JPMorgan Chase has urged a London court to dismiss a lawsuit brought by the Nigerian government that argues the US bank facilitated the misappropriation of state funds amounting to $875m.
The lender said it received sufficient approvals from Nigerian authorities before proceeding with the transfer of funds from a government account it managed to accounts controlled by Dan Etete, a former Nigerian official convicted of money laundering.
The payments were made after a 2011 settlement aiming to end years of wrangling over the ownership over a controversial oil licence, that has since embroiled energy majors Royal Dutch Shell and Eni in corruption investigations in Milan.
The Nigerian government tossed the OPL 245 licence back and forth between Shell and Malabu, a domestic oil company backed by Mr Etete who first awarded it rights in 1998 when he was also the petroleum minister.
Abuja argues that it was “the victim of a serious fraud” involving payments of bribes to former and current Nigerian politicians and oil executives via the transfer of funds through Malabu accounts.
According to a skeleton argument submitted to the court, Nigeria argued that JPMorgan’s conduct was “grossly negligent”, saying the bank should have blocked the transfer of funds given it was already “on notice” of a fraud being perpetrated on its customer.
Multiple “red flags” should have caused JPMorgan to “refuse to make the requested payments”, Nigeria said. In its own court submissions, JPMorgan said it had “no duty to inquire into or investigate the validity or legality of the instructions it received”.
The bank, through its lawyer Rosalind Phelps, argued in the commercial division of the High Court that it had “no responsibility to look behind any payment instructions”, adding that there was no question over the “authorisation” of the transaction.
The hearing — taking place on Monday and Tuesday — comes after the UK government established a new task force to tackle economic crime, working with the financial sector to crack down on fraud, corruption and money laundering. Financial institutions are also grappling with public demands to go beyond their legal obligations and to conduct themselves in a manner that is in line with society’s expectations.
Separately, Nigeria has filed a $1.1bn legal claim against Shell and Eni to “recover the very significant sums lost to corruption and the unlawful activity” of the two energy majors.
Shell and Eni have said their transaction with the federal government was legal, adding the payment was made to the state and they had no part to play in what happened to the money afterwards. Many global banks shrank their overseas operations in the wake of the 2008 financial crisis and higher compliance requirements.
But JPMorgan maintained a big international presence, with operations in more than 100 countries, while executives argue it has sufficiently robust checks and balances in place.
The judge is expected to give his ruling in approximately two weeks and should the claim not be struck out, it will proceed to trial in the coming months.
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