Assessing implications of EFCC, CBN’s clampdown for financial system stability

The on-going investigations of some Deposit Money Banks by the Economic and Financial Crimes Commission, EFCC, and Central Bank of Nigeria, CBN seem to have divided stakeholders over whether such raids would improve or worsen the sector’s stability. Udo Onyeka reports

There is disquiet in the banking industry over the clampdown on banks by Economic and Financial Crimes Commission, EFCC, and Central Bank of Nigeria, CBN, even as there are speculations that the apex bank and the anti graft agency have widen their probe. According to a source close to the EFCC, “ there was the need to extend the investigations in the banking sector due to some revelations made by some of the operators and in line with the anti corruption stance of President Muhammadu Buhari administration, the needful steps must be taken.” Also the need to extend the probe to other lenders in the sector may unearth some unethical and corrupt practices. For instance there is unconfirmed report that the EFCC is currently looking at a leading tier one bank and focusing on the lender’s alleged role in laundering over $1bn for the Office of National Security Adviser during the tenure of Colonel Sambo Dasuki, who is facing charges for allegedly moving billons of dollars of security funds into private hands. In fact the invitation and questioning of First Bank Limited, Executive Director, Dauda Lawal last week end confirmed the extension of investigations into alleged illegal transactions by the country’s banks. Lawal was questioned about sums allegedly distributed by a former minister of petroleum, and is cooperating fully with the agency, FBN said in a statement Friday on the Nigerian Stock Exchange website. The questioning of the FBN director brings to four the number of Nigerian lenders whose officials have been interrogated by the anti-graft agency since last week over alleged illegal dealings. Fidelity Bank Plc appointed Mohammed Balarabe as acting head on May 3 after the agency arrested.

The probe has however been interpreters differently by stakeholders, while some see it as a welcomed development; others say that it is capable of sending wrong signal to the banking populace. Before the inviting Lawal, the EFCC had arrested Managing Director of Fidelity Bank Plc, Nnamdi Okonkwo, Managing Director, Access Bank, Herbert Wigwe and Sterling Bank Managinger Director, Yemi Adeola. Okonkwo, was arrested alongside some other staff of the bank for allegedly receiving $115m in cash from a former Minister of Petroleum Resources, Diezani Alison-Madueke. According to informed sources, Alison-Madueke was said to have deposited the $115m in the Bank as preparations commenced for the 2015 presidential election. She was said to have invited Okonkwo to Abuja, where she briefed him on the deal. Okonkwo allegedly accepted to receive the money into the Bank’s coffers despite the fact that Alison-Madueke did not have an account with Fidelity Bank Plc. The discovery was said to have been made by the EFCC when its operatives were probing how officials of the Independent National Electoral Commission in Rivers, Delta and Akwa Ibom States allegedly received N675.1m. The money was said to have been given to the INEC officials a day or two before the election and the source of the money was traced to Fidelity Bank Plc. Okonkwo was said to have confessed that he was indeed invited to a meeting by Alison- Madueke as preparations for the 2015 election began and that the former Minister told him that some companies would deposit some funds in his bank. He said Alison-Madueke then told him she would give him further instructions on how the funds would be disbursed.

After the meeting, four companies made cash deposits into Fidelity Bank Plc.The were Auctus Integrated, which deposited $17,884,000; Northern Belt Gas Company, which made a deposit of $60m; Midwestern Oil and Gas, $9.5m; and Leno Laitan Adesanya, $1.85m. Okonkwo was said to have received $26m in cash himself. Alison-Madueke’s son, Ugonna Madueke, was said to have become the go-between after the cash deposits were made. Ugonna allegedly supplied the names of the beneficiaries of the funds. “The EFCC has released Wigwe and Adeola after the CEOs returned billions of naira they had illicitly acquired from political slush funds during the administration of President Goodluck Jonathan. Adeola was released after he deposited a payment of N5bn. According to one of our sources, the money returned by Mr. Adeola was in partial restitution for a transaction of $88m he received from Nigeria’s former Petroleum Minister, Diezani Alison-Madueke. He is expected to pay back a total of N17bn to the recovery accounts of the Nigerian treasury”, SaharaReporters said. Also Managing Director of Access Bank Plc, Herbert Wigwe has been released after EFCC agents raided the bank headquarters in Lagos. According to SaharaReporters “EFCC investigators said Zenith Bank had illicitly transferred the $5m to Access Bank from a slush fund arranged by Ms. Alison-Madueke. The case of Access Bank it was alleged was also linked to oil businessmen Jide Omokore and Kola Aluko, now a fugitive. Between them, both men are suspected to have stolen more than $6bn from oil proceeds that should have accrued to the Nigerian government treasury. According to an EFCC source, the two oil businessmen’s link at Access Bank was an executive director, Angela Ebagua, who is said to be Omokore’s wife. It was also alleged that- FBN may have helped launder funds for Madueke, Omokore, and Aluko,which led to EFCC officials allegedly inviting a former CEO of the bank, Bisi Onasanya, for questioning. In all these a major sin of the banks was the lenders had allegedly failed to report these transactions to the Nigerian Financial Intelligence Unit, NFIU, as required by the law.

Under the Bank and Other Financial Institutions Act, BOFIA and Money Laundering Act, banks are mandated to report unusual transactions to the NFIU. Fidelity Bank has been insisting that the transaction was duly reported to the appropriate agencies, as required by law, but it is left for the outcome of the probe to confirm such claim. According to a shareholder, Kazeem Sanyaolu, investigating banks especially when there is allegation of fraudulent practices such as money laundering is a good move but the noise about EFCC raid on banks is capable of negatively affecting the industry. Many investors were panicked by such information and their fears affected the transaction at the Exchange. For instance two days after the news of the arrest of Fidelity Bank CEO filtered in the lender’s stock market price fell by 5.98 per cent to close at N1.10 per share.

The same happened to other banks that are under investigation. A Lagos based financial analyst who pleads anonymity said the anti graft if care was taken would do severe damage to the banking industry with its approach to investigating financial transactions, adding that there should be some element of decorum and discretion in the way the EFFCC is going about its investigations. A bank customer said he was worried how the EFCC leak information to the media even before an individual is put on trial and “people would assume you are guilty even before judgment begins”, he said. He pointed EFCC’s actions could discourage customers especially those who would want to lodge sizeable deposits with banks, “many people would begin to think twice before”, he said. However to douse the tension in the banking industry, the CBN, said the on-going investigation of certain financial transactions in some banks by law enforcement authorities were aimed at strengthen the financial sector and the economy. The apex bank in statement yesterday signed by Acting Director, Corporate Communications, Isaac Okorafor said that the banking public and indeed the general need not be afraid of the exercise as all the banks would continue to do their normal businesses and meet all their obligations.

The CBN said it was fully aware and indeed a part of the on-going investigations of certain financial transactions in some banks by law enforcement authorities, noting that it is also carrying out its own special examinations and investigations to ascertain the veracity of some allegations, as well as the extent and persons that may be involved in such activities. “The Bank would like to reiterate that financial system stability remains a priority and therefore assures customers and stakeholders that it would not allow the banking system to be used as a conduit for any illicit transactions. “Some of these investigations are routine and only relate to isolated transactions, therefore it is important to state that the safety and soundness of the Nigerian banking industry remain strong”, the CBN said. The banks were not left out in assuring their customers and general public that all was well. In a statement Fidelity Bank reassures all its stakeholders, including “over 400,000 shareholders and 3.4 million customers, of its continued seamless services.” Sterling Bank has also assured its customers and other stakeholders that it remained committed to upholding the highest tenets of corporate governance and was cooperating with law enforcement officials in their ongoing investigations.

In its explanation to customers and the general public Access Bank said that the EFCC officials visited the bank on May 6, 2016 to investigate a specific transaction involving a customer of the bank in the normal course of business. The visit, according to the bank, came without any form of earlier notification or invitation to the bank. The bank said that the officials informed the bank that they were investigating some transactions and sought the bank’s cooperation. The officials, according to the bank, met with the Group Managing Director and the Bank’s Chief Compliance Officer who provided the needed information and documents. “Thereafter, the Group Managing Director was requested to accompany them to their office to further their investigation, which he willingly acceded to. Following the resolution of the underlying issues, he was allowed to leave the commission’s office on the same day. We have observed the wideranging speculations in the media connecting the visits of the commission to various personalities. We would like to state emphatically for the benefit of our stakeholders that the bank has absolutely no link, interaction or relationship whatsoever with any of the personalities stated in the media reports. As a bank, we shall continue to operate in line with the highest level of professionalism, consistently seeking best practices, and hereby wish to re-assure our esteemed stakeholders that the bank remains committed to its strategic goals and objectives,” it said.

Source: nationalmirroronline