The UK anti-money laundering unit, Serious Organised Crime Agency (Soca), gave authorisation for the transfer of $875 million to accounts linked to a former Nigerian oil minister and convicted money launderer in the controversial Malabu scandal, JP Morgan has said.
The shocking revelation is contained in High Court documents filed by U.S. banking giant, JP Morgan Chase Bank, last week, seen by PREMIUM TIMES London partner, Finance Uncovered.
The claims were filed by the bank to counter the massive claim for damages filed by the Federal Republic of Nigeria in 2017.
Last November, the Nigerian government had quietly sued the bank for $875 million (N315 billion) in the London courts over its alleged failure to block payments made from the massive Malabu oil deal that is subject to a string of international corruption investigations.
The notorious Malabu deal, involving OPL245, involved Shell, Italian oil company ENI, a convicted money launderer and former Nigerian oil minister, Dan Etete, a former Nigeria president Goodluck Jonathan and his then oil minister, Dieziani Alison-Madueke.
The court claims were made as part of a wider drive by President Muhammadu Buhari to recoup massive sums believed to have been siphoned out of Nigeria by previous regimes.
In the civil claim issued in the High Court, the Nigerian government argued that JP Morgan had been "grossly negligent" when it was banker to a previous government. The claim, seen by Finance Uncovered, alleged that JP Morgan did not act "with the reasonable care and skill to be expected of a bank in compliance with the laws of England and Wales" when it authorised enormous payments resulting from the 2011 oil deal.
There was an "abuse of the banking system", the claim said, adding that JP Morgan "could and should" have done enough reasonable due diligence to discover the deal involved the "misappropriation" of up to $1.1 billion from state coffers. It, therefore, demanded that the bank repay $875 million it paid out to the money launderer, plus interest, and to account for the rest.
But in its counter claim, the U.S. bank claims it repeatedly sought consent from the Serious Organised Crime Agency (Soca) to make the payments and instead of being told to block the transfers, the bank says it was given the green light to proceed.
Details of 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 documents show that 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 then Home Secretary, Theresa May.
THE MALABU DEAL
The controversial payments, made to a front company controlled by Mr. Etete, were the proceeds from what is believed to be one of the world's most corrupt oil deals.
As oil minister in the last week of the late Sani Abacha's regime in 1998, Mr. Etete awarded a massive untapped oil block off the coast of Nigeria known as OPL 245 to a company called Malabu, which he secretly co-owned with Mr. Abacha's son.
After leaving government and following several years of legal disputes, Mr. 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 involved a series of back-to-back agreements which would make Malabu surrender all rights to OPL245 to the Nigerian government in exchange for $1.1 billion. And in parallel, Eni and Shell agreed to transfer a total $1.3 billion to the Nigerian government in exchange for OPL245.
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 Mr. Etete. At the time of the deal, Shell and Eni knew not only that Mr. 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.
JP Morgan's Controversial Role
There have been concerns over JP Morgan's role in the deal, with arguments that its London branch should never have facilitated the transfers to Mr. Etete's Malabu in 2011 and 2013. The Nigerian government based its claim on this premise when it filed its charges last November.
For a long period of time, JP Morgan denied any wrongdoing but never provided any details on why it decided to proceed with the transfers until last week when it filed the fresh claim.
In the bank's defence, filed by City law firm Freshfields Bruckhaus Deringer, it argues that the instructions to pay Mr. 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 Mr. Etete and that he had a money laundering conviction.
It however argued strongly that it complied fully with UK anti-money laundering laws by raising a series of Suspicious Activity Reports with Soca for various requests to pay Mr. Etete's company over two years. These reports, it said, would have detailed the bank's concerns, including any red flags about Mr. Etete, Malabu and his money laundering conviction.
It argued further that officials from Soca, which was disbanded by Theresa May in late 2013 when its much criticised operations folded into the new National Crime Agency, NCA, would then have made various checks and assessments before giving any permission to proceed.
In its court filing, JP Morgan says except on one occasion, it was repeatedly given consent by officials at Soca. It argued further that on the one occasion in July 2013 when it requested payment of $74 million, Soca refused but made a U-turn a few weeks later. The documents also claim that on two occasions, even after Soca had given consent, the payments failed because banks in Switzerland and Italy declined to touch Mr. Etete's money.
But in August 2011, the bank secured the transfer of two payments totalling $801.4 million to Malabu accounts at two Nigerian banks.
An anti-corruption campaigner at Global Witness, which has spent years investigating the OPL245 deal, Barnaby Pace, said the revelations in JP Morgan's new court filing raise serious questions for the UK authorities.
"If we want to stop corrupt deals happening in the future we need to address the systems that make them possible," he said.
"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."
When probed on why the UK anti-money laundering enforcement agency allowed huge sums to pass to a convicted money launderer, the National Crime Agency, the successor organisation to Soca, told Finance Uncovered that the transaction predated the NCA's existence.
It however refused to comment on "individual cases of litigation".
Investigators into the deal allege 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.
Finance Uncovered reported in 2017 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.
Internal Shell documents obtained by Finance Uncovered and Global Witness revealed that 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."
Efforts to speak to a spokesperson for President Muhammadu Buhari's presidential advisory committee against corruption, Bolaji Owasanoye, we're unsuccessful.
In March, an Italian court adjourned the trial of Shell and Eni and its former executives to May. All of them have consistently denied any wrongdoing. Mr. Etete, who remains unreachable, has also denied wrongdoing.
Similarly, former president Jonathan, who is not facing trial, has also denied the claims of wrongdoing.