MELBOURNE (Reuters) - Some global banks briefly froze credit lines for Singapore metal traders last month after a unit of commodities giant Glencore (GLEN.L) uncovered fake warehousing receipts, people familiar with the matter said, reviving the spectre of a $3 billion (2 billion pound) scandal that rocked the trading world three years ago.
Though the impact has proved limited so far, the “forged” receipts for nickel stocks that Glencore’s Access World unit said it found still set alarm bells ringing - even though regulation and scrutiny have been tightened across the business since the 2014 Qingdao port scandal in China.
Two people who have metal storage dealings with Access World said the company told them the receipts were from a third party, not issued internally. At Qingdao, a firm allegedly duplicated notes pledging metal as collateral for multiple bank loans.
“We checked with (Access World) and all our stock was in good order,” said one of the people, an official at a Singapore trading house. But the firm did have its credit lines temporarily frozen by several banks while they investigated, the person said, speaking on condition of anonymity.
Metals traders told Reuters that a raft of international banks involved in providing finance to the sector, including Australia’s ANZ (ANZ.AX), France’s Natixis (CNAT.PA) and Rabobank of the Netherlands, temporarily froze some credit lines before for the most part resuming business.
Natixis declined to comment. Rabobank said it was aware of the news on forged warehouse certificates circulating in the name of Access World, and was “assessing the situation,” but could not comment further.
ANZ said that its “warehouse commodity financing was a small business within (the bank‘s) institutional division with only a handful of customers”, and declined to comment further.
In its statement disclosing the incident, Access World said it had become aware of “forged warehouse receipts” and urged holders of its warehouse receipts to authenticate them. Last week it said it would provide authentication for clients’ certificates on Feb. 10-15, after which it would honour “duly authenticated original warehouse receipts”.
The warehouse receipts concerned applied to stockpiles in Singapore, people said. Reuters was unable to confirm the volumes involved, nor whether finance had been advanced against them, or which, if any other locations were affected.
Glencore itself declined to comment.
The late January disclosure led to a frenzy of phone calls among trading houses and banks - and the cancellation of holidays over the Lunar New Year period - as warehousers combed through their stock to make sure all was in order.
“There’s a lot of ‘calm panic’ out there,” said an executive at another trading company in Singapore, speaking on condition of anonymity. At the time the news broke, he said, people were asking, “(What if) It’s internal fraud at a warehouse company?”
But the fallout appears to have been limited, partly because the type of alleged fraud attempted was via a third party. “It’s not systemic like the one in Qingdao,” said one banker familiar with the matter, who declined to be identified because he wasn’t authorised to discuss the matter.
Banks and trading houses have tightened procedures around collateral financing since Qingdao, particularly around limiting transfers of titles to metal.
The London Metal Exchange - the largest base metals exchange - set up a global inventory monitoring chain known as LMEShield for private stocks held outside its warehousing network, where rent is cheaper, but security is also lower.
Tighter scrutiny notwithstanding, the January incident left the metals trading business on edge and, for some, on hold.
“Our first reaction was, ‘Not another one! This isn’t China, it’s Singapore and (Malaysia‘s) Johor’,” said an official at one Western Bank active in financing metal, who declined to be identified.
“We were on green, we are now on amber. Until we know exactly what happened and how was it done, we wouldn’t be financing this name (Access World),” said the banker, who warehouses his metal with a competitor.
Reporting by Melanie Burton; Editing by Kenneth Maxwell