5 Red Flags in Petroleum Deal Documents That Indicate Fraud

Most petroleum fraud doesn’t arrive looking like a scam. It arrives looking like a real deal — with a company registration, a bank comfort letter, and a contact who answers the phone. The documents are the weapon. Knowing what to look for is the defense.

Here are the five document red flags we see most often in our due diligence assessments — and why each one matters.

1. Bank Comfort Letters With Outdated SWIFT Formats

A bank comfort letter (BCL) is one of the most commonly forged documents in petroleum transactions. It’s designed to confirm that a buyer has adequate funds to complete a transaction, and it carries the weight of the issuing bank’s name.

The problem: most people reviewing a BCL don’t know what a legitimate one looks like. Key things to check:

The SWIFT format should match current interbank messaging standards (MT700 series for documentary credits; standalone comfort letters follow no single standard, which is part of what makes them easy to fake)
The correspondent bank named in the letter should be verifiable against the issuing bank’s actual correspondent network
Contact the issuing bank directly — not through contact details on the letter, which can be spoofed — to verify the letter’s existence

We’ve assessed BCLs that were structurally perfect but originated from banks that have no record of the document or the signatory. A letter that looks right is not the same as a letter that is right.

2. Company Registrations That Don’t Match the Signatories

Every company has authorized signatories on record with its registration authority. In legitimate transactions, the person signing documents should be one of them.

What to check:

Pull the company’s filing from the relevant jurisdiction’s public register (Companies House for UK entities, the SEC EDGAR for US issuers, local registrars for other jurisdictions)
Compare the name of the person who signed your LOI, term sheet, or contract against the registered authorized signatories
Check the signatory’s appointment date — a signatory added days before the deal submission is a flag

We regularly see deals where the person emailing the transaction is not listed as an authorized signatory anywhere in the company’s public filings. Sometimes this has a benign explanation (a junior employee acting under a power of attorney). More often, it indicates the company registration is either borrowed or fabricated.

3. SGS or Inspection Reports Referencing Unverifiable Vessels

Proof of product in petroleum transactions typically comes in the form of an SGS inspection report, a Q88 (for tankers), or a cargo manifest. These documents confirm the physical existence of the commodity.

The fraud pattern: Reports are generated for real commodities on real vessels — but the specific cargo, date, and port don’t exist in public maritime records.

How to verify:

Cross-reference the vessel name and IMO number against Lloyd’s List Intelligence or MarineTraffic
Confirm the vessel was at the stated port on the stated date using AIS (Automatic Identification System) data — this is publicly available and free to check
Contact SGS or the named inspection company directly to confirm the report number exists in their system

A genuine SGS report can be verified with a single phone call or portal query. If a counterparty resists third-party verification of their product documentation, treat that resistance as the answer.

4. Audited Financials That Show Revenue Without Cost of Goods

Physical commodity trading is a volume business with thin margins. The financial profile of a legitimate petroleum trading company looks a specific way:

High revenue relative to assets (physical traders don’t hold much inventory)
Cost of goods sold (COGS) that is close to revenue — typically 90%+ of the revenue line
Modest net margins (2–5% is normal for physical trading; significantly higher suggests misrepresentation)

The fraud tell: fabricated financials often show revenue figures that look plausible but COGS that are zero, missing, or implausibly low. A company claiming to have traded 500,000 barrels of crude with no cost of goods recorded has not traded 500,000 barrels of crude.

If the financials were prepared by an accounting firm, verify the firm’s registration and call them to confirm the engagement. Fabricated accountant letters are common.

5. Mandate Letters From Intermediaries With No Verifiable Principal

In petroleum trading, mandate letters are used by intermediaries to demonstrate they have authority to sell on behalf of a principal (the actual holder of the commodity or refinery allocation). A mandate letter that cannot be independently verified is essentially worthless — and often deliberately so.

What legitimate mandate letters include:

The full legal name and registration details of the principal
Contact information for the principal that you can verify independently
A specific product, volume, and pricing basis
A defined validity period

What red-flag mandate letters do instead:

Reference a “government authority” or “national oil company” that has no public record of the deal
Name a principal that turns out to be another intermediary — creating a chain of mandates with no verifiable source
Restrict you from contacting the principal directly (“all communication must go through us”)

The restriction on direct contact is the clearest indicator of fraud. In a legitimate transaction, the principal wants to know who their ultimate buyer is. Any structure that systematically prevents that contact protects someone — and it isn’t you.

The Common Thread

Every red flag on this list has one thing in common: it requires verification that goes beyond the document itself. The document can be forged. The underlying record — a port authority AIS log, a companies register filing, an SGS report portal query — cannot.

The BarrelBridge due diligence process goes off-document on every assessment. If you have a deal on your desk and you want a structured assessment, submit it here or contact us to discuss your situation.