The Central Bank of Nigeria (CBN) last week wielded the big stick against four commercial banks that helped facilitate the illegal repatriation of $8.1 billion dollars for South African telecommunications company, MTN since 2007.
Standard Chartered Bank had been slammed the heaviest fine of N2.47 billion while Stanbic IBTC Nigeria was fined N1.88 billion.
Citibank Nigeria and Diamond Bank had also been fined N1.26 billion and N250 million each for violating foreign exchange rules.
The banks had done the illegal repatriation with irregular Certificates of Capital Importation (CCIs) issued on behalf of some offshore investors. According to documents made available, Standard Chartered Bank along with Stanbic IBTC, Citibank and Diamond Bank had issued CCIs for an investment of the sum of $402.59 million in MTN from 2001 to 2006.
The documents tendered by the banks showed that $59.43 million was recorded/invested as shareholders’ loan and $343.15 million as equity. This position was, however, contrary to the position in the financial statements of MTN Nigeria Communications Limited for the year ended December 31, 2007, which revealed that $399.59 was invested as shareholders’ loan and $2.99 as equity investment, in accordance with the shareholder’s agreement but contrary to the CCIs issued by the banks.
Standard Chartered Bank had subsequently applied to the CBN on behalf of MTN Nigeria Communications Limited for the conversion of the shareholder’s loan to preference shares, for which an approval-in-principle was granted by the apex bank subject to MTN’s compliance to conditions given it.
In spite of the non-compliance of MTN to the conditions given it, Standard Chartered had gone ahead to convert the loan to preference shares and had issued new CCIs in support of the illegal conversion. When accosted, the bank in a letter to the CBN dated December 10, 2009, described the action as an “unintended omission.”
On account of the illegal conversion of the shareholders loan to preference shares of $399.59 million the sum of $8.134 billion was illegally repatriated by Standard Chartered bank along with the other banks over the years.
According to the CBN, Standard Chartered Bank had been found guilty of issuing three CCIs outside the regulatory 24 hours without its approval, contravention of Memorandum 24 (ii) of the Foreign Exchange Manual, which requires that CCIs should be transferred based on customer’s instructions to a bank of the customer’s choice along with the transaction history of the CCI, Standard Chartered provided confirmation to two other banks, Citibank and Diamond Bank, instead of transferring the CCIs to them as required by the Foreign Exchange Manual.
It also failed to issue a letter of indemnity to the CBN against double remittance in respect of 10 CCIs transferred by Diamond Bank and Citibank to it as required under subsection 5(iii) of Memorandum 24 of the Foreign Exchange Manual and repatriated the sum of $3.44 on the basis of the illegally issued CCIs.
Citibank on its part had issued seven CCIs to MTN Nigeria totaling $42.12 million that were subsequently transferred to Standard Chartered Bank Limited at the request of MTN on February 6, 2006, which constituted part of the CCIs that were consequently irregularly re-issued.
Four of the CCIs issued by Citibank showed that the inflow of capital imported as cash were issued outside the period of 24 hours allowed by regulation upon the receipt of inflow and the bank also failed to comply with regulations on the issuance of letter of indemnity to the CBN in addition to forwarding the transaction history of the CCIs to the CBN, as provided in Memorandum 24(5)(ii)(b) of the Foreign Exchange Manual in respect of the CCIs received from Standard Chartered Bank
Asides this, Citibank purchased $535millon on the basis of photocopies of Form “A” bearing the name of Standard Chartered Bank as the applicant bank and the referenced CCIs in contravention of Memorandum 24 (4) (a) of the Foreign Exchange Manual 2006 and helped repatriate the sum of $1.766 billion on the basis of the illegally issued CCIs.
Stanbic IBTC had on its part falsely reported 35 CCIs valued $313.68 million inappropriately as “other purchases” in its MTR 203 returns for February 2008 instead of “capital importation” and issued eight CCIs of $58.359 million in respect of foreign exchange sourced locally as shareholders’ loan in contradiction to the requirement of Section 15 of the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act, 1995 and Memorandum 20 (1.3) (iii) of the Foreign Exchange Manual, which stipulate that CCIs should only be issued on capital imported.
It also issued eight CCIs for capital inflows in form of machinery outside the 24 hours regulatory requirement of receipt of shipping documents in contravention of paragraph 4.1.1 (IV) of the Monetary, Credit, Foreign Trade, and Exchange Policy Guidelines for Fiscal Years 2012 to 2013, and failed to issue a letter of indemnity to the CBN against double remittance in respect of 20 CCIs transferred to it by Standard Chartered Bank.
Diamond Bank was fined for issuing three CCIs in favour of Dantata Investment for the sum of $5million without converting the foreign exchange received into Naira as required by regulations and on the basis of these illegally issued CCIs, repatriated the sum of $102.54 million. CBN said its finding showed that a further review of the CCIs revealed that no Form “M” was opened as evidence of the utilization of the FX for the importation of goods.
It also remitted the sum of $348.914 millio as dividend to MTN Nigeria Communications Limited offshore corporate shareholders without any documentary evidence of the audited account of the company to justify the basis of the payment of the dividend declared and paid by MTNN. This action was a violation of the provision of Memorandum 24(4)(b) of the Foreign Exchange Manual.
Although Diamond Bank Plc and Stanbic IBTC Plc had issued statements about their financial stability despite the fine and that they are discussing with CBN to ensure the issue is resolved, the share prices of both banks came under pressure last week after the announcement of the sanction.
Citibank and Standard Chartered Bank have however been silent over the issues as they are privately held. Access Bank Managing Director and Chief Executive, Herbert Wigwe, last weekend said the Bankers Committee which comprise of bank chief executives and regulators in the industry will convene soon to discuss the fines.
MTN on the other had which had been accused of illegal repatriation of $13.92 billion to its parent company through four banks between 2006 – 2016 by Senator Dino Melaye in September 2016, said Certificate of Capital Importation (CCI) for this dividend repatriation was duly approved by the Apex Bank.