asked same to refund the sum of $8,134,312,397.63 for what it described as
‘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 four banks that have come under the sledge hammer of the CBN for the
violations are Standard Chartered Bank, Stanbic-IBTC, Citibank, and
Diamond Bank.
Announcing the decision in Abuja, on Wednesday, August 29, Isaac Okorafor,
CBN’s director, Corporate Communications, said that the actions of the
Bank became necessary following allegations 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 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.
Figures obtained from the CBN on Wednesday, August 29, indicate that the
highest fine of N2,470,604,767.13 was slammed on Standard Chartered Bank,
while Stanbic IBTC Nigeria was fined the sum of N1,885,852,847.45. For its
punishment, Citibank Nigeria was penalized in the sum of
N1,265,541,562.31, just as Diamond Bank was directed to pay the sum of
N250 million for violating extant rules.
Okorafor further disclosed that the decision of the bank followed thorough
investigations by it into the allegations of remittances by the four banks
of forex with irregular certificates of Capital Importation, CCIs, issued
on behalf of some offshore investors of MTN Nigeria Communications
Limited.
He said the investigations revealed that the sum of $3,448,119,321.72 was
repatriated by Standard Chartered Bank on the basis of the illegally
issued CCIs. Similarly, he said the sums of $2,632,005,623.78,
$1,766,263,212.75 and $348,914,501.30 were repatriated by Stanbic IBTC
Nigeria, Citibank Nigeria and Diamond Bank Plc, respectively, during the
period 2007 and 2015. Accordingly, he said the CBN had directed the
affected banks to immediately refund the respective sums to the CBN.
The CBN 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.
While disclosing that the investigations by the CBN took a while in order
to carry out thorough inquiry and give fair hearing to all parties
involved, Mr. Okorafor advised all banks and multinational companies in
Nigeria to adhere strictly to the provisions of all extant laws and
regulations of Nigeria in their foreign exchange transactions. He warned
that failure by the management of banks and companies to abide by the
existing guidelines would be appropriately sanctioned, which sanctions may
include denial of access to the Nigerian foreign exchange market.
Details of the Investigations
CBN’s letter to MTN says:
Our investigation also revealed the following, among others:
The shareholders of your company invested the sum of $402,590,261.03 in
the company from 2001 to 2006;
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 (SCB), Citi Bank (CB) and Diamond Bank
(DB);
iii. The CCIs issued at the time of the investment by the above banks
to your organization in respect of the $402,590,261.03 showed that
$59,436,923.44 was invested as shareholders’ loan and $343,153,339.56 as
equity;
However, a review of your organization’s financial statements for the year
ended December 31, 2007 revealed that $399,594,146.00 was
recorded/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 the banks in (iii) above;
Following a request by your organization through Standard Chartered Bank
for CBN’s approval to convert the shareholder’s loan to preference shares,
an approval-in-principle was granted vide our letter dated November 13,
2007; with the grant of final approval made subject to the fulfillment of
the following conditions by your organization.
Implementation of the decision in item 5B of your board resolution dated
November 08, 2007 and submission of documentary evidence to that effect to
the Director, Trade and Exchange Department of the Central Bank of
Nigeria; and
Provision of an undertaking that no remittance for either interest or
principal repayment would be made to the shareholders from the date of the
loan to the date they were converted to preference shares.
In spite of the non-fulfillment of the conditions in (v) above and
consequently, the non-issuance of a final approval by the CBN, your
organization converted the shareholders’ loan to preference shares with
Standard Charted Bank issuing new CCIs in respect of the illegal
conversion;
vii. The action of your banker in aiding your organisation in the
illegal conversion of the shareholders’ loan was later described by SCB in
a letter to the CBN dated December 10, 2009 as an “unintended omission”;
and
viii. On account of the illegal conversion of your shareholders’ loan to
preference shares (interest free loan) of $399,594,146.00, the sum of
$8,134,312,397.63 was illegally repatriated on behalf of your company by
the aforementioned banks between 2007 and 2015.
CBN’s Letter to Standard Chartered bank says:
Our investigation also revealed the following, among others:
The shareholders of MTN Nigeria Communications Limited invested the sum of
$402,590,261.03 in the company from 2001 to 2006;
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.
Your bank 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 vide our
letter dated November 13, 2007 with the grant of final approval made
subject to the fulfillment of the following conditions by MTNN:
Implementation of the decision in item 5B of MTN Nigeria Communications
Limited board resolution dated November 8, 2007 and submission of
documentary evidence to that effect to the Director, Trade and Exchange
Department of the Central Bank of Nigeria; and
Provision of an undertaking that no remittance for either interest or
principal repayment would be made to the shareholders from the date of the
loan to the date they were converted to preference shares.
In spite of the non-fulfillment of the above conditions in (iv) above and
consequently, the non-issuance of a final approval by the CBN, your bank
issued new CCIs in support of the illegal conversion of the shareholders’
loan to preference shares; an action that was later described by your bank
in a letter to the CBN dated December 10, 2009, as an “unintended
omission”; and
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.
Other findings from our investigation included the following:
Your bank issued three (3) CCIs outside the regulatory 24 hours without
the approval of the CBN;
In 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, you provided confirmation to two other banks, Citibank
and Diamond Bank, instead of transferring the CCIs to them as required by
the Foreign Exchange Manual.
The two banks on the strength of your confirmation subsequently remitted
various sums as dividend for MTN Nigeria Communications Limited at
different times; and
Your bank failed to issue a letter of indemnity to the CBN against double
remittance in respect of ten CCIs transferred by Diamond Bank and Citibank
to your bank as required under subsection 5(iii) of Memorandum 24 of the
Foreign Exchange Manual.
Upon the conclusion of the investigation, the Committee of Governors of
the Central Bank of Nigeria met with the management of your bank and the
other banks as well as representatives of MTN Nigeria Communications
Limited in Lagos on May 25, 2018. This was to give all the parties fair
hearing, towards taking an informed decision on the matter.
CBN’s letter to Stanbic-IBTC says:
Our investigation also revealed the following, among others:
The shareholders of MTN Nigeria Communications Limited invested the sum of
$402,590,261.03 in the company from 2001 to 2006;
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 totaling $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.
Other findings from our investigation included the following:
a). Your bank falsely reported thirty five CCIs valued $313,683,925.84
inappropriately as “other purchases” in your MTR 203 returns for February
2008 instead of “capital importation”;
b)Your bank issued eight CCIs of $58,359,616.67 in respect of foreign
exchange sourced locally as shareholders’ loan. This constituted 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;
c). 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;
d) 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
e) Your bank repatriated dividends totaling $905,260.20 in respect of CCIs
illegally issued on the strength of locally sourced capital.
Upon the conclusion of the investigation, the Committee of Governors of
the Central Bank of Nigeria met with the management of your bank and the
other banks as well as representatives of MTN Nigeria Communications
Limited in Lagos on May 25, 2018. This was to give all the parties fair
hearing, towards taking an informed decision on the matter.
CBN’s letter to CitiBank says:
Our investigation also revealed the following, among others:
The shareholders of MTN Nigeria Communications Limited invested the sum of
$402,590,261.03 in the company from 2001 to 2006;
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 issued seven (7) CCIs to MTN Nigeria (MTNN) totaling
$42,126,803.04 that were subsequently transferred to Standard Chartered
Bank Limited at the request of your customer (MTNN) on February 6, 2006,
which constituted part of the CCIs that were consequently irregularly
re-issued;
Four of the CCIs issued by your bank 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 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; and
vii. 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.
Upon the conclusion of the investigation, the Committee of Governors of
the Central Bank of Nigeria met with the management of your bank and the
other banks as well as representatives of MTN Nigeria Communications
Limited in Lagos on May 25, 2018. This was to give all the parties fair
hearing, towards taking an informed decision on the matters.
CBN’s letter to Diamond Bank says:
Our investigation also revealed the following, among others:
The shareholders of MTN Nigeria Communications Limited invested the sum of
$402,590,261.03 in the company from 2011 to 2006;
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; and
On account of the illegal conversion of the shareholders loan to
preference shares (interest free loan) of $399,594,146.00, the sum of
$8,134,312,397.63was illegally repatriated by your bank and the other
banks on behalf of MTN Nigeria Communications Limited, within a period of
six years.
Other findings from our investigation included the following:
a) Your bank issued three CCIs in favour of Dantata Investment for the sum
of $5million without converting the foreign exchange received into Naira
as required by our regulations. On the basis of these illegally issued
CCIs, your bank repatriated the sum of $102,545,336.77 in respect of these
CCIs;
b)A further review of the CCIs also showed that no Form “M” was opened as
evidence of the utilization of the FX for the importation of goods (as
“Not valid for FX”) into the country;
c)Your bank remitted the sum of $348,914,501.38 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;
d)Your bank failed to indemnify SCB for losses and/or liabilities that may
arise from the use of the CCIs you transferred to SCB in violation of the
provisions of the Foreign Exchange Manual 2006;
e)Your bank issued three CCIs outside the regulatory 24 hours without the
approval of the CBN contrary to provisions of Memorandum 22 of the Foreign
Exchange Manual 2006; and
f)Your 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.
Upon the conclusion of the investigation, the Committee of Governors of
the Central Bank of Nigeria met with the management of your bank and the
other banks as well as representatives of MTN Nigeria Communications
Limited in Lagos on May 25, 2018. This was to give all the parties fair
hearing, towards taking an informed decision on the matter.