CBN fines four banks in ‘cahoot’ with MTN illegal funds transfer

MTN

Nigeria’s Central Bank said it has placed various fines and sanctions on four banks for illegally repatriation funds to South Africa on behalf of MTN Nigeria, the home country of MTN Group Limited.

MTN Nigeria is a wholly-owned subsidiary of South Africa’s MTN Group which has been mulling a public listing in Nigeria since 2016.

The Central banks said it has placed a regulatory fine of N5.87 billion on four banks namely Stanbic IBTC, Diamond Bank, Standard Chartered and America’s local unit of Citibank.

The CBN also ordered MTN Nigeria to refund $8.1 billion illegally taken out of the country.

In a terse statement issued by the apex bank’s Director, Corporate Communications, CBN, Isaac Okorafor, he said it is a ‘flagrant violation of extant laws and regulations of the Federal Republic of Nigeria, including the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act, 1995 of the Federal Republic of Nigeria and the Foreign Exchange Manual, 2006’.

The CBN spokesman added that actions of the bank became necessary following allegations of remittance of foreign exchange with irregular Certificates of Capital Importation issued on behalf of some offshore investors of MTN Nigeria Communications Limited and subsequent investigations carried out by the apex bank in March 2018.

“The CBN has therefore asked the managements of the banks and MTN Nigeria Communications Limited to immediately refund the sum of $8,134,312,397.63, illegally repatriated by the company to the coffers of the Central Bank of Nigeria,” it stated.

Data released by the CBN indicated that that the highest fine of N2.47 billion was slammed on Standard Chartered Bank, while Stanbic IBTC Nigeria was fined N1.885 billion.

Citibank Nigeria was penalised to the tune of N1.265bn, just as Diamond Bank was directed to pay N250m for violating extant rules.

He said that the investigations revealed that the sum of $3.448bn was repatriated by Standard Chartered Bank on the basis of the illegally issued CCIs.

Similarly, he added that the sums of $2.632bn, $1.766bn and $348.914m were repatriated by Stanbic IBTC Nigeria, Citibank Nigeria and Diamond Bank Plc, respectively between 2007 and 2015.

He said the CBN had directed the affected banks to immediately refund the respective sums to the CBN.

“The CBN’s investigation further revealed that on account of illegal conversion of MTN shareholders’ loan to preference shares (interest free loan) of $399,594,146.00, the sum of $8,134,312,397.63 was illegally repatriated by the company,” the statement said.

It seems that the apex bank had concluded the matter before the sanctions as Okoroafor said that the investigations by the CBN took a while in order to carry out thorough inquiry and give a fair hearing to all parties involved.

He however warned that the failure by the management of banks and companies to abide by the existing guidelines would be appropriately sanctioned, adding that the sanctions would include denial of access to the Nigerian foreign exchange market.

The CBN has also sent out official letters to all the affected banks and what they needed to do to defray the fines and pursue compliance.

Standard Chartered Bank
“Our investigation also revealed the following, among others: i. The shareholders of MTN Nigeria Communications Limited invested the sum of $402,590,261.03 in the company from 2001 to 2006;

ii. The investment was carried out through the inflow of foreign currency cash transfers and equipment importation, which was evidenced by the CCIs issued by your bank, Citi Bank (CB) and Diamond Bank (DB) at the initial stage of the investment.

iii. The CCIs issued at the time of investment by your bank along with the other banks in respect of the $402,590,261.03 showed that $59,436,923.44 was recorded/invested as shareholders’ loan and $343,153,339.56 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 $399,594,146.00 was invested as shareholders’ loan and $2,996,117.00 as equity investment, in accordance with the shareholder’s agreement but contrary to the CCIs issued by your bank, Citi Bank (CB) and Diamond Bank (DB). Your action in this regard constituted a rendition of false returns to the Central Bank of Nigeria.”

CitiBank
i. The shareholders of MTN Nigeria Communications Limited invested the sum of $402,590,261.03 in the company from 2001 to 2006;

ii. The investment was carried out through the inflow of foreign currency cash transfer and equipment importation evidenced by the CCIs issued by your bank, Standard Chartered Bank and Diamond Bank;

iii. The CCIs issued by your bank along with the other banks in respect of the $402,590,261.03 showed that $59,436,923.44 was recorded/invested as shareholders’ loan and $343,153,339.56 as equity at the time of the investment. 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 showed that $399,594,146.00 was invested as shareholders’ loan and $2,996,117.00 as equity investment, in accordance with the shareholder’s agreement but contrary to the CCIs issued by your bank, Standard Chartered Bank (SCB) and Diamond Bank (DB). Your action in this regard constituted a rendition of false returns to the Central Bank of Nigeria…

“Your bank failed to comply with extant 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 by your bank from Standard Chartered Bank.”

Diamond Bank
i. The shareholders of MTN Nigeria Communications Limited invested the sum of $402,590,261.03 in the company from 2011 to 2006;

ii. The investment was carried out through the inflow of foreign currency cash transfer and equipment importation, which was evidenced by the CCIs issued by your bank, Citi Bank and Standard Chartered Bank;

III. The CCIs issued illegally by your bank along with the other banks in respect of the $402,590,261.03 showed that $59,436,923.44 was recorded/invested as shareholders’ loan and $343,153,339.56 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 showed that $399,594,146.00 was invested as shareholders’ loan and $2,996,117.00 as equity investment, in accordance with the shareholder’s agreement but contrary to the CCIs issued by your bank, Citi Bank (CB) and Standard Chartered Bank (SCB). Your action in this regard constituted a rendition of false returns to the Central Bank of Nigeria.”

Stanbic-IBTC
i, The shareholders of MTN Nigeria Communications Limited invested the sum of $402,590,261.03 in the company from 2001 to 2006;

ii. The investment was carried out through the inflow of foreign currency cash transfers and equipment importation, which was evidenced by the CCIs issued by Standard Chartered Bank, Diamond Bank and Citibank, out of which eight of the CCIs totalling $377,216,508.30 were transferred to your bank by Standard Chartered Bank. Consequently, your bank repatriated the sum of $929,051,331.83 as proceeds of divestment from the CCIs valued at $42,704,408.61.

iii. On account of the illegal conversion of the shareholders loan to preference shares (interest free loan) of $399,594,146.00, the sum of $8,134,312,397.63 was illegally repatriated by your bank and the other banks on behalf of MTN Nigeria Communications Limited between 2007 and 2015.”

MTN Group, the parent company of MTN Nigeria has not commented on the matter but it is expected to make official statements on the matter to the Johannesburg Stock Exchange later today.

It could be recalled that the allegation of illegal funds repatriation was brought against MTN in 2017 by Senator Dino Melaye.

The Senator alleged that MTN had illegally transferred varies sums of money out of Nigeria totaling about $13.92 billion.