The Quincecare duty, a U.K. legal standard, was tested again in a case brought in a London court by Nigeria against JPMorgan Chase & Company. According to the Quincecare duty, a bank must refrain from executing a customer’s instructions if the bank has reason to believe those instructions constitute an attempt to misappropriate the customer’s funds. Increasing attention has been paid to the Quincecare duty lately as novel forms of fraud mutate and multiply.
Judge Sara Cockerill decided against Nigeria on June 14, ruling that the Nigerian government failed to show that it had been defrauded or that JPMorgan Chase had been “grossly negligent.” At issue were three transactions totaling $875 million made during 2011 and 2013 related to the sale of an offshore oilfield license referred to as OPL 245. Nigeria filed for damages comprised of that $875 million in cash payments plus interest, bringing the requested judgment against the U.S. investment bank to more than $1.7 billion.
One focus of the case was Dan Etete, who owns Malabu Oil and Gas, is a former Nigerian Minister of Petroleum, and is a convicted money launderer. In 1998, Nigerian military dictator Sani Abacha issued oilfield license OPL 245 to Malabu Oil and Gas with Etete using a false identity. At that time, Etete was the nation’s Minister of Petroleum. Subsequent Nigerian administrations fought to wrest control of the oilfield away from Etete. Eventually, an agreement was reached in 2011 to sell the OPL 245 license to Shell and Eni, an Italian multinational oil and gas company. The three allegedly fraudulent transactions were part of that sale.
Roger Masefield, Nigeria’s lawyer, argued that JPMorgan Chase had breached its Quincecare duty when it overrode concerns expressed by its own compliance staff and sent $875 million to an escrow account controlled by Etete. “Under its Quincecare duty, the bank was entitled to refuse to pay for as long as it had reasonable grounds for believing its customer [Nigeria] was being defrauded,” said Masefield.
In a statement after the ruling, JPMorgan Chase said the judgment provided evidence that “we are prepared to robustly defend our actions and reputation when they are called into question.”