MTN to refund $8b as CBN fines four banks N5.87b

MOBILE giant MTN Nigeria is to refund $8,134,312, 397.63 it illegally repatriated to the Central Bank of Nigeria (CBN), the apex bank said yesterday.

The CBN said it had imposed N5.87 billion sanctions on four banks, which are to refund $8,134,312, 397.63 for “flagrant violation of extant laws and regulations of Nigeria, including the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act, 1995 of the Federal Republic of Nigeria and the Foreign Exchange Manual, 2006”.

So far, the telco has paid N165 billion out of N330 billion fine, representing 60 per cent of total payment, according to the CEO of NCC, Prof Umar Danbatta.

CBN’s Director, Corporate Communications, Isaac Okorafor, in a statement in Abuja, said the actions of the apex bank became necessary following allegations of remittance of foreign exchange (forex) 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 this year.

The four lenders also came under the sledge hammer of the CBN for violations of extant forex regulations. The lenders are Standard Chartered Bank, Stanbic-IBTC, Citibank, and Diamond Bank.

Figures obtained from the CBN yesterday indicate that the highest fine of N2,470,604,767.13 was slammed on Standard Chartered Bank. Stanbic IBTC Nigeria was fined N1,885,852,847.45. Citibank Nigeria was penalised N1,265,541,562.31. Diamond Bank was directed to pay N250 million.

Okoroafor said the decision followed thorough investigations into the allegations of remittances by the four banks of forex with irregular certificates of CCIs issued on behalf of some offshore investors of MTN Nigeria Communications Limited.

He said $3,448,119,321.72 was repatriated by Standard Chartered Bank on the basis of the illegally issued CCIs. Similarly, $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 between 2007 and 2015. The CBN directed the banks to immediately refund the sums.

The apex bank’s investigation revealed that on account of illegal conversion of MTN shareholders’ loan to preference shares (interest free loan) of $399,594,146.00, $8,134,312,397.63 was illegally repatriated by the telco.

Okoroafor  said investigations by the CBN took a while in order to carry out a thorough inquiry and give fair hearing to all parties involved. He advised all banks and multinational companies to adhere strictly to the provisions of all extant laws and regulations in their forex transactions. He warned that failure by the management of banks and companies to abide by existing guidelines would be appropriately sanctioned. Sanctions may include denial of access to local forex market.About two years ago, the telco was accused of illegally repatriating $13.8 billion. It blamed its failure to comply with the law requiring issuance of CCIs within 24 hours of conversion on “administrative requirement”.

During the opening of investigative hearing by the Senate Committee on Banks, Insurance and Other Financial Institutions into the transfer, MTN said circumstances beyond its control necessitated its decision to move funds without following the law.

A lawmaker had accused MTN of flouting its host country’s financial regulatory laws to obtain a CCI within 24 hours before moving the money out of the country without the required authorisation.

The repatriation was allegedly carried out between 2006 and 2016 in connivance with the Minister of Trade and Investment, Okechukwu Enelamah, and four commercial banks – Standard Chartered Bank, Stanbic IBTC, Diamond Bank and Citi Bank.

The CCI is a requirement under the Central Bank of Nigeria (CBN) financial and miscellaneous provisions Act.

The telco’s Chief Executive Officer (CEO), Ferdi Moolman, had said it was practically impossible for the firm to comply with the 24 hours required to issue the CCI before moving funds.

“The requirement to issue a CCI within 24 hours of conversion is an administrative requirement. As such, the CBN has the authority, and indeed we believe approved the banks’ applications to issue CCIs outside the recommended time frame.

“Often, for various reasons (such as not having all the required documentation for instance), it is not possible to issue a CCI within 24 hours, and the Central Bank of Nigeria’s Forex Manual contemplates such situations by asking that the banks refer to the CBN for approval,” Mr. Moolman had explained in a statement from Johannesburg, South Africa.

He said no dividends were declared or paid until the CCIs were issued and finalised, adding that MTN Nigeria only requested CCIs for Foreign Capital that was imported into Nigeria, and dividends were externalised on CCIs.

MTN Nigeria

CBN’s letter to MTN reads: “Our investigation also revealed the following, among others: that 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);  and the CCIs issued at the time of the investment by the above banks to your organisation 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 organisation’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 organisation 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 organisation.

“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 CBN; 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 organisation converted the shareholders’ loan to preference shares with Standard Chartered Bank issuing new CCIs in respect of the illegal conversion;

“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

“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.”

Standard Chartered

In a letter to Standard Chartered, the apex bank said that its investigation also revealed that shareholders of MTN Nigeria Communications Limited invested $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; 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,” the apex bank said.

Other findings from its investigation showed that bank issued three  CCIs outside the regulatory 24 hours without the approval of the CBN; in contravention of Memorandum 24 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,” the apex said.

Stanbic IBTC

On Stanbic-IBTC, the CBN said its investigation also revealed that the shareholders of MTN Nigeria Communications Limited invested $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.”

On account of the illegal conversion of the shareholders loan to preference shares (interest free loan) of $399,594,146.00, $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 the investigation also showed that  the bank falsely reported 35 CCIs valued $313,683,925.84 inappropriately as “other purchases” in your MTR 203 returns for February 2008 instead of “capital importation”;

“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 stipulates that CCIs should only be issued on capital imported;

“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.

“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,” the letter read.

On its findings in its letter to CitiBank, the CBN said its investigation also revealed that the shareholders of MTN Nigeria Communications Limited invested $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;

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

“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,” the letter read.

CBN’s letter to Diamond Bank stated that its investigation also revealed that the shareholders of MTN Nigeria Communications Limited invested $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; 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 $8,134,312,397.63 was illegally repatriated by your bank and the other banks on behalf of MTN Nigeria Communications Limited, within a period of six years,” the apex bank said, adding that its findings showed that the 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.”

“A further review of the CCIs also showed that no Form “M” was opened as evidence of the utilisation of the FX for the importation of goods (as “Not valid for FX”) into the country;

“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;

“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;

“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

“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 matte,” the letter explained.