N5.65bn Fine: CBN Debits Accounts Of Stanbic, Diamond, Others Despite Protest

• We’re Innocent, Stanbic IBTC Tells NSE

Despite protest by the directors of Standard Chartered Bank, Citibank, Stanbic IBTC Bank and Diamond Bank and assurances to investors that they were engaging the Central Bank of Nigeria (CBN) over a N5.65bn fine imposed for alleged “irregular” issuance of Certificates of Capital Importation (CCIs) totally $8.13bn to telecommunications giant, MTN Communications Nigeria Limited, indications emerged on Thursday that the accounts of the four banks have been debited by the apex banks to the tune of the fines.
This followed a letter to the Nigerian Stock Exchange (NSE) by the board of Stanbic IBTC Holdings, insisting on the innocence of its banking subsidiary in the matter.

A breakdown of the amount showed that while Standard Chartered was fined N2.4bn; Stanbic IBTC was hammered to the tune of N1.8bn; followed by Citibank’s N1.2bn; and Diamond Bank, N250m.
Godwin Emefiele, Governor, Central Bank of Nigeria (CBN) recently insisted that the N5.78bn fine imposed on the four followed over 30 months of investigation into the alleged fraud.

In a letter by Chidi Okezie, its company secretary, to the Nigerian Stock Exchange (NSE), which follows an earlier one on August 30, 2018, Stanbic IBTC Holdings noted that the CBN had debited the account of its banking subsidiary for the full amount of the fine.
Stanbic IBTC Holdings Plc and its banking subsidiary insisted their earlier position, “which is the fact that the bank has done nothing illegal,” has not change.
Accordingly, the statement said “the bank will continue to provide CBN with documents and details in support of our contention that our actions in relation to these transactions were not illegal.”

Nonetheless, the group assured that the debit does not impact on the capacity of our banking subsidiary to handle clients’ requests or clients’ ability to continue to carry out viable business transactions with either the bank or the Stanbic IBTC Group, whether in relation to the importation of capital or otherwise.

Media reports some days ago quoted Emefiele as saying that once the CBN receives $8.14bn illegally repatriated, the CBN will credit MTN with the Naira equivalent at the exchange rate at which the transactions were consummated,
According to him, “CBN examiners had been investigating three charges of infractions against the four banks and MTN, particularly the manner of funding the equity investment into MTN and the subsequent capital repatriation that resulted thereafter”.

“The investigation was in two parts, the first allegation started about two and a half years ago, when examiners began to investigate;

“The method of payment for shares by local shareholders in MTN International, which is the sole owner of MTN Nigeria.

“Whether the banks breached the extant regulations requiring banks to issue CCIs within 24 hours of receipt of funds inflowed into Nigeria.

“On the first charge regarding investment by local shareholders, the CBN examiners discovered that the local investors, purchased fx from the Nigerian foreign exchange market, repatriated the funds and these funds formed part of the total funds inflowed by MTN totaling $402m between 2001 and 2003. By the extant regulation, only funds inflowed into Nigeria qualify for the issuance of CCI.

“However, examiners observed that the extant FX regulations at the time of investment allowed Nigerians to purchase shares with foreign currency. So, whereas you would say that the investment of the local shareholders should be voided because the funds came from within Nigeria and were round tripped, you can also say that it is allowed because Nigerians were allowed to invest in foreign currency assets. So, we reasoned that since this transaction happened over 10 years ago and the company was doing well, we should grant them a waiver.

On the Second offence regarding the CCIs, the regulation provides that banks must issue CCIs for inflowed funds within 24 hours. The examiners reported that the banks failed to issue some of the CCIs within 24 hours; which is sanctionable. Again the CBN decided to overlook this offence given that these transactions took place over 10 years ago.

It was based on these facts that the CBN wrote the letter dated February 22, 2017 granting MTN the permission to continue paying dividends on the CCIs. So when our Directors were summoned by the Senate to provide the CBN perspective, they told the Senate that the CBN had pardoned the offences and based on this, the Senate towed the same line with the CBN and cleared MTN and the banks of the issues.

“Now the third offence, which is actually the crux of the matter in dispute now relates to the unauthorized conversion of a loan of $399 million to preference shares by the MTN and the banks and thereafter repatriated the sum of $8.1 billion without CBN final approval.

“The facts from the last examination which commenced in March 2018 is that, at the inception of the company, the shareholders inflowed the sum of $402m and reported that $343m was equity and $59m as loan. The examiners later discovered that in its 2007 audited accounts MTN’s auditors reported that the investment of $402m was stated as $2.99m in equity and $399m as loan, a statement that is in conflict with their earlier disclosure and on the basis of which CCIs had long been issued to the company. Soon after, the company, through its bankers approached the CBN for the conversion of the loan of $399m to Preference shares. The CBN thereafter gave an Approval in Principle subject to fulfilling certain conditions. Notwithstanding, the Company and the bank went ahead and concluded the conversion to Preference shares without CBN’s final approval and based on this, repatriated the sum of $8.1bn outside the country,” he stressed.

The CBN felt this was too grievous and that this couldn’t be ignored. When the Committee of Governors was informed about this breach, it sounded unbelievable. In order to give the MTN and the banks a fair hearing, a meeting comprising the CBN Committee of Governors, the over 20 Examiners, the MTN officials and the banks was held on May 25,2018. At this meeting, we gave the company the opportunity to defend itself over the breach but unfortunately, it couldn’t. In fact the bank that concluded the conversion, apologized; stating that it was an unintended error. The COG was alarmed that a bank could ignore CBN’s directive requiring final approval before such a huge transaction could be consummated.

 The COG further directed MTN and the banks to meet with the examiners to provide any evidence within one week that could convince the examiners to change their position. Indeed, the deadline for the submission of documents and evidence was extended to over 12 weeks. Despite granting these extensions, the examiners position never changed, as the Company and the banks had no new evidence to provide. Based on this, the examiners concluded their reports and made their recommendations which was subsequently adopted by the COG

https://investdata.com.ng/2018/09/n5-65bn-fine-cbn-debits-accounts-of-stanbic-diamond-others-despite-protest/