Commonwealth Bank (ASX:CBA) - CEO, Matt Comyn
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  • Oil and gas explorer Petsec Energy (PSA) has reported $2.4 million was siphoned from its bank account by Houthi rebels in Yemen
  • Allegedly, the illegitimate Houthi Minister for Oil and Minerals made a false claim for Petsec’s cash
  • Despite being fraudulent, this claim was honoured by Arab Bank, Qatar National Bank, and Australia’s own Commonwealth Bank
  • This lead to Petsec and its business partner, Mitsui, having money transferred out of their accounts into those owned by the Houthi group
  • It’s unclear if the fraudulent transfers were the result of simple banking errors or more sinister means
  • Since announcing the news yesterday, Pestec shares have declined almost 17 per cent and last traded for 4.4 cents each

Oil and gas explorer Petsec Energy (PSA) has allegedly had $2.4 million stolen from its bank account by the Houthi rebel group in war-torn Yemen.

Three banks have been outed by Petsec for funding the Houthi group, which was responsible for the last year’s drone strike on Saudi Arabia’s Aramco oil and gas plant. Among these banks is Australia’s own Commonwealth Bank, though its involvement may have been unintentional.

The company told shareholders yesterday morning that an illegitimate claim was made for a Letter of Credit held by the Arab Bank in Sana’a, the capital of Yemen.

A Letter of Credit is a form of guarantee generally used in international trade. Usually, it is a guarantee from one bank to another that if a transaction with a buyer or seller falls through, the bank will cover any outstanding payments.

Suspicious banks or simple mistakes?

While the details around the banking fraud are “far from clear”, according to Petsec, the company gave its best interpretation of events.

Based on the information provided, it seems the Letter of Credit in question was previously issued to Arab Bank under contract agreements for Petsec’s Block 7 exploration target in Al Barqa, Yemen. Petsec also had $2.4 million (US$1.61 million) on deposit with Qatar National Bank (QNB).

In November 2019, a claim was made for the Letter of Credit from a party that had no right to make any such claim. Petsec said it told both banks the claim was illegitimate. Nevertheless, both banks honoured the claim.

Allegedly, Arab Bank requested that QNB release Petsec’s $2.4 million (US$1.61 million), and QNB acted on this request and sent the funds into an Arab Bank account based in Europe in early January. Petsec said it has only just become aware that its funds were transferred to a new account without company consent.

Rebels at the gate

The key suspect of the false claim, according to Petsec, is the rebel Houthi Minister for Oil and Minerals, Ahmad Daris. The Houthi group seized illegitimate control of the Sana’a-based Ministry for Oil and Gas during the Yemeni Civil War which has been raging since 2015.

The legitimate United Nations-recognised government Ministry for Oil and Minerals was relocated to the city of Aden and is the true beneficiary of the letter of credit in question. Further, the Yemeni government has banned any and all financial dealings with the Houthis throughout the country.

Petsec shared contents of a letter written to Arab Bank by Aws Abdullah Al-Awd, the legitimate Minister for Oil and Minerals:

“We would like to confirm that we, the Yemeni Ministry of Oil and Minerals currently located in the temporary capital Aden, are the real and sole beneficiary of the aforementioned letter of credit (Block 7). We are the only entity part of the legitimate Yemeni Government recognized internationally and by the United Nations.

Furthermore, we would like to let you know that until date we have not made any arrangements, issued any instructions or claims to liquidate the letter of credit mentioned above. It is also worth noting and mentioning that any claims to liquidate the letter of credit from any other party beside (The Ministry of Oil and Minerals in the temporary capital Aden) are void, fraudulent and incorrect and you should not count on nor act on it in any way.”

Aws Abdullah Al-Awd, Yemeni Minster for Oil and Minerals, February 2020

To add another spanner to the works, Block 7 is in Forced Majeure status, meaning unforeseen circumstances have stopped Petsec from operating on the block at all. More importantly, however, the Forced Majeure means even the legitimate Ministry has no right to a claim on the Letter of Credit. The unforeseen circumstance is, of course, the country’s civil war.

So far, Petsec hasn’t shared any response from the banks in question. As such, it’s not yet certain if the company’s funds were transferred due to a lazy mistake or more sinister means.

Commonwealth Bank asleep at the wheel

On top of the $2.4 million fraud, Petsec is also facing legal proceedings from business partner Mitsui/AWE.

Petsec said around the same time its own funds were siphoned out of its bank account, $1.58 million (US$1.05 million) of Mitsui’s cash was transferred away by Commonwealth Bank under the same Letter of Credit claim.

Petsec said it believes these funds were transferred to an Arab Bank account, though it gave no evidence to support this claim just yet.

Giving Commonwealth the benefit of the doubt, Petsec said it will first work to determine if all information given to Mitsui of the illegitimacy of the claim was passed on to Commonwealth before the claim was made.

While it’s likely Commonwealth was none-the-wiser to the fraud being highlighted by Petsec this week, the unintentional funding of a terrorist group still does not bode well for the big bank fresh out of Hayne Royal Commission hot water.

Petsec has asked for some more information from Mitsui but said it will defend the legal claims if needed.

Meanwhile, the company is proposing to launch its own legal action against the Arab Bank in Sydney, Jordan, and Sana’a, as well as QNB in Doha and Sana’a, to recover its lost cash.

Since announcing the news yesterday morning, Pestec shares have declined 16.98 per cent. Shares last traded for 4.4 cents each in a $17.54 million market cap.

PSA by the numbers
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