The Nation Newspaper

Tag: Banks

  • CBN lends banks N27.6tr in six months

    Banks borrowed N27.46 trillion from the Central Bank of Nigeria (CBN) in six months, according to the apex bank’s half year report on financial sector performances released yesterday.

    The 2017 half-year Financial Markets Activity Report, said loans came in the form of Standing Lending Facility (SLF), including the Intra-day Lending Facilities (ILF). The standing facilities were accessed by the banks to enable them either meet their short-term liquidity needs or place their surpluses. The rates for SDF and SLF remained at nine and 16 per cent, respectively.

    The report said the SLF was utilised by the banks in order to enable them square up their positions after inter-bank market trading hours. It said of the total SLF granted in the review period, N20.62 trillion was conversion from unsettled ILF.

    The SLF is an overnight CBN credit available on banking days between 2 pm and 3.30 pm, with settlement done on same day value. Funds were sourced mainly from time, savings and foreign currency deposits, as well as accretion to unclassified assets. The funds were used, largely, to extend credit to the private sector and payment of claims on demand deposit.

    According to the report, signed by CBN Director, Financial Markets Department, Alvan Ikoku, said the banks continued to access the CBN’s Standing Facilities window to square up their positions either by borrowing from the SLF window or depositing excess reserves at the standing deposit facility (SDF) window of the CBN at the end of each business day.

    The report said the SLF was utilised by the banks in order to enable them square up their positions after inter-bank market trading hours. It said the patronage of the facility reflected the liquidity position during the first half of the year, as requests were at its lowest on January 2, 2017 with N83.61 billion and at its highest on April 18, 2017 with N478.54 billion.

    “In view of the 122 transaction days within the period, average daily request amounted to N225.14 billion. Consequently, the cumulative interest received on the facilities was N21.13 billion at 16.00 per cent. In comparison with the corresponding period of the previous year, total SLF transactions amounted to N5.07 trillion, out of which N4.87 trillion was conversion from ILF.

    It said the average daily request stood at N59.76 billion, while the cumulative interest received on the facilities was N2.92 billion at the applicable rates of 13.00 and 14.00 per cent. The higher level of transactions over the corresponding period in 2016 was occasioned by the tight monetary operations in 2017.

    The CBN report said patronage of the SDF reflected the liquidity unease in the system as less funds were deposited compared with the corresponding period of the preceding year.

    “The reduced patronage was due to tighter monetary operations through increased Open Market Operation (OMO) auctions. The foreign exchange interventions, in addition, moderated the cash balances in the banking system. The restriction of N7.50 billion maximum remunerable SDF per bank remained applicable.

    The total request for SDF in the review period was N5.1 trillion, indicating a daily average volume of N45.54 billion as against a total SDF of N12.69 trillion and daily average of N102.42 billion in the corresponding period of 2016.

    Further analysis of the transactions indicated that the highest amount of SDF was N121.50 billion on February 2, while the lowest was N0.30 billion on March 20.

    Consequently, the interest paid on SDF amounted to N1.99 billion at the rate of 9.00 per cent in the first half of 2017, as against N2.84 billion at 4.00 per cent from January 1 to March 21 and 7.00 per cent from March 22 to June 30, 2016.

    It said the total value of transactions in the funds market stood at N864.93 billion in the first half of 2017, as against N513.11 billion in the corresponding period of 2016. The high level of activity in the review period was attributable to liquidity squeeze occasioned by tight monetary operations.

    Further analysis of the transactions indicated that open-buy-back (OBB) accounted for 89.42 per cent at N773.42 billion, while the unsecured recorded 10.58 per cent at N91.51 billion.

    In the preceding year, OBB accounted for less at N203.54 billion or 39.67 per cent compared to the unsecured segment which recorded N309.57 billion or 60.33 per cent. The shift in patronage in favour of OBB in the review period was attributable largely to greater risk aversion by market participants.

  • Banks fail to adopt single rate on dollar asset reporting

    Banks  have not adopted a uniform exchange rate in reporting foreign currency assets in their financial statements, a Fitch Ratings report has said.

    The banks’ action falls below the International Financial Reporting Standards (IFRS) which the lenders are expected to comply with. Many of the Tier-1 banks have released their 2017 full year results.

    The IFRS guidelines state that companies operating in countries with multiple exchange rates should translate their foreign currency assets and liabilities into local currency based on the exchange rates at which they expect to settle them. But the guidelines leave room for considerable judgment and flexibility, and Nigeria operates with multiple exchange rates, which adds to the confusion.

    The global rating agency said the need for uniform exchange rate reporting becomes exigent as exchange-rate risk warrants scrutiny for banks as about 40 per cent of assets and liabilities in Nigeria’s banking sector are denominated in dollars and not all banks operate with matched foreign currency positions.

    Confirming the asset reporting gaps, Exotic Capital said foreign exchange measures implemented by the authorities appear to have worked. “We think we may see more lenders adjust the exchange rate used in reporting results. Such adjustments could impact capital and other metrics, but we think the banks are in a better position to deal with these adjustments now than some were before,” it said.

    The research firm, said banks’ management teams appear as focused on changes in required provisions against specific exposures to the power sector and to companies, such as 9 Mobile, for instance, as they are on the overall impact of IFRS 9 implementation.

    “Lenders expect regulatory risk reserves to help offset the impact of the transition to IFRS 9, at least in part. Provisions against loans to the power sector and against 9 Mobile exposures may rise at some banks. Having said this, most banks believe the worst is behind us and asset quality metrics may improve as the year progresses,” it said.

    Continuing, Fitch said banks’ move to a more market-based presentation of dollar-currency assets, liabilities and profit-and-loss items is likely to come into focus as the lenders begin to publish their 2017 results.

    Fitch said financial statements with foreign currency items translated more in line with market exchange rates will give a more realistic representation of banks’ foreign currency positions and capital at risk from potential further depreciation of the naira.

    “Our discussions with banks that we rate suggest that most will publish their 2017 financial statements based on the Nigerian Foreign Exchange Fixing (NiFEX) rate (about NGN330/$) instead of the official exchange rate of NGN305/$, which they previously used. Some may use a blended rate. The NiFEX rate is the Central Bank of Nigeria’s (CBN’s) reference rate for spot foreign-exchange transactions, widely used on the interbank market,” it said.

     

  • Banks not impacting Nigerians, says Osinbajo

    Vice President Yemi Osinbajo yesterday decried the low impact of commercial banks on the citizenry with no fewer than 40 per cent of the people under-banked.

    He spoke at the public presentation of the book “Banking Reform in Nigeria: the Law, the Prospects and the Challenges’’ written by a member House of Representatives Bode Ayorinde, in Abuja.

    ”It is perhaps accurate to say that for most Nigerians, banks have not really significantly impacted their lives or livelihoods. First, the under-banked population is said to be in the order of about 40 per cent, which means that a significant number do not even have access to banking facilities let alone banking products of any kind. The majority of those who have bank accounts for a variety of reasons are not able to access personal loans, mortgage or business loans. This explains why financial inclusion has gained inclusive currency and resonance in the past few years.’’

    According to Osinbajo, depositors give their hard-earned funds to the banks at single-digit interest rate but cannot get anything less than double-digits when they seek the same funds for their businesses or mortgages for homes. He noted that the practice occurred against the backdrop of what seemed to be regular declarations of hefty profits by banks. The Vice President stated that the issue was not just about safe keeping of funds especially for the poor and those in the rural areas.

    He said everyone should have access to financial products designed for low income earners as well as for the SMEs. Osinbajo stated that when the administration started the conditional cash transfer scheme for the poor it experienced the banking problems first hand.

  • Banks not impacting on the Nigerian population, 40% under-banked – Osinbajo

    The Vice President, Prof Yemi Osinbajo, on Monday decried the low impact of commercial banks on the citizenry with no fewer than 40 per cent of the people under-banked.

    He said this in a remark at the public presentation and launching of the book “Banking Reform in Nigeria: the Law, the Prospects and the Challenges’’ written by a doctor of Law, former lecturer in the University of Ife and a member House of Representive,  Bode Ayorinde in Abuja.

    Audio attached

    “It is perhaps accurate to say that for most Nigerians, banks have not really significantly impacted their lives or livelihoods.

    “First, the under-banked population is said to be in the order of about 40 per cent, which means that a significant number do not even have access to banking facilities let alone banking products of any kind.

    “The majority of those who have bank accounts for a variety of reasons are not able to access personal loans, mortgage or business loans

    “This explains why financial inclusion has gained inclusive currency and resonance in the past few years.’’

    Cue out audio

    According to Osinbajo, depositors give their hard-earned funds to the banks at single-digit interest rate but cannot get anything less than double-digits when they seek the same funds for their businesses or mortgages for homes.

    He noted that the practice occurred against the backdrop of what seemed to be regular declarations of hefty profits by banks.

    The Vice President stated that the issue was not just about safe keeping of funds especially for the poor and those in the rural areas.

    He said everyone should have access to financial products designed for low income earners as well as for the SMEs.

    Osinbajo stated that when the administration started the conditional cash transfer scheme for the poor it experienced the banking problems first hand.

    He said the government had relied on the words of enthusiastic banks for sending N5,000 to the first batch of the One million poor but got disappointed when the banks could not perform.

    He said that by the way bank businesses were designed in the country there was little room for financial inclusion and little room for those who could pay the banks charges.

    He, however, said it was not the fault of the banks alone as the financial system favoured the strong  and excluded the weak.

    Osinbajo noted that there was a need to use mobile banking as an important tool to reach more Nigerians.

    “It is an important consideration in any economy that the banking system must be able to provide loans adding that the intention of the administration was to facilitate the growth of SMEs.

    Osinbajo stated that the author had stirred intellectual discourse on the subject matter and there was the need for all to pay attention to his suggestions and adapt those that could propel the economy.

    Accordingly, he said  banking supervision was crucial as regulation was at the heart of the  financial system.

    “Regulation is at the heart of our whole financial and economic system.

    “One thing that we have learnt from the last decade is that more often than not it is these ordinary citizens who pay for the misadventures of the financial services sector and the failures of government regulation.

    “Not only do they lose their homes and moneys, sometimes even their live savings they also shoulder the cost of the bail outs in the banks.

    “This is why, it is my view that independence governance of the CBN and closer and more regular forensic scrutiny of banks is fundamental,’’ he added.

    According to Osinbajo, it is not more rules and regulations but greater enforcement.

    ”It is holding our bankers to account; it is insisting that they keep their books honestly and transparently and to sanction effectively those who so often step out of line.”

    He expressed gratitude on the conversation of the book on the financial sector and the economy adding that it would be a worthwhile contribution on what needed to be done in the regulation of the financial system.(NAN)

  • CBN’s stress test shows oil assets big risks to banks

    The Central Bank of Nigeria (CBN) bi-annual banking industry stress test carried out to evaluate the resilience of banks to credit risk, liquidity, interest rate, has shown the deteriorating state of oil sector assets in banks’ balance sheets.

    Signed by CBN Governor Godwin Emefiele, the test report showed that despite the deteriorating state of oil assets and slow growth in the economy, the economy is on the path to full recovery and as forecasted, will return to normal growth this year.

    The CBN’s Financial Stability Report for the first half of last year premised the recovery on the expected stability in oil prices, responsive monetary policy and expansionary fiscal policy.

    The bank assured that it will continue to monitor developments in the sector to keep lenders safe   and   sound.

    The report linked oil asset deterioration in lenders’ books to lingering impact of macroeconomic instability which trailed the oil price shock in 2014.

    According to the apex bank, industry asset quality deteriorated in the first half of last year as Non-Performing Loans (NPL) ratio rose 2.2 percentage points to 15 per cent from 12.8 per cent in the 2016 fiscal year.

    The report said that regulatory attention was being focused on ensuring an improvement in the quality of banks’ assets  as  well  as  ensuring  that  the  banks  contribute  effectively  to  the  real  sector.

    It said the disruptions experienced  in  the  economy  with declining  oil prices  and  government  revenue resulted  in  an  increase  in  the  NPLs  in  the  banking  industry.

    The  CBN said it  will continue  to  monitor  developments  and  initiate  measures  to  limit  contagion  and  ensure  that financial   institutions   remain   safe   and   sound. The regulator promised to ensure the provision of appropriate structures and policies in financial institutions to curb money laundering and financing of terrorism.

     

     

     

  • Banks to raise Tier-1 capital over new divided rule

    Deposit Money Banks (DMBs) are expected to raise Tier-1 capital in compliance with the Central Bank of Nigeria’s (CBN’s) new dividend payout policy, The Nation has learnt.

    Tier-1 capital is the core measure of a bank’s financial strength from a regulator’s view. It is composed of core capital, which consists primarily of common stock and disclosed reserves (or retained earnings), but may also include non-redeemable non-cumulative preferred stock.

    Raising Tier-1 capital becomes necessary, if the lenders intend to pay dividend or distribute capital as directed by the apex bank, the Financial Derivative Company (FDC) Economic Monthly Update released last week advised.

    The report explained that since the issuance of the directive, the banking sub-sector index, on the Nigerian Stock Exchange (NSE) lost about 4.03 per cent.

    “This is partly as a result of negative investor sentiment towards banking stocks, as investors’ expectations point towards reflecting the true value of these stocks. Hence, banks will have to boost their tier 1 capital, if they intend to embark on distribution of capital ( that is, issue dividend) as a way to signal financial strength, as well as comply with this new directive,” it said. This, it said, affirmed that the banking system remains fragile.

    The report said the adoption of International Financial Reporting Standards (IFRS 9) from  last month would further exacerbate the financial woes of most banks.

    The implementation of IFRS 9 changes the measurement of financial assets as well as provisions for loan losses (impairments). This will have an immediate impact on profitability and ultimately worsen most banks’ CAR, it said.

    It added that banks’asset quality might improve considerably, while the cost of regulatory capital to cover risk weighted assets will remain high.

    “This will further erode banks’ economic profit, preventing banks from taking on more risk assets with-out raising additional capital. This becomes a vicious cycle – in a bid to protect depositors from growing NPLs, the CBN imposes strict regulations to serve as buffers, which reduces the risk appetite of banks. As a result, banks charge borrowers exorbitant rates to cover the cost of regulatory compliance. But sky high rates increase the risk of default, adversely affecting NPLs,” it said.

    It said prior to this guideline, most banks adopted an aggressive dividend policy, partly to shore up their share price and to splash cash to shareholders.

    Consequently, banks resorted to external funding sources to support their balance sheet, as against internal capital consolidation in the form of retained earnings.

    According to the report, to further comply with the Basel accords, the CBN in October 2014 issued a directive aimed at preventing a systemic failure and effectively pushing banks to enhance their capital buffers.

    This was in form of restricting deposit money banks (DMBs) and discount houses (DHs) with low capital base and high non-performing loans (NPLs) from paying out dividend.

    This order ensured banks provided adequate capital buffers and prevented them from paying out cash dividend out of their reserves.

    The CBN on January 31 directed banks, which maintained Capital Adequacy Ratio (CAR) of at least three per cent above minimum requirement, low composite risk rating (CRR) and Non-Performing Loans (NPLs) between five and 10 per cent, to retain a dividend pay-out ceiling of 75 per cent. Banks with worse indexes were banned from paying dividends.

    Before this new guideline, the CBN did not make adequate provision for banks with low CRR, but NPLs between five per cent and 10 per cent.

     

  • Banks to raise Tier-1 capital over new divided rule

    Deposit Money Banks (DMBs) are expected to raise Tier-1 capital in compliance with the Central Bank of Nigeria’s (CBN’s) new dividend payout policy, The Nation has learnt.

    Tier-1 capital is the core measure of a bank’s financial strength from a regulator’s view. It is composed of core capital, which consists primarily of common stock and disclosed reserves (or retained earnings), but may also include non-redeemable non-cumulative preferred stock.

    Raising Tier-1 capital becomes necessary, if the lenders intend to pay dividend or distribute capital as directed by the apex bank, the Financial Derivative Company (FDC) Economic Monthly Update released last week advised.

    The report explained that since the issuance of the directive, the banking sub-sector index, on the Nigerian Stock Exchange (NSE) lost about 4.03 per cent.

    “This is partly as a result of negative investor sentiment towards banking stocks, as investors’ expectations point towards reflecting the true value of these stocks. Hence, banks will have to boost their tier 1 capital, if they intend to embark on distribution of capital ( that is, issue dividend) as a way to signal financial strength, as well as comply with this new directive,” it said. This, it said, affirmed that the banking system remains fragile.

    The report said the adoption of International Financial Reporting Standards (IFRS 9) from  last month would further exacerbate the financial woes of most banks.

    The implementation of IFRS 9 changes the measurement of financial assets as well as provisions for loan losses (impairments). This will have an immediate impact on profitability and ultimately worsen most banks’ CAR, it said.

    It added that banks’asset quality might improve considerably, while the cost of regulatory capital to cover risk weighted assets will remain high.

    “This will further erode banks’ economic profit, preventing banks from taking on more risk assets with-out raising additional capital. This becomes a vicious cycle – in a bid to protect depositors from growing NPLs, the CBN imposes strict regulations to serve as buffers, which reduces the risk appetite of banks. As a result, banks charge borrowers exorbitant rates to cover the cost of regulatory compliance. But sky high rates increase the risk of default, adversely affecting NPLs,” it said.

    It said prior to this guideline, most banks adopted an aggressive dividend policy, partly to shore up their share price and to splash cash to shareholders.

    Consequently, banks resorted to external funding sources to support their balance sheet, as against internal capital consolidation in the form of retained earnings.

    According to the report, to further comply with the Basel accords, the CBN in October 2014 issued a directive aimed at preventing a systemic failure and effectively pushing banks to enhance their capital buffers.

    This was in form of restricting deposit money banks (DMBs) and discount houses (DHs) with low capital base and high non-performing loans (NPLs) from paying out dividend.

    This order ensured banks provided adequate capital buffers and prevented them from paying out cash dividend out of their reserves.

    The CBN on January 31 directed banks, which maintained Capital Adequacy Ratio (CAR) of at least three per cent above minimum requirement, low composite risk rating (CRR) and Non-Performing Loans (NPLs) between five and 10 per cent, to retain a dividend pay-out ceiling of 75 per cent. Banks with worse indexes were banned from paying dividends.

    Before this new guideline, the CBN did not make adequate provision for banks with low CRR, but NPLs between five per cent and 10 per cent.

  • Jonathan’s wife, banks trade blame over funds trapped in 10 accounts

    Jonathan’s wife, banks trade blame over funds trapped in 10 accounts

    Former First Lady Patience Jonathan, some firms and groups linked to her and their bankers are engaged in a blame game over their inability to retrieve huge sums trapped in the banks in the wake of a freezing order obtained by the Economic and Financial Crimes Commission (EFCC).

    Mrs. Jonathan, the firms and groups accused the banks – First Bank, Skye Bank and Diamond Bank – of withholding their funds despite an order of court vacating the freezing order. But the banks argued that the way the ex-First Lady and others sought to retrieve the trapped funds violated existing financial regulations.

    The firms and groups include: Incorporated Trustees of Ariwabai Aruera Reachout Foundation, Fagmat Oil and Gas Nigeria Limited, Finchley Top Homes Limited, AM PM Global Network Limited and Magel Resort Limited.

    Others are: Incorporated Trustees of Women for Change and Development Initiative Nigeria, Seagate Property Development Investment Company, Globus Integrated Services and Pluto Property and Investment Company Limited.

    Although the total amount involved could not be immediately ascertained at the weekend, some documents filed before the Federal High Court, Abuja revealed the distribution of the accounts.

    Mrs. Jonathan is said to own the account marked:  2022646664 with First Bank, with a balance of about $3.6million ($3,626, 273.71). Globus Integrated maintains account: 210002269 domiciled in Skye Bank.

    Incorporated Trustees of Ariwabai Aruera Reachout Foundation, Fagmat Oil and Gas Nigeria Limited, Finchley Top Homes Limited, AM PM Global Network Limited and Magel Resort Limited are said to maintain accounts: 0024351569, 0026838491, 0019213687, 0026718889, 0024351590 with Diamond Bank.

    Also, the Incorporated Trustees of Women for Change and Development Initiative Nigeria is said to maintain three accounts: 0035481691, 0025879578 and 0019213632 with Diamond Bank.

    Mrs. Jonathan, the firms and groups are contending that the banks’ alleged refusal to release the money amounted to flouting the December 5, 2017 order of a Federal High Court in Abuja, vacating the freezing order got by the EFCC on May 30, 2017.

    They subsequently initiated contempt proceedings against the banks’ heads, who they accused of disobeying the December 5, 2017 order by Justice Binta Nyako of the Federal High Court, Abuja, which was to the effect that the freezing order obtained by the EFCC on the affected accounts has lapsed.

    Mrs. Jonathan, the firms and groups stated, in a supporting affidavit filed with the committal application, that they attempted to make withdrawals from the accounts after the December 5, 2017 order, but were denied access to the accounts by the banks.

    They added: “The respondents/contemnors all refused to obey the court order and thus, bluntly refused to pay the applicants or allow them operate their accounts. Despite the service of the orders and Forms 48 and 49 of this court on the respondents/contemnors, they have bluntly refused to obey the orders of this honourable court.”

    They prayed the court to commit the bank chiefs to prison for “the persistent and flagrant disobedience of the order of this honourable court made on the 5th of December 2017 in suit No: FHC/CS/821/2016 between Incorporated Trustees of Ariwabai Aruera Reachout Foundation and 10 others vs. EFCC.”

    Dr. Adesola Adeduntan (described in the application for committal as the Group managing Director/Chief Executive Officer, First Bank); Mr. Tokunbo Abiru (Chief Executive Officer, Skye Bank) and Uzoma Dozie (Managing Director/Chief Executive Officer, Diamond Bank) have denied any wrong doing.

    The bank chiefs claimed that their banks complied with the December 5, 2017 ruling unfreezing the accounts. They have also challenged the competence of the contempt proceedings.

    In a counter-motion, Adeduntan challenged the competence of contempt proceedings on grounds of incompetent service. He argued that no processes in relation the proceedings were served on him personally as required by law.

    The First Bank CEO denied flouting any order of the court. He stated that his bank has complied with the December 5, 2017 order and has lifted the restriction on Mrs Jonathan’s account with the bank.

    In a supporting affidavit, First Bank stated that “upon confirming the authenticity of the order of court and advice from its legal department, the bank forthwith complied with the order of court by defreezing the account on 16th December 2017.

    “This was communicated to 11th judgment creditor/respondent (Mrs. Jonathan) vide a letter dated 18th December 2017. The bank also informed the 11th judgment creditor/respondent that its management had taken a decision to close the account with it and therefore requested her to provide the details of an account into which the balance in the said account should be transferred.

    “Upon receipt of the letter, the 11th judgment creditor/respondent and her counsel, Granville Abibo (SAN), vide letter dated 20th December 2017 respectively informed the bank that the 11tth judgment creditor/respondent could not provide detail of any account into which the balance in her defreezed account with the bank should be transferred and thus demanded that she should be paid in cash.

    “The bank, having complied with the order of court to unfreeze the account, no longer owe the 11th judgment creditor/respondent any obligation as regard assisting her to violate the provisions of the Money Laundering Laws of Nigeria and normal banking practice of delivering foreign currency in large quantum in cash.

    “In response to letters dated 20th December 2017 the bank, vide letters dated 21st December 2017 to the 11th judgment creditor/respondent and her counsel respectively, informed them of the bank’s inability to accede to their request for cash payment, but advised that a bank cheque will be issued in the name of the 11th judgment creditor/respondent for the balance in the unfreezed account if she fails to provide detail of account into which the said balance should be transferred on or before 4tth of January 2018.

    “In response, the 11tth judgment creditor/respondent and her counsel respectively informed the bank that the 11tth judgment creditor/respondent does not have any account in her name where monies can be transferred and would prefer cash to be paid to her as the lodgements made into that account were done in cash.

    “The 11th judgment creditor/respondent further wrote the bank on 277th December 2017 supplying three separate accounts of her counsel, telling the bank that the said sum be paid into those three named accounts of solicitors who are third parties and the balance paid to her in cash.

    “In line with the bank’s letter of 21th December 2017, upon the failure of the 11th judgment creditor/respondent and her counsel to provide any account detail in her name to transfer the funds in her unfreezed account, the bank on 17th January 2018 issued, in her name, a bank cheque no: 014602 in the sum of $3,626,273.71 representing the total balance in her account with the bank, less applicable charges.

    “Further to the above, the bank also informed the 11th judgment creditor/respondent and her counsel vide letters dated 17th January 2018 to visit a designated office of the bank in Abuja to pick up the cheque. The 11th judgment creditor/respondent refused to collect the letter, but her counsel received his own copy,” the bank said.

    Meanwhile, Mrs. Jonathan, the firms and groups have taken steps to frustrate a renewed move by the EFCC to have the accounts frozen again. They have challenged the competence a fresh motion filed by the EFCC to that effect.

    They urged the court to strike it out for not only being incompetent, but constitution an abuse of court process. They noted that the EFCC has among others, filed similar application before the Lagos division of the Federal High Court.

    When the two cases marked: FHC/ABJ/CS/821/2016 and FHC/ABJ/CS/1207/2017 came up last Friday, the court could not take any of the pending application because the EFCC was not represented.

    Justice Nyako noted that the EFCC was served with a hearing notice just the previous day, which the judge said was insufficient.

    Following agreement by lawyers in the cases, including Mike Ozekhome, SAN, (for Mrs. Jonathan), Justice Nyako adjourned further proceedings to April 11.

  • ‘Banks can do better in tackling financial crimes’

    ‘Banks can do better in tackling financial crimes’

    The Inter-Governmental Action Group against Money Laundering in West Africa (GIABA) is committed to fighting corruption, terrorism financing and money laundering across the ECOWAS sub region. The agency has established functional financial intelligence units in all ECOWAS member-states and strengthened financial institutions to report suspicious transactions to regulators. GIABA’s Head in Nigeria, Timothy Melaye, speaks with COLLINS NWEZE on the enormous threats posed by money laundering and terrorism financing to the economy, security and social life in the ECOWAS region and globally.

    Can you tell us some of the steps the Inter-Governmental Action Group against Money Laundering in West Africa (GIABA) has taken to tackle money laundering across the West African sub-region?

    The GIABA as an organisation has been working assiduously to cover all aspects relating to fight against money laundering and terrorist financing. Basically, we are working with all stakeholders and in doing that, we have initiated a lot of programmes that are very different from the level of stakeholders. We are working, as you are aware, with journalists and we think these poeple are veritable tools to pass information in terms of awareness reasons and agenda settings.

    We are also working with the civil society organisations. We have established network of civil society organisations that are working in this area to raise awareness as well, and to confront and advocate in the areas of money laundering and terrorist financing. We have specific trainings for law enforcement agencies, the Customs, the Police, the Economic and Financial Crimes Commissions (EFCC) and border agencies across the region. We are training them to  address the gap within their area.

    Are there further steps you are taking in that direction?

    We did not stop there. We also have specific training for financial institutions, all the banks compliance officers. We have specific annual trainings for them in terms of what they need to do, for instance, in raising what we call the Suspicious Transaction Reports (STRs) for them to know when to submit those reports. We also have what we call Currency Transaction Reports (CTRs). These reports are raised by banks on suspicious activities of individuals and are submitted to Financial Intelligence Unit. Asides the bank, we have looked at the judiciary, just in August last year, we took Court of Appeal Judges and Justices of Supreme Court of member state to United States in Washington, for them to have first-hand experience of what other jurisdictions are doing. Well, this is the second round of that.

     Money laundering and terrorist financing, do they really pose a threat to ECOWAS countries?

    Yes, money laundering and terrorist financing pose not only a threat, but are enormous threats, enormous challenges to the economy, to security, to social life in this region and globally. You will notice, for instance, no one needs explanation to know that terrorism is a major threat. You saw the number of lives that were lost in the northeast of Nigeria, in Mali, in Niger, even down to Burkina Faso and in Cote d’Ivoire. All these activities are of terrorist. Without funding it is impossible for them to execute their prospect. They use cars to operate, those cars were purchased with money.

    So, if we do not deal with terrorist financing, we cannot deal with fight against terrorism itself. You will see the dearth of facilities and infrastructure in the region, some of them can be directly attributed to the activities of economic crime and financial crimes. We must fight money laundering, we must fight terrorist financing to have a sane society in this region and globally.

    Financial institutions have been blamed for aiding these malpractices. Now, don’t you see them as a setback to this fight?

    Yes, financial institutions will continue to be partners, that does not mean they are adequately doing what they should do, but they have improved overtime. The level of knowledge within the financial institutions across the region has greatly increased from what it used to be. Now, there is functional financial intelligence unit in all member states of ECOWAS. Therefore, they have also received capacity to collect, analyse and disseminate intelligence from financial information or suspicious transaction that come to them and banks have been strengthened to do that.

    So, we have moved away from where we were, we are not yet where we want to be, but we are progressing. I will say financial institutions have made tremendous efforts and contributions in terms of the activities that are going on. That does not mean there are no bad eggs, that does not mean there are no institutions that are still covering up for criminals. But it is just that the system is having a self-check. If any criminal activity is conducted and researched or investigated  and you find a financial institution… for instance, if you get a man who is corrupt arrested and you find out that he has some money and by the time the money got to the bank, the financial institution did not file suspicious transaction report, which they supposed to file, that bank can be sanctioned.

    If you look at our recent histories you will find that in the United States (US) that HSBC was fined $1.9 billion. In our region, hardly will any bank survive that kind of fine; fines will escalate in this region, sanctions will be proportionate, will be dissuasive and will be appropriate for the crime and if that increases and continues that way, there will be no incentive for any financial institution to hide or not to comply again.

    There are countries that are not implementing the Financial Action Task Force (FATF) recommendations. What are the implications for such countries? And secondly, can a country implement all the 40 recommendations?

    The FATF 40 recommendations are expected to be implemented by all member states and many countries have signed on to it and almost about 180 countries. So, any country that is not implementing should be sanctioned. Those sanctions are dissuasive enough for you not to comply. For instance, if a country is put on the list, public statement is issued on that country; so investors will not want to go there and corresponding banks of that particular country will not even be taken  serious.

    No international transaction that anybody wants to do in that country will be effective, this is because the country is under one form of sanction or the other. So, no country will want to be sanctioned and countries are forced to comply because they want to avoid sanction. So, hardly will you find out any country that is a threat; that is not implementing. It is possible for countries to implement, but nobody is saying that you have the capacity and resources to implement all the 40 recommendations and the full standard that is expected, that is why we will have what we call the immediate outcomes.

    There are 11 immediate outcomes and those ones are kind of essential areas and we have some that we consider. It is important for global security, so these are what we expect that each country will comply with. We will measure performance of evaluation based on the categories as we implement them and then each country is rewarded in terms of our own rating. Countries are rated based on that they are sanctioned.

    What is Nigerian status in that category?

    Nigeria’s mutual evaluation is on our website, the next one has not taken place yet.

    But what is the last evaluation?

    The reports are there and there are lots of recommendations that are involved, but the performance, I will tell you is not encouraging. The last one was long ago, it is a bit overtime because it was done in 2007 and the report came out in 2008. So, we are talking of about 10 years and things have changed drastically over that period of 10 years. It will be unjust for me to give you the result of Nigeria based on what happened 10 years ago. Over 10 years now, a lot of things and a lot of activities have taken place. A lot of identified gaps have been filled. The next one was supposed to commence last year or this year, but unfortunately it is not going to commence because Nigeria has applied for membership of FATF and that process has halted the evaluation pending when the FATF approves.

    When is this application likely to take effect?

    No fixed time. The application has been submitted to FATF. FATF has some process and procedures. Those processes are still undertaken, they were supposed to be in Nigeria last November, unfortunately that meeting has been shifted again because Nigeria has an issue with Edmond Group of FIUs and they wanted to see if this can be resolved before they can proceed with that process.

    What advise do financial institutions give priority to at present?

    According to the recommendations of the FATF, financial institutions are supposed to deal with two major issues, which concerns Customer Due Diligence and Know Your Customer. So, if they do that and they submit their own suspicious transactions report of foreign exchange, they maintain the fact that they need to identify their customers and do customer due diligence. If the banks can know their customers, they have addressed major challenges. And they submit their STRs as and when due, and they do not collude with criminals to hide resources, those are the expectations of the recommendations as they concern financial institutions.

    GIABA has been in operation since 2000. Are there some major achievements that can be credited to it?

    GIABA was established in 2000 by the authority of heads of states and governments of Economic Community of West Africa States (ECOWAS). But major operations started in 2005 and 2006. There were no major operations in the early years of operations,. But subsequently, GIABA has done quite well. For instance, when GIABA started operations, there were only two financial intelligence units in the region. Today, GIABA has helped all member states to have functional intelligence units. So, that is a major step taken.

    GIABA grew from nowhere to become an associate member of FATF. GIABA competencies have brought it to do mutual evaluation of member states, which is usually done by FATF, the World Bank and International Monetary Fund (IMF). GIABA has trained accessory, built capacities to conduct evaluation of countries. GAIBA’s performance in the region has made non-ECOWAS members to start joining such Comoros Island, and Sao Tome and Principe. They left their own region and said, this is where they want to belong. GIABA has assisted in legislation drafting, review of legislative documents to support enactment of laws that are needed in the regions. We have identified sources, patterns and so on concerning terrorist financing in the region.

    And it’s a specialised institution, and the Financial Action Task Force (FATF) regional body. The FATF is the global body responsible for building standards and recommendations to fight money laundering, terrorists financing and proliferation of small, light and weapons of mass destruction. Within the confine of this work, GIABA has a mandate to protect the economy and financial institutions of West African states from laundering of proceeds of crime and  to work with the FATF recommendations to ensure that terrorists financing is not happening within the region and by extension, across the world. That is the core mandate and responsibility of GIABA. Today in this region, we have raised consciousness about money laundering like no other organisation has done. This is why GIABA is considered as one of the champions of the ECOWAS region.

    What is the biggest challenge GIABA is facing within the ECOWAS sub-region?

    There is no political will in the region. We need more political commitment from the leaders. That does not mean they are not committed, but they need more of it. More political commitment in terms of driving process from leadership position.  Secondly, resources can never be enough; the challenges are daunting. The training required is huge, and our region is seen as low capacity region. The more knowledge we are able to pass to others depends on how much resources are available to us. Also, this region does not have good and structured database. If you require some data or information, they are hardly available.

    Are there other specific challenges you are facing in Nigeria now?

    Of course everywhere you see issues of criminality, there are challenges. Not only in Nigeria, but eventually in most African countries; corruption is high, trafficking is high, drug related offences are also high. We are trying to work with all relevant agencies. For instance, GIABA provided technical assistance to EFCC in Nigeria, and this is part of things to strengthen their capabilities to carry out their duties and encourage the leadership to provide the political will.

    How sincere are the various governments across the region about fighting corruption and terrorist financing?

    Low political will is not synonymous with sincerity or in sincerity. Low political will is about commitment in terms of allocation of resources, manpower and other issues that are related to that. For instance, we want to see a situation whereby government allocates adequate manpower, resources and attention to key issues about fighting corruption, money laundering and terrorist financing as well as other offences of money laundering. Sometimes, physical presence of top government official in a relevant meeting may be a political will. If you have a meeting and you see the President of a country or minister that has power to take major decisions that are politically willed. Not necessarily talking about sincerity or insincerity, there are those who are not sincere. It is not my position to identify them now. But the truth is that we expect more commitment and allocation of resources and attention from those taking decisions.

    Are there steps you are taking to help government achieve better tax compliance?

    It is fine for any country in the region, which decides to pursue adequate payment of taxes. Citizens do not only have rights, they also have obligations. Some of such obligations are for them to pay their taxes, adequately and as at when due. And any process or policy of government that drive that process is a welcome development. FATF 40 recommendations have added tax evasion as one of predicate offences of money laundering. It is right for government to pursue proper tax payment for everyone to be able to pay adequate tax and have the voice as a taxpayer to make demand on public service.

    And GIABA, as an institution, has always advocated that every predicate offence on money laundering should be pursued vigorously. And if government decides to pursue payment of taxes, I think it is a commendable effort and every hand should be on deck to support it and ensure that it succeeds. Those, who evade taxes should know they are committing crimes, and the crime that is committed should be paid for.

    There seem not to be many convictions on money laundering and corruption. What is the problem?

    I think that should be left for each of the country’s criminal justice system to address because conviction is not a product of whether they were arrested, it is a matter of criminal justice system. And criminal justice system starts with issues of identifying them, prosecuting and convictions. It is a chain of actions. And the fact that there are no convictions bothers GIABA. Therefore, in 2013, we supported some institutions in the region with financial capacity to strengthen capacity of investigators and persecutors by providing trainings for them.

    We also trained judges to enable them understand the processes and procedures for them to be able to secure convictions. It is not just to secure convictions when people have not committed a crime. That will be unfair on the people. It is to secure convictions where crimes are committed. We are training law enforcement agencies. We are training investigators, prosecutors and judges, so that we can end up letting no criminal escape and those, who have not committed crimes, should of course, be set free.

    What advice do you have for governments and businesses across the West African sub-region?

    My sincere message to businesses is that they should do business with conscience. Let business you are doing add to the society and not to destroy the fabric of the society. If terrorists engage in activities and they kill people, they do not identify your race or age. Bomb does not know who is who. Anybody can be hit, anybody can die in the process. Therefore, whatever you are doing, do it with conscience. If you are a businessman, contractor, and you have contract to execute for a school, for education, hospitals and you are part of those, who corrupt and destroy the system, one way or the other, it will affect you or member of your family.

    So, let us do business with conscience. And if you are a public office holder, or government official, do the right thing. I must insist that government in the region must be people-serving. The purpose of government is to serve the people. Government  must be people-serving and not self-serving. We want to encourage them to do that. We are seeing changes, we are seeing improvements, that must be enhanced, increased and we will see the best out of it. That is how we can better and best our society.

     

     

  • Banks get two weeks to settle complaints

    Banks get two weeks to settle complaints

    Banks and other financial institutions must settle customers’ complaints on overcharge, unauthorised deductions and other matters within two weeks, the Central Bank of Nigeria (CBN) has directed.

    Mr Tajudeen Ahmed, the CBN Head of Complaints Management Division, broke the news yesterday.

    Ahmed reiterated the apex bank’s commitment to eradicating excess and arbitrary charges.

    According to him, the CBN has issued a circular which could be found on its website showing all legitimate bank charges.

    Any charge outside what is contained in the circular is not allowed and should not be charged.

    “The Consumer Protection Department issued guidelines to banks dated August 16, 2011, directing all banks and other financial institutions to resolve all customer complaints within two weeks of receipt of that complaint.

    “Before the expiration of that complaint, the financial institution is expected to be engaging the customer on a continuous basis to update him or her on the status of the complaint.

    “If it is not resolved within the deadline given, then such a person is encouraged to draw the attention of Central Bank of Nigeria to find solution to that complaint,” he said.

    Ahmed advised customers with unresolved complaints to contact the CBN by writing to the Director Consumer Protection Department or send an email to cbd@cbn.gov.ng.

    He also advised disgruntled bank customers to visit any branch of the CBN closest to them to lay their complaints.

    “The CBN continually engages the banks to find out if their conducts and practices are fair to their customers in order to stimulate people’s confidence in the banking system.

    “Non-adherence to that normally results to regulatory sanctions as the case may be,” he said.

    Ahmed faulted banks for setting a limit on ATM withdrawals to get customers to make several withdrawals to cash large sums.

    “I have also observed and noted this. Don’t forget that at the beginning, it wasn’t like this. Over time, we started having this problem.

    “One of the reasons is that the quantum of N500 denomination is much more than that of N1,000 denomination.

    “When we approached the banks about these problems, they said that the machines become easily faulty when they are set to dispense up to N30, 000 to N40, 000 units.

    “However, CBN has directed that the machines that allow payment of up to N30,000 to N50,000 should be installed.”

    Also, the Head of Consumer Protection Division, Mrs Hadija Kasim, said bank customers could also avoid some of these issues by inculcating the habit of cashless policy.

    She reminded the public that there were various methods to make payments rather than carrying cash.

    “Let’s not forget that ATM cards can also be used on Point of Sale (POS) terminals.

    “We are encouraging people that unless it is absolutely necessary, they should reduce the carriage of cash.”