The UK’s frontline anti-money laundering unit gave the green light to transfer $875m from a “corrupt” oil deal – to a high profile politician with a money laundering conviction.
The shocking revelation is contained in High Court documents filed last week by JP Morgan Chase Bank.
Defending itself from a massive claim for damages by the Federal Republic of Nigeria, the US bank claims it repeatedly sought consent from the Serious Organised Crime Agency (Soca) to make the payments.
But instead of being told to block the transfers, the bank says it was given the green light to proceed.
Why that permission was granted has not been explained, but campaigners say the decision means there is “real cause for concern” about the UK’s current anti-money laundering regime.
The green lights to make the payments in two tranches in 2011 and 2013 were given by Soca, at the time the UK’s main anti-corruption unit which reported to the Home Secretary – then Theresa May.
The payments – to a front company controlled by Nigeria’s former oil minister Chief Dan Etete – were the proceeds from what is alleged to be one of the world’s most corrupt oil deals.
As oil minister in 1998, Etete had awarded a massive untapped oil block off the coast of Nigeria known as OPL 245 to a company called Malabu, in which he secretly held a major stake.
After leaving government and following several years of legal disputes, Etete decided to reject overtures from Russia and China and eventually sold the block to Shell and Italian oil company Eni in 2011 for $1.1bn.
The deal also involved the former Nigerian government of Goodluck Jonathan which agreed to act as a middleman. This meant Shell and Eni were not contracting directly with Etete.
At the time of the deal, Shell and Eni knew not only that Etete controlled Malabu, but also that he had been convicted on an unrelated money laundering case in Paris in 2007.
The 2011 deal has since triggered police raids in Italy and the Netherlands, and an array of legal cases. Shell, Eni and former executives from both companies are due to stand trial on corruption charges in Italy in May.
Campaigners who have investigated the deal have also long raised questions about JP Morgan’s role, arguing its London branch should never have facilitated the transfers to Etete’s front company in 2011 and 2013. JP Morgan has always and continues to deny any wrongdoing but until last week, it had never provided any details on what warnings it may have raised or why it decided to proceed.
As Finance Uncovered revealed last December, the bank is defending itself against a claim for $875m, plus interest, which was filed by the Federal Republic of Nigeria.
Nigeria alleges the bank had been “grossly negligent” in making the payments.
Finance Uncovered has now obtained JP Morgan’s defence, which was filed by City law firm Freshfields Bruckhaus Deringer last week.
In it, the bank argues that the instructions to pay Etete’s company were valid and legal and came from its client, the Nigerian government.
According to the court document, JP Morgan also admits it knew it was paying the money to a company associated with Etete and that he had a money laundering conviction.
However, it says it complied fully with UK anti-money laundering laws by raising a series of Suspicious Activity Reports with Soca for various requests to pay Etete’s company over two years.
These reports would have detailed the bank’s concerns, including any red flags about Etete, Malabu and his money laundering conviction.
Officials from Soca, which was disbanded by Theresa May in late 2013 when its much criticised operations folded into the new National Crime Agency, would then have made various checks and assessments before giving any permission to proceed.
In its court filing, JP Morgan says it was repeatedly given consent from Soca.
Only one occasion, in July 2013 for a requested payment of $74m, did Soca refuse – but the agency made a U-turn a few weeks later.
On two occasions, even after Soca had given consent, the payments failed because banks in Switzerland and Lebanon declined to touch Etete’s money.
JP Morgan finally secured successful transfers for the bulk of the money in August 2011, two payments totalling $801.4m to Malabu accounts at two Nigerian banks.
Barnaby Pace, an anti-corruption campaigner at Global Witness, which has spent years investigating the OPL245 deal, said the revelations in JP Morgan’s new court filing raise serious questions for the UK authorities.
He said: “If we want to stop corrupt deals happening in the future we need to address the systems that make them possible. There must be accountability for individuals and institutions that enable corruption in major financial centres like London.
“The failure of the UK’s anti-money laundering regime to prevent this billion dollar payment to a front company owned by a former minister and convicted money launderer is a real cause for concern.”
We asked the National Crime Agency, which is the successor organisation to Soca, why the preeminent UK anti-money laundering enforcement agency allowed huge sums to pass to a convicted money launderer.
While refusing to comment on “individual cases of litigation”, it said that the transaction predated the NCA’s existence.
The NCA added: “Under the Proceeds of Crime Act 2002 (POCA) a reporting organisation which has received a defence from the NCA, or formerly SOCA, under POCA for a transaction has a defence against money laundering charges in a court. This is commonly known as the consent regime.
“Responsibility for undertaking the transaction or activity, or not undertaking it, remains with the reporting organisation.”
The Home Office is considering a series of questions posed by Finance Uncovered at the time of publication.
It is alleged that the money from the OPL245 deal was used to buy a private jet and armoured Cadillacs in the US, fine art and luxury shotguns in London, and to pay a series of kickbacks to various officials.
Last year Finance Uncovered reported that two Shell staff members now in the dock in Italy were believed to be former MI6 agents and that Shell had a policy of recruiting former security agents to an internal intelligence-gathering body, which had a direct line to top executives in London and The Hague.
According to internal Shell documents obtained by Finance Uncovered and Global Witness last year, a senior Shell executive received a briefing in 2010 that stated: “In country view [in Nigeria] is that the President is motivated to see [OPL]245 closed quickly-driven by expectations about the proceeds that Malabu will receive and political contributions that will flow as a consequence.”
The two former MI6 agents also shared intelligence with their superiors that rival Russian and Chinese oil companies were interested in acquiring the rights to OPL 245.
Shell and Eni and its former executives who are due to stand trial in Italy all deny any wrongdoing, as has Etete.
Goodluck Jonathan, who is not facing trial, also denies the claims.
*JP Morgan’s court filing can be read here.