05 Oct 2020
Classified documents from Britain’s financial crime agency have revealed how it allowed JP Morgan to pay $875 million of suspicious funds to Dan Etete, a former Nigerian oil minister widely known as a convicted money launderer.
The documents, rarely seen Suspicious Activity Reports (SARs), were filed by the banking giant’s London branch as it raised concerns about huge payments it was being asked to make by the Nigerian government to Etete.
The reports were filed in 2011 and 2013 to the UK’s Financial Intelligence Unit (FIU), which at that time sat within the now defunct Serious Organised Crime Agency.
According to the documents, JP Morgan’s compliance bosses warned the agency “the funds may constitute criminal property”.
But despite also being told that two other banks – one Swiss and one Lebanese – had refused to handle the funds – the FIU appears to have given JP Morgan tacit permission to make the payments.
In doing so, it may also have immunised JP Morgan from any future money laundering prosecution.
The money, the proceeds of the notorious OPL245 oil deal, was then allegedly used for kickbacks, to buy a private jet, an armoured Cadillac, and antique shotguns.
The documents underline serious failings in the use of SARs, which are meant to be a central plank in the international fight against money laundering.
Last week, a massive leak of suspicious activity reports from the US’s financial intelligence unit, FinCen, and published by the International Consortium of Investigative Journalists, revealed similar concerns.
Critics claim they are little more than exercises in ticking boxes that allow banks to duck their responsibilities.
Susan Hawley, director of Spotlight on Corruption, said the SARs regime needed a drastic overhaul.
“There is little prospect of winning the battle against money laundering without some kind of radical shift in how we deal with this,” she said.
“It can’t be right that banks can effectively shrug off their responsibility for handling dirty money by filing a SAR and passing the buck to overstretched and underfunded law enforcement bodies.”
JP Morgan declined to comment on detailed questions, citing ongoing legal proceedings. The bank is being sued by Nigeria in connection with its role in the deal. It has strongly denied any wrongdoing.
A spokesman for the National Crime Agency, which now oversees the FIU, said at the time of the JP Morgan payments, consent could only be declined if there was a realistic prospect of “positive law enforcement action” within 31 days of a refusal.
OPL245 – The background
In the OPL 245 deal, Shell and Italy’s Eni in 2011 paid the Nigerian government of then president Goodluck Jonathan a combined $1.3 billion for an oil block. Of that amount $875 million was paid to Malabu Oil & Gas, a company controlled by Etete.
Etete had awarded Malabu the rights to the block in 1998 when he was Nigeria’s oil minister.
Within weeks of the deal in April 2011, half of Malabu’s money was allegedly packed into bags and paid out to Nigerian government officials and Western oil executives as cash bribes.
The major players in the deal, including Shell and Eni, are being tried on various corruption charges in a major criminal trial in Milan. All have denied wrongdoing.
But the deal has also spawned further lawsuits, including efforts by a new presidential regime in Nigeria to recover assets.
The latest is a $1 billion case brought by the Republic of Nigeria against JP Morgan in the UK. Nigeria claims the bank failed in its due diligence and duty of care when it processed the payments.
JP Morgan says that it has done nothing wrong and that it followed “valid, binding and irrevocable” instructions from its client, the Federal Government of Nigeria.
The SAR files
It has cited its SAR submissions in its defence, claiming that the FIU gave it consent to make the payments.
The SARs were obtained by Eni via the UK courts last year, and have been accepted as evidence in the ongoing criminal trial in Milan.
They also show just how strong the corruption suspicions were among JP Morgan bosses before they made the payments – two of around $400 million in 2011, and a final $74 million in 2013.
In each of the nine SARs made by the bank over this two year period, Dan Etete is named as the “main subject” of its suspicions.
In its first report to the FIU in June 2011, the bank stated that OPL 245 had been originally awarded to Malabu in 1998 and that, “according to public domain sources, Malabu is owned or substantially owned by Daniel Etete, a former Minister of Petroleum in Nigeria from 1995 – 1998”.
The report also noted Etete’s recent money laundering conviction in France in 2007.
The bank then told the FIU that one attempted payment to Swiss bank BSI Lugano had already been rejected “for compliance reasons,” because BSI was “not comfortable” receiving the funds.
After a second bank, this one in Lebanon, rejected the money in August 2011, JP Morgan emailed the FIU to explain it had received “new instructions to split the funds between two local Nigerian Banks”.
These instructions, according to the compliance official, had “resulted from the rejection by Banque Misr Liban of the earlier payment”.
This turned out to be the last chance that UK law enforcement had to stop the bulk of the money flowing to Etete.
According to Susan Hawley, the proposed splitting of funds should have stopped JP Morgan in its tracks.
But at this point, a senior FIU officer emailed JP Morgan to say: “This is a business decision for JP Morgan to make, taking into account the legitimacy and all aspects of due diligence regarding this new request.”
In a highly revealing exchange in August 2011, a JP Morgan compliance director forwarded this email to a colleague, writing that there was “no need for a further SAR… Provided we are sufficiently happy with the legitimacy of the instruction then no objections from SOCA.”
By Margot Gibbs and Lionel Faull, Premium Times, 1 October 2020
Read more at Premium Times
RiskScreen: Eliminating Financial Crime with Smart Technology
Advance your CPD minutes for this content, by signing up and using the CPD WalletFREE CPD Wallet