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It looked like
a great godsend for Nigerian taxpayers where more than half lived “
“Two giant energy companies offered more than $ 1 billion to drill oil on an ocean strip off the coast of the country.
But there was a problem: in the 1990s, a corrupt regime had sold the drilling rights to a senior minister who was also a convicted money launderer. So the booty of this new deal was in his pockets. JPMorgan Chase had been asked to ease payment for 2011, which posed some challenges for the largest bank in the western hemisphere. “We remain suspicious that these agents could be the process[[[[
]]about official corruption, ”a London anti-money laundering official wrote in an email from BuzzFeed News.
Banks should be on their guard for clues about possible corruption, money laundering or terrorism. When they detect it in a proposed transaction, they need to alert law enforcement and decide whether to finalize the payment.
In an email to one of JPMorgan’s directors, the anti-money laundering officer explained the bank’s options. First he wrote: “We could refuse to pay.” Alternatively, they could ask a court to decide what to do.
Or they could find a way to make the payment – by sending it via the UK. That way, it would run into fewer obstacles than if it were routed through the US, where it would be much more likely to be blocked, the money laundering commissioner wrote.
The payment was subject to a court testimony by the bank’s lawyers and anti-money laundering officers, which a court testimony described as a “high-level review”. In the end, JPMorgan sent the money – and used its UK office to close the deal, though it is not known if any other offices were used as well. Much of the money ended up with the corrupt ex-minister, who spent it on a private jet and big game hunting. JPMorgan earned an undisclosed fee.
The deal has since become an international scandal, resulting in jail terms for two of the middlemen involved. Executives from Shell and ENI, the energy companies that bought the oil rights, were acquitted on corruption charges in an Italian criminal court on Wednesday. The current Nigerian government is suing JPMorgan in a UK court, arguing that “no sane and honest banker” should have approved the payments.
JPMorgan says it took all the precautions it could. However, documents verified by BuzzFeed News, including materials that are part of the FinCEN Files investigation, show that the banking giant sent the money despite several clear warning signs of corruption that its own employees unearthed and brought to the attention of senior managers.
After the first payments were received, JPMorgan employees in the US opened a new investigation against one of the Shell companies used in the alleged fraud. These officials reported their suspicions to the US Treasury Department. And as money moved around the world, employees from other major banks checked the transactions involved – and reported their own concerns about possible corruption to the US Treasury Department. Deutsche Bank even launched a “special investigation” into the ex-minister’s finances in conjunction with law enforcement agencies.
Still, JPMorgan approved a final $ 75 million transaction to close the deal. Months later, a JPMorgan financial crime officer again raised concerns about the company’s “corruption risks”.
In response to an extensive letter requesting comment, JPMorgan issued a statement through a spokesman: “We believe that we have fully met our legal and regulatory obligations on this matter and that Nigeria’s ongoing legal claims are wholly unfounded, so will we defend the claim robustly in court. “
In court, JPMorgan has argued that it received proper approvals for the transactions from Nigerian officials and was not responsible for investigating the recipients of the money. The bank has produced a testimony from an executive involved in the deal that JPMorgan was not instructed to proceed with the payment after receiving instructions from Nigerian officials and permission from the UK authorities. “I don’t think the bank had a realistic alternative other than making a payment in accordance with its contractual obligations to its client,” the official said.
Prior to the Italian court ruling, Shell and ENI told BuzzFeed News that they still believed the transactions were legal. Shell and ENI issued statements on Wednesday welcoming the acquittals. “We have always claimed that the 2011 settlement was legal,” said a Shell spokesman. “At the same time, it was a difficult learning experience for us. Shell is a company that works with integrity and we work hard every day to ensure that our actions not only follow the letter and the spirit of the law, but also the wider Society’s expectations of us. “
Since last fall, the FinCEN files, an investigation based on thousands of government documents shared by BuzzFeed News with the International Consortium of Investigative Journalists, have shown large banks around the world are shedding trillions of dollars despite warnings from their own staff Approving suspicious transactions could be crime related.
The investigation prompted the UK legislature to open a formal investigation into government oversight of banks and money laundering. UK companies have been reported as suspicious activity more than 3,000 times in FinCEN Files, more than any other country. In a secret report from the US Treasury Department, American officials described the UK as a “higher risk jurisdiction” and compared it to notorious money laundering centers “like Cyprus”.
JPMorgan’s anti-money laundering commissioner’s email raises further questions – why a suspicious billion dollar payment would face fewer obstacles if it were made via the UK rather than the US.
JPMorgan is one of the most famous American financial institutions. Its founder, John Pierpont Morgan, helped usher in the Gilded Age in the late 19th century. The current CEO, Jamie Dimon, is one of Wall Street’s most recognizable executives. The bank is valued at more than $ 470 billion and manages more than $ 2.5 trillion.
Nigeria has Africa’s largest economy, powered by the country’s vast oil and gas reserves. But government corruption has for a long time not put that wealth into the hands of its citizens, millions of whom live in poverty. A former government and World Bank official estimated that more than $ 400 billion in oil revenues have been stolen or poorly managed since Nigeria’s independence in 1960.
The problem was particularly serious during the military dictatorship of Sani Abacha in the 1990s. He is believed to have embezzled $ 5 billion from the country during his five-year tenure.
Dan Etete was Abacha’s petroleum minister. In 1998, the Etete Ministry gave control of a deep-sea oil reserve to a company called Malabu. The owner of the company was none other than Etete himself.
In the same year Abacha died and Nigeria began a transition to democracy. The new government claimed that Etete stole the oil rights for his personal gain, but after a series of legal disputes, he managed to maintain control.
In 2007, a French court sentenced Etete for using a pseudonym to open a Swiss bank account and injecting illegal cash into French real estate. In 2009 his belief was confirmed.
Research by BuzzFeed News found that Shell’s top executives knew the money would go to Etete but were still on the lookout for the purchase. For the deal to happen, the energy companies had to find banks willing to send the money.
Shell hadn’t wanted to deal directly with Etete because of the risk of corruption, so a deal was struck in which the money would be paid to the Nigerian government, which in turn would pass it on to Etete.
With Nigeria already a JPMorgan client, the bank agreed to act as an escrow account for the deal. An account has been set up where the money is received from Shell and ENI and sent to the final recipient.
In May 2011, JPMorgan tried to deposit the first tranche of money into an account in Switzerland. However, the Swiss bank was concerned that the funds were linked to corruption and blocked payment.
The document claiming to be Nigeria’s official approval for the deal was faxed from a Hilton hotel rather than a government office.
This has led JPMorgan’s financial crime staff to scrutinize the deal in detail, according to court records.
One wrote that he thought there were red flags. For example, the document claiming to be Nigeria’s official approval for the deal was faxed from a Hilton hotel rather than a government office. “[T]The communications reflect a strong sense of urgency, ”he wrote, asking,“ Was the rationale for this understood? “JPMorgan has argued in court that the Hilton fax was” not unusual or suspicious “.
In JPMorgan’s London office, the money laundering officer assessed the situation. He wrote in an email that he had pondered the deal overnight and directed a colleague to file a so-called suspicious activity report with the UK’s Serious Organized Crime Agency. Over the course of nine of these reports, first reported by Finance Uncovered, JPMorgan found Etete’s money laundering conviction, raised concerns that Etete owned Malabu and indicated that the transaction was rejected by the other banks has been. JPMorgan asked for permission to proceed with the deal despite these concerns.
While the bank waited for an answer, the money laundering officer warned his colleagues via email that “these means could be the procedure[[[[sic]]corruption by civil servants. “The version of the email received from BuzzFeed News was originally made available to Italian prosecutors investigating Shell and ENI. The bank redacted a few passages and claimed a legal privilege, a claim that the UK Serious Fraud Office” has yet to make Has decided”.
“JPMorgan needs to be sure that it is taking the appropriate steps,” wrote the anti-money laundering officer. Not only did the anti-money laundering officer refuse the payment or seek help from the courts, he suggested going to the Nigerian attorney general or, given the size and sensitivity of the payment, perhaps even the president himself.
“Of course there doesn’t seem to be a disagreement about making a payment from the UK.”
The anti-money laundering commissioner’s JPMorgan colleagues would likely block the transaction, he wrote. Britain was a better choice. “There clearly does not seem to be a contradiction in making a payment from the UK,” he wrote, “which JPMorgan would refuse in the US based on the same pattern of facts.” He didn’t say why.
He also asked that “we review the legal risks if we proceed with the payment[[[[sic]]under the circumstances. “It is not known what legal advice the bank received. The money laundering officer did not respond to requests for comments.
The Serious Organized Crime Agency eventually wrote to JPMorgan that they “agreed for you to proceed”. The agency warned that JPMorgan would continue to have a responsibility to conduct its own due diligence and make its own decision.
The Serious Organized Crime Agency has since closed. Its successor, the National Crime Agency, told BuzzFeed News that it could “neither confirm nor deny” what happened, but noted that under the law at the time, it could only refuse to approve a transaction if it was a “realistic one.” Proposal for positive prosecution “give action” within 31 days.
It’s not clear who made the final decision within JPMorgan, and JPMorgan declined to identify the person in its response to BuzzFeed News. Bank employees have testified that the payment was “the subject of a high-level audit” and that the bank has consulted lawyers from senior law firm Clifford Chance on the legality of the transaction. Clifford Chance declined to comment.
The bank made the first payment in August 2011. The US department of the bank was already investigating this in November. A US finance detective warned in an email that “JPMC has identified possible concerns about foreign corruption,” although it has not yet confirmed the wrongdoing.
Around the same time, the US Department of Justice opened a probe. Other banks began tracking down the money and reporting what they saw to the U.S. Treasury Department via suspicious activity reports.
A month after the funds were received, Etete transferred much of the money from Malabu to Rocky Top Resources, another company whose finances have been scrutinized.
In 2012, Standard Chartered found that Rocky Top had sent $ 17 million to a company called Gunes General Trading that was apparently laundering money in the United Arab Emirates. It was later revealed that Gunes is controlled by Reza Zarrab, who was arrested by the US in 2016 for running a money laundering organization in the Middle East. The next year, Deutsche Bank uncovered suspicious Rocky Top-related transactions worth $ 271 million, including direct payments to Etete for an armored car, hunting trips to South Africa and a 17-seat Bombardier 6000 jet that authorities later confiscated .
In July 2013, after a Nigerian anti-corruption agency said Etete had used Rocky Top to launder the proceeds of the Malabu deal, JPMorgan reported its own suspicions about the company to the US government, the FinCEN Files show. The full contents of this suspicious transaction report are not known, but a later filing shows that it is related to a UK energy company’s $ 10 million payment to Rocky Top. JPMorgan didn’t respond to questions about Rocky Top payment.
JPMorgan’s investigation into Etete’s relationship with the bank was still ongoing, and one of the financial crime officials involved recommended that Etete be placed on an internal watch list of people whose transactions required specific approval by anti-money laundering officers.
Etete remains unrepentant. He owns a number of luxury villas in Dubai.
The bank followed that advice – but only after transferring the final $ 75 million payment from the Shell deal in August 2013, court records show. In court, JPMorgan has argued that timing was irrelevant to the transaction, which financial crime officials had already examined.
It was around this time that JPMorgan wrote to another client, Arcadia Petroleum, to find out why Rocky Top had paid $ 10 million despite “corruption risks.” This is evident from documents shared with BuzzFeed News by Finance Uncovered.
Arcadia assured the bank that the companies “have no business relationship” and that the transactions are merely paying back the cost. However, it was later reported that the Arcadia CEO had advised Etete on the oil law deal. Arcadia Energy did not respond to a request for comment. it has previously denied any wrongdoing.
Nigeria’s lawsuit against JPMorgan is pending in UK courts. The trial is scheduled to take place next year.
Etete remains unrepentant. He owns a number of luxury villas in Dubai, including a mansion in Emirates Hills, a gated community surrounded by artificial lakes, and an 18-hole championship golf course named after Beverly Hills. In a rare interview last year, Etete described the allegations against him as “political propaganda”. ●
March 17, 2021, 5:12 p.m.
This story has been updated to reflect Wednesday’s judgment in the Italian criminal court acquitting Shell, ENI and their executives on heightened international corruption charges. The judge’s final comments on the ruling are expected in the coming weeks.