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CBN sanctions 4 banks for helping MTN illegally move $8.1bn from Nigeria

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Four banks in Nigeria have been accused by the Central Bank of Nigeria of illegally helping MTN Nigeria repatriate a sum of $8.1 billion from Nigeria, and issuing irregular capital importation certificate on behalf of the South African company. The banks consequently are facing heavy sanctions by the regulatory bank.

The banks collectively facing a N5.87 billion sanctions are Standard Chartered Bank, Stanbic IBTC, Citibank and Diamond Bank Plc. Standard Chartered Bank is fined N2.4 billion, while Stanbic IBTC got sanctioned a sum of N1.8 billion. Citibank and Diamond Bank were sanctioned N1.2 billion and N0.25 billion respectively on what the CBN called “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”.

Nigeria’s central bank accused Standard Chartered Bank illegally repatriating about $3.4 billion from  the West African country, while Stanbic IBTC Nigeria was said to have repatriated $2.6 billion on the behalf MTN Nigeria Ltd. Citibank and Diamond Bank Plc were said to have helped the South African company move $1.7 billion and $348.9 million respectively.

The CBN also said that its investigation revealed an illegal conversion of MTN shareholders’ loan to preference shares (interest free loan) of $399,594,146.00, totalling the sum of $8.1 billion that was illegally repatriated by the company.

The banks, as well as MTN Nigeria have been asked to return total sum of $8.1 billion to CBN.

CBN’s Director, Corporate Communications, Isaac Okorafor, said from Abuja that the sanctions follow an “allegation of remittance of foreign exchange with irregular Certificates of Capital Importation (CCIs) 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 said the Certificates of Capital Importation (CCIs) issued by Standard Chartered Bank at the time of investment along with the other banks in respect of  $402.6 million showed that $59.4 million was recorded/invested as shareholders’ loan and $343.1 million as equity.

But this position was contradicted by the  financial statements of MTN Nigeria Communications Limited for the year ended December 31, 2007, which indicated that $399.5 million was invested as shareholders’ loan and $2,9 million as equity investment, in accordance with the shareholders agreement but contrary to the CCIs issued by Standard Chartered Bank,  Citibank and Diamond Bank.

Other accusations against the bank include issuance of three (3) CCIs outside the regulatory 24 hours without the approval of the CBN; providing confirmation to two other banks, Citibank and Diamond Bank, instead of transferring the CCIs to them as required by the Foreign Exchange Manual, and therefore contravening 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.

The bank was also accused of failing to issue a letter of indemnity to the CBN against double remittance in respect of ten CCIs transferred by Diamond Bank and Citibank to it as required under subsection 5(iii) of Memorandum 24 of the Foreign Exchange Manual.

Nigeria’s central bank has also accused Stanbic IBTC of falsely reporting 35 CCIs valued $313,683,925.84 inappropriately as “other purchases” in its MTR 203 returns for February 2008 instead of “capital importation”.

The bank was said to have issued eight CCIs of $58.3 million in respect of foreign exchange sourced locally as shareholders’ loan, a “contravention of 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.”

A letter written to the bank by CBN reads: “Your bank 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;

“Your bank failed to issue a letter of indemnity to the CBN against double remittance in respect of twenty CCIs transferred by Standard Chartered Bank to your bank as required under subsection 5(iii) of Memorandum 24 of the Foreign Exchange Manual; and your bank repatriated dividends totaling $905,260.20 in respect of CCIs illegally issued on the strength of locally sourced capital.”

In its part in the alleged illegal transactions, Citibank is accused of issuing seven (7) CCIs to MTN Nigeria totaling $42.1 million that were subsequently transferred to Standard Chartered Bank Limited at the request of MTN Nigeria on February 6, 2006, which constituted part of the CCIs that were consequently irregularly re-issued.

According to CBN, four CCIs issued by Citibank evidencing the inflow of capital imported as cash were issued outside the period of 24 hours allowed by regulation upon the receipt of inflow, in flagrant contravention of Memorandum 22 of the Foreign Exchange Manual.

“Your bank purchased $535,000,000 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,” CBN wrote in a letter to Citibank.

On its part, Diamond Bank is accused of issuing three CCIs in favour of Dantata Investment for the sum of $5 million without converting the foreign exchange received into naira as required by CBN’s regulations.  “On the basis of these illegally issued CCIs, your bank repatriated the sum of $102,545,336.77 in respect of these CCIs,” CBN said in a letter to Diamond Bank, accusing it of remitting the sum of $348.9 million 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 MTN Nigeria.

CBN added that Diamond Bank “illegally remitted the sum of $352,222,358.39 on behalf of Standard Chartered Bank and Stanbic IBTC Bank in respect of the various CCIs issued to MTN Nigeria Communications Limited.”

A managing director of one of the four banks confirmed the sanction and the request that it returns a certain sum of money to the CBN.

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