Confronting Growing Challenge of Fraud


As financial markets become more complex, companies are faced with external fraud threats, writes Nume Ekeghe

As the business world gets more complex, fraudsters are becoming even more sophisticated in their approach to crime. At present, growing desperation among fraudsters has made many corporations admit that the possibility of having fraud related problem is ever present.

Indeed, there are examples of companies in the most secure and developed countries that have been victims of impersonation related fraud.

In the 2018 edition of Price Waterhouse Coopers’ Global Economic Crime and Fraud Survey, 49 per cent of organisations surveyed admitted to being victims of fraud and economic crime at some point.

In August 20019, Toyota Boshoku Corporation, lost over $37 million to fraudster while American media giant, Nikkei, lost $29 million to fraud in the same year.
This is just a snippet of the major external fraud cases recorded in 2019. But the business community has not been silent.

Following an attack on an indigenous oil and gas company in January 2020, the founder of ANAP Foundation, Mr. Atedo Peterside had twitted, “Clever fraudsters have invaded the business space too and it is not only cybercrime. Individuals and corporates need to be constantly alert and on their toes; the fraudsters are getting smarter. Lekoil has become the latest victim. Lekoil must chin up and bounce back.”

The response his tweet got was indicative of how big a problem corporate fraud has become. Less than 24 hours after he tweeted, his initial tweet had been retweeted 1,042 times, attracting over 110 comments and 344 likes.

Lekoil, of which Peterside, spoke had fallen victim to an impersonation ring that claimed to be representatives of the Qatar Investment Authority (QIA).

Lekoil’s CEO was introduced to the fake Qatari investors early last year by the Managing Partner for Seawave Invest, an independent consultancy firm specializing in cross-border transactions with a focus on exclusively on Africa, Bismark Abrafi.
The firm is based in Bahamas and targets opportunities primarily in Sub-Saharan Africa and the MENA region.

Seawave described itself as an independent consultant specialising in cross-border transactions, with a focus on Africa. The company said it wouldn’t comment on the matter until it conducted its own investigation. The firm is based in Accra, Ghana, according to its website.

However, after several visits by Nigerian officials, they found Seawave’s office, on the first floor of a modern building in the heart of the city, empty. Law firm Norton Rose Fulbright LLP advised Lekoil on the documentation needed for the deal.

“We understand that the matter is under investigation by Lekoil and we cannot comment further at this time,” it said in a statement.

THISDAY checks revealed that, Lekoil’s exposure was limited to funds, which it used to process the purported loan, estimated at $600,000. None of the company’s asset was tied to the fake loan, neither did Lekoil stake any fund as counterpart payment to secure the anticipated loan.

“No capital commitments have been made based on anticipated drawdowns, and that the Company will cover the cost of the site survey (estimated at c. $4 million) on OPL 310 as announced on 10 January 2020 from a mixture of existing cash resources and income from operations at Otakikpo, ”LEKOIL said in a statement posted on its website.

“Lekoil continues to generate positive cash flow at the operational level and will seek alternative funding for the future development of OPL 310 as a priority, including reactivating other existing funding discussions.

“The drilling of an appraisal well within OPL 310 is still expected to occur within the tenure of the license which expires on the 2 August 2022,” the statement added, assuring investors of a bright future. Understandably, the stock price ballooned moderately reflecting the confidence boosting impact of Lekoil’s openness.

Reward for Openness
“Not many companies are that lucky, ”says Dr. Eric Omo, a lawyer who specialises in oil and gas finance.
“Things are so bad these days. The fraudsters run wide and complex chains that are built with so much diligence and effort, even the most finicky companies could be victims.
“When these things happen what really matters is how the companies involved handle information dissemination, openness and stakeholders, ”Omo said.

“Those who open up are immediately seen as companies that can be trusted, ”he added.
In September 2019, a UK based energy firm’s executive was tricked into wiring about $220,000 to a Hungarian supplier because he believed his boss was instructing him to do so.

But the energy company’s insurance firm, Euler Hermes Group SA, told the Wall Street Journal that a clever AI-equipped fraudster was using Deepfake Software to mimic the voice of the top executive and demanded to be paid within 60 minutes.
What is different between how that company handled the case of external fraud is that unlike Lekoil, they held their cards close to their chest and speculated about what had happened.

In the case of Lekoil, things were handled differently. A timely intervention from Qatar’s sovereign wealth fund drew the attention of Lekoil to the problem. Thereafter, Lekoil was at the forefront of informing relevant stakeholders about the issue and disseminating timely information around progress into the situation.

“It is one thing to start an oil company, it is another thing to start an oil company that is different from anyone else, ”Chief Executive Officer of Lekoil, Lekan Akinyanmi, told Andrew Wilson, a business correspondence with CBS News in Davos, on 20, January 2020.
He added, “What we were hoping to do, and what we have started to do, is to do business in such a way as to make a difference in peoples’ lives.”

Issues around transparency, prudence and environmental impact considerations are at the heart of the way Lekoil has done its business. In particular, the company puts the community’s welfare first before embarking on any major investment or development, as was done at Otakikpo, one of its operational areas.

Equipped with a 7-member board, Lekoil has Samuel Adegboyega, as non-executive chairman, based on information available on Lekoil’s website as at 30 January 2020. Akinyanmi, who is CEO is not new to the oil and gas industry. He started his career as a field engineer traveling the world with Schlumberger before getting an MBA from the Massachusetts Institute of Technology and moving into finance. He worked for UBS Investment Research and later headed AllianceBernstein LP‘s international energy sector.
Lekoil’s strategy draws deeply from the experience of multinationals, which have done business in Nigeria for decades, especially in the area of community relations and engagement.

Next step
In a statement recently, the company said its board has appointed Mark Simmonds and Tony Hawkins, who are Independent Non-Executive Directors of the Company, to investigate the origination and execution of the QIA Facility Agreement, what steps can be taken to retrieve any monies already paid in association with the Transaction and the Company’s wider corporate governance practices.

Simmonds and Hawkins, it stated, were appointed to the board after the signature of the QIA Facility Agreement, “and did not have any connection with the origination or execution of the Transaction, making them suitable, in the wider Board’s opinion, to lead a fully independent review. They will be assisted by third party forensic investigators and legal counsel, as appropriate.”

While the response of the market has indicated that Lekoil handled the aftermath of the fraud incident satisfactorily, the key lesson is that openness is key to dealing with issues of this nature.

There is no silver bullet that will obliterate the issue of external corporate fraud from the modern business environment. However, organisations have to be more vigilant and proactive.

“We live in a world where these occurrences are inevitable. But for a company like Lekoil that has been a victim, there is every likelihood that they will do better equipped to manage these things because they are now at a position where they will question everything, and double check,”Omo added.