year investigation by The Sentry 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. The investigation found clear indications that the arrangement enabled powerful individuals to benefit from the manipulation of business worth hundreds of millions of dollars. The loan deal skirted legislation on oversight, transparency, and competition and facilitated off-book government spending, including supplies of fuel to the South Sudan army. It also perpetuated a damaging reliance on future oil production to finance current spending, mortgaging the future prosperity of the country and its citizens.
In April 2018, South Sudan’s Trinity Energy Limited agreed 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 arrangement gave Trinity Energy—a company that had never before traded crude—privileged access to the market for South Sudan’s oil, the country’s most valuable resource and the source of the vast majority of its national wealth.* Crude oil earnings accounted for 81% of government revenue in the second half of 2018, when the Afreximbank trade finance deal was first in place.* Trinity Energy was awarded more than 40% of crude cargoes contracted by the government from June 2018 to May 2019.* At the same time, the company 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.* *
The trade finance facility also 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 and Afreximbank.* *
The Sentry interviewed a former Trinity Energy employee and reviewed the trade finance facility, bank statements, emails, internal memos, and ministerial correspondence and found that the arrangements between Trinity Energy, Afreximbank, and the government of South Sudan were contrary to South Sudanese law, and their implementation raised red flags for bribery, tax evasion, and trade-based money laundering.* *
The investigation found that Trinity Energy spent millions of dollars on “facilitation” and “business acquisition” costs for the Afreximbank deal, including 18.7 million South Sudanese pounds (SSP) ($125,000) in payments to the government committee responsible for approving the deal. * 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.* * * * The South Sudanese government’s actions were at odds with its own laws on procurement, competition, transparency, and petroleum revenue management.* * *
The absence of checks to government power in South Sudan opens the door to commercial dealings that are based on personal relationships and the exchange of benefits and favors. The result is that companies and the executive branch can conduct business in the absence of oversight or transparency and with scant regard to the rule of law, economic sustainability, and the wellbeing of the nation and its citizens. State officials and businesspeople operate in an environment of impunity that incentivizes rather than deters negligence, rent-seeking, and illegal activity.
- The United States, European Union, United Kingdom, Canada, and Australia should investigate and, if appropriate, sanction individuals and entities involved in corrupt oil deals. South Sudan’s oil sector, rife with opaque deals and a lack of accountability, remains a cash cow for the ruling elite and their transnational networks. Targeted network sanctions have the potential to disrupt the illicit money flows derived from the theft of South Sudan’s main natural resource. This report uncovers red flags for corruption and evidence of support to those undermining peace in South Sudan, including the use of a trade finance agreement to finance army spending and the supply of fuel to a UN-sanctioned general, who is now the chief of staff. The identified conduct is consistent with sanctions designation criteria under the relevant anti-corruption and South Sudan-specific sanctions authorities.
- 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. Financial institutions should also undertake increased screening, enhanced ongoing monitoring, and transaction reviews to identify, investigate, and report potentially suspicious financial activity related to South Sudan, especially with respect to international networks profiting from such activity. Additionally, financial institutions should carry out enhanced due diligence on high-value letters of credit or similar instruments issued to companies beneficially owned or controlled by South Sudanese PEPs, influential public officials, military officers, their families, and their business associates, as well as on all parties to a transaction. This should include ongoing monitoring of the transaction through to completion.
- Afreximbank should initiate an independent investigation into its relationships and transactions with Trinity Energy and the government of South Sudan. The investigation should include a review of whether the initiation and execution of the trade finance facility described in this report complied with Afreximbank’s policies, in particular its anti-bribery and -corruption (ABC) and anti-money laundering (AML) policies.* * The investigation should also probe how the financing provided to Trinity Energy was utilized and whether Trinity Energy breached any representations or warranties set out in the financing agreement.
- The UN Panel of Experts on South Sudan should investigate Trinity Energy’s support—via monetary payments and fuel supplies—for political and military leaders and entities. Notably, Trinity Energy’s provision of diesel supplies to UN-sanctioned General Santino Deng Wol should be investigated. Trinity Energy provided support to military elements during a precarious time in South Sudan’s peace process, and the supplies may have perpetuated violence and stalled efforts toward the implementation of the peace agreement. If appropriate, the UN Panel of Experts should recommend the imposition of additional sanctions and other accountability measures.
- 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. Uganda particularly should investigate the trades identified in this report for which no physical trade was recorded, a classic red flag for trade-based money laundering. Kenya should investigate the finances of Kenyan national Ann Kathure Rutere to ascertain whether any dubious or illegal payments or deposits have been made into her accounts. Where appropriate, Kenya and Uganda should launch criminal proceedings to repatriate assets.
- 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 fueling conflict. In accordance with Chapter IV, the government of South Sudan must reorient its priorities to make sustainable development, sound fiscal management, transparency, accountability, and the wellbeing of its citizens central pillars of economic policy. The government of South Sudan should also conduct a rigorous investigation into the 2018 trade finance facility between Afreximbank and Trinity Energy Limited, as well as its implementation, to identify breaches of the laws of South Sudan and prosecute transgressors.
This investigation was possible largely due to the courage of Biswick Kaswaswa, Trinity Energy’s former finance manager. Over a period of almost three years, The Sentry conducted a series of in-depth interviews with Kaswaswa, who worked for Trinity Energy at a crucial time in the evolution of the trade finance deal. His courageous story has also been highlighted by others, including the Platform to Protect Whistleblowers in Africa (PPLAAF).