Quick read: The Afren scandal and the banks that let it happen

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A recent criminal trial in London has revealed how banking negligence enabled a multi-million dollar fraud at the now defunct oil company Afren. Read on for a guide to Olivier Holmey’s feature in the February issue of Euromoney examining the errors made and what the financial sector can learn from them.

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1.      
Avenues to greater wealth

Not content with their Afren wages, Osman Shahenshah and Shahid Ullah, the company’s former chief executive and chief operating officer, conceived of two schemes to achieve greater personal wealth. The two men secretly negotiated with the bosses of Afren’s Nigerian business partners, Oriental Energy Resources and Amni International Petroleum, in the hope that either or both of them would add to their fortune. The Oriental scheme eventually delivered millions of dollars in undeclared revenue to Shahenshah and Ullah. Read more…


2.       The search for a bank begins

Sourcing the money was only a first step in the fraud. To retrieve the illicit funds, the oil executives still had to launder them. For that they required the services of an international bank. But finding one was no simple task, as due diligence thwarted their efforts. Read more…


3.       'Constantly thinking, strategizing, contemplating'

The fraudsters did not give up. They approached more financial institutions and attempted new ways to deceive their counterparties. One person assisting them in their search for a bank complained that the task’s complexity required “constantly thinking, strategizing, contemplating”. Read more…


4.       Accessing international finance

Eventually, Shahenshah and Ullah found a way in to the banking system. Nigeria’s Zenith Bank agreed to open an account through which their money would transit. This crucial error by Zenith finally allowed the fraudsters to access the Oriental funds. Read more…


5.       Four institutions duped

Apart from Zenith, the two men found other firms to unwittingly process the undeclared money they had obtained in Nigeria. Among them were UBS, Bermuda Commercial Bank and the law firm, Blaser Mills. Having acquired their services, the two fraudsters were able to launder their illicit gains, in part through the purchase of expensive homes in the Caribbean. Read more…


6.       A buyout overshadowed

Although Shahenshah and Ullah were only found guilty of fraud, abuse of position and money laundering in the Oriental scheme, the Amni scheme also came to light through their trial. It involved secret help provided by the two Afren executives to the head of Amni, as he sought to buy out his partners in that firm. Evidence heard in court brings into question the legitimacy of the management buyout’s funding and of the checks performed by the banks that provided it. Read more…


7.       Seeing through the lies

Uncovering the fallen executives’ fraud was no easy task. But one man, a Standard Bank employee, managed to see through the lies and blocked their efforts – at least for a time. As other institutions failed to prevent the crimes for which Shahenshah and Ullah have now been sentenced, this individual’s contribution serves as an example that rigorous due diligence can halt fraud. Read more…