- StanChart, Stanbic, Citi, Diamond Bank incur fines for aiding telecoms firm
Three years after facing a record-breaking $5.2 billion fine in Nigeria, South Africa’s telecommunications giant, MTN, is again in trouble with the Nigerian government over the illegal repatriation of $8,134,312,397.63 from the country, in violation of the extant laws and regulations.
According to banking industry sources, who spoke to THISDAY, the Central Bank of Nigeria (CBN), having carried out its investigation into the illegal remittances to MTN’s Johannesburg-based parent company over a nine-year period, wrote to the Nigeria subsidiary on Tuesday demanding that the $8.134 billion be refunded with immediate effect to the CBN.
The illegal foreign exchange remittances to MTN’s parent company in South Africa, said the sources, was done through four Nigerian banks.
The banks – Standard Chartered Bank, Citibank Nigeria Limited, Stanbic IBTC Bank Limited and Diamond Bank Plc – were found to have helped MTN illegally repatriate $8.134 billion between 2007 and 2015, despite the fact that the telecoms giant was in violation of the extant Nigerian foreign exchange and anti-money laundering laws.
The four banks have also been directed by the CBN to refund the $8.134 billion with immediate effect and were respectively fined by the central bank for the various violations regarding the remittances undertaken on behalf of MTN Nigeria.
After the issuance of its operating licence by the Nigerian Communications Commission (NCC) in 2001, the shareholders of MTN Nigeria invested the sum of $402,590,261.03 between 2001 and 2006 to fund its investments in the country by way of inter-company loans and equity investments.
The investments were carried out through the inflow of foreign currency cash transfers and equipment importation, which was evidenced through the Certificates of Capital Importation (CCIs) issued by the four banks.
The CCIs issued at the time of the investment of $402.6 million showed that $59,436,923.44 was invested by way of a shareholder loan and $343,153,339.56 as equity.
However, this position was contrary to MTN’s financial statement for the year ended December 31, 2007, which showed that $399,594,146 was invested in the firm by way of a shareholder loan and $2,996,117 was invested as equity investment, in accordance with the shareholder’s agreement, but contrary to CCIs issued by StanChart, Citibank and Diamond Bank.
This was deemed as a rendition of false returns by the banks to the CBN.
According to the banking sources, following MTN’s request through StanChart for CBN’s approval to convert the $399.6 million to preference shares, an approval-in-principle was granted by the central bank vide a letter dated November 13, 2017; with the grant of a final approval after MTN must have fulfilled certain conditions.
The conditions were for the implementation of the decision through a board resolution by MTN and the submission of documentary evidence to that effect to the Director, Trade and Exchange Department with the CBN.
The second condition was for the provision of an undertaking that no remittances will be made for either of the interest or the principal repayment would be made to the shareholders from the date of the loan to the date they converted to preference shares.
But the banking sources said that MTN failed to meet the conditions, and despite its non-fulfillment of the conditions, which led to the non-issuance of a final approval by the CBN, the telecoms firm went ahead to convert the shareholders’ loan to preference shares, following which StanChart issued new CCIs in respect of the illegal conversion.
The sources said that the action of the bank, in aiding MTN in the illegal conversion of the shareholder loan and issuance of the new CCIs, was described by StanChart as an “unintended omission” in its submission to the central bank during the latter’s investigation of the illegal remittances.
On account of the illegal conversion of the interest-free shareholder loan of $399.6 million, the sum of $8.134 billion was illegally repatriated on behalf of MTN by the four banks between 2007 and 2015.
Having found MTN and the four banks complicit in the illegal repatriation of the $8.134 billion to South Africa, the central bank on Tuesday wrote MTN demanding that it refund the said sum with immediate effect.
It further warned MTN to be guided by the provisions of the extant laws and regulations of Nigeria in its foreign exchange transactions and to adhere strictly to them, failing which appropriate sanctions, including but not limited to, denial of access to the foreign exchange market will be imposed on the company.
Other findings made by the CBN included the discovery that StanChart issued three CCIs outside the regulatory 24 hours without the approval of the central bank.
StanChart, also in contravention of Memorandum 24(ii) of the Foreign Exchange Manual, which stipulates that CCIs should be transferred based on a customer’s instructions to a bank of the customer’s choice along with the transaction history of the CCI, StanChart provided confirmations to Citibank and Diamond Bank, instead of transferring the CCIs to them as required by the FX Manual.
It was discovered that the two banks, on the strength of StanChart’s confirmation, subsequently remitted various sums as dividend from MTN Nigeria at different times.
Owing to the hefty infractions committed by StanChart, the central bank ordered the bank to refund $3.448 billion with immediate effect to the CBN, being the sum repatriated by the bank on the basis of illegally issued CCIs.
It also fined the bank to the tune of N2,470,604,767.13 for the various violations of the extant laws and regulations in its foreign exchange dealings regarding the remittances on behalf of MTN.
The central bank instructed StanChart to send a cheque in discharge of the N2.470 billion fine to the Director of Banking Supervision with the central bank immediately.
THISDAY also learnt that fines of N1.89 billion, N1.30 billion and N250 million were also imposed on Stanbic IBTC, Citibank and Diamond Bank respectively.
It was however not immediately ascertained how much Stanbic IBTC, Citibank and Diamond Bank were ordered to refund to the CBN for their role in the foreign exchange illegal remittances on behalf of MTN.
Subject to Nigeria’s foreign exchange and anti-money laundering laws, foreign companies are free to bring in any recognised foreign currency into the country. Such funds will have to be brought in through an authorised dealer, usually a bank authorised by the CBN.
The bank through which the funds are imported would need to issue a certificate of capital importation (CCI) to the investor as evidence of the inflow of such fund into Nigeria. In the absence of the CCI, foreign exchange cannot be purchased from the official foreign exchange market for the repatriation of the proceeds of the foreign company’s investment in Nigeria.
Prior to the sanctions imposed by CBN, the Senate had carried out an investigation into the illicit remittances done by MTN through the four banks.
Last year, the Attorney General of the Federation and Minister of Justice, Mr. Abubakar Malami, had also written to the CBN Governor, Mr. Godwin Emefiele, notifying him that it had mandated a firm to carry out a comprehensive audit for the recovery of funds due to the federal government with respect to illegally repatriated export revenue by MTN and the banks.