The Legal 500 Shipping Guide – Hot Topic: Fraudulently-issued Letters of Indemnity – Risks, Mitigation, and Prevention

Insights / / Singapore

Introduction – the contraction of Singapore’s Trade Finance industry
The recent spate of allegations of fraud or foul-play that have rocked Singapore’s beleaguered commodities market, and in particular the oil trading industry have brought to light the significant effect of various pervasive practices that are seemingly innocuous, but have potentially left the trade-finance banking industry reeling from billions of losses.

To name a few examples, the immediate short-term impact of the Hin Leong Trading (Pte) Ltd., Zenrock Commodities Trading Pte Ltd and Hontop Energy (Singapore) Pte Ltd sagas has seen various banks either ceasing their regional trade commodity finance operations, or exiting the trade and commodity financing industry altogether.

One only needs to look at ABN Amro Bank, who is ending all of their engagements in trade and commodity financing and shedding 800 jobs in the process, a decision that is at least in part linked to its overall exposure of around US$300 million to Hin Leong.

Likewise, Societe Generale SA (“SocGen”) was reportedly closing its trade commodity finance unit in Singapore and has halted fresh funding to trade finance firms in the region. Large Asian commodities trading clients with operations in Singapore would henceforth be handled by SocGen’s Hong Kong office, with SocGen ceasing ties with Singapore-based small and medium commodities trading firms.

Australia and New Zealand Banking Group has also reportedly decided to only service their existing commodity trading clients and will not take on any new business in commodity finance, following its exposure to Hin Leong Trading.

In this article, we will examine the role of letters of indemnity in international trade transactions, and the risks associated with its use in the commodities industry. We will conclude by looking at what steps can be taken by the industry as a whole to mitigate and prevent these risks.

Please click here to read the full article.

Feel free to get in touch with your usual contact at Ince or any of the authors for more information.

Kimarie Cheang

Kimarie Cheang Director and Head of China Practice, Singapore; Partner, Hong Kong

Mohammad Haireez

Mohammad Haireez Director and Head of Litigation, Singapore; Accredited Specialist (Maritime and Shipping Law), Singapore Academy of Law

Alankriti Sethi

Alankriti Sethi Associate

Thaddaeus Chan

Thaddaeus Chan Associate

Related sectors:


commodity finance

Quick links

The Legal 500 2021

“Very available and responsive to company developments in real time. Frank, clear advice – not just the ‘easy’ answer.”

The Legal 500 2022

“The solicitors who have handled our employment related issues are of the highest quality in terms of their specialist area of expertise, their professionalism and their approach to us as clients and as people. Special mention has to be made of Laura Livingstone. Laura became a key member of our team and felt more like a colleague than an external adviser – a colleague you could rely upon. Laura’s attention to detail, professionalism and responsiveness was second to none. Laura has come to know and understand us as individuals and this has enabled her to personalise her advice and even sometimes to preempt our future requirements. We have a very special and extremely valuable relationship with her and the firm.”

- The Legal 500

The Legal 500 2022

“Ince are an excellent “fit” with our specific needs. The firm has consistently provided a broad range of personnel-related advice and in our experience that advice has been consistently of the very highest professional standard: it has been timely, comprehensive, accurate and at a cost which is commensurate with the budget of an organisation of our size.”

- The Legal 500

The Legal 500 2022

“The firm has an unusually high degree of insight into the practices and policies required by the Gambling Commission as regards compliance with its own requirements and conditions – particularly Andrew Tait, derived from his previous in-house experience.”

- The Legal 500