Nedbank repeatedly breaks antiterrorism laws in Mozambique, but who calls it out?

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Editor’s note: The opinions in this article are the author’s, as published by our content partner, and do not represent the views of SME Fusion this is written by Ilham Rawoot

Nedbank was fined twice in 2018 by the Central Bank of Mozambique for violating laws against financial terrorism, but there appears to be a lack of accountability for South African entities conducting illegal activities outside the country.

South African corporations and financial institutions have a questionable ethical record in the rest of Africa.

Telecommunications company MTN has been fined by the governments of Uganda, Rwandaand twiceNigeriain the past three years alone.

In 2016,Standard Bank’s Angolan unitwas fined $800 (R11,000 on 28 November) by the Central bank of Angola for allegedly violating foreign exchange laws.

In 2018 KPMG South Africawas fined $100,000 (R1.37-million on 28 November) by the US Securities Exchange for “improper professional conduct” when it placed great reliance on an audit done by KPMG Zimbabwe, as part of KPMG SA’s own audit of a Canadian firm operating in Zimbabwe in 2014. KPMG SA knew that its Zimbabwean counterpart was not registered with the Public Company Accounting Oversight Board (PCAOB), and hence was not authorised to perform the audit.

One business, Nedbank, has been behaving particularly badly in 2018, and the ease with which it has got away with it is an example of the lack of accountability that South African entities face for illegal activities outside the country. In 2018 alone, Nedbank was fined twice by the Central Bank of Mozambique for violating laws against financial terrorism.

In April, and most recently at the end of October, the Mozambican governor of the central bank, Rogerio Zandamela, did what he had been threatening for a long time — to name and shame banks violating anti-terrorism laws. Nedbank, through its Mozambican entity, Banco Unico, received the largest fines both times.

Nedbank is the largest shareholder in Banco Unico, owning 50% plus one share. Information from official releases from the Central Bank show that Banco Unico was fined 32-million Mozambican meticais (R7,644,939) in April for “breaching the Law on Prevention and Combating Money Laundering and Financing of Terrorism”, and two further fines of 400,000 meticais (R95,561) each for “breaching the Law on Credit Institutions and Financial Companies” in the 2015-2016 financial year.

On 23 October, Nedbank was fined 36.8-million meticais (R 8,791,680), again for breaking the same anti-terrorism laws in the year 2016-2017, through “non-establishment of the client’s risk profile”, “lack of special control of certain transactions”, and the rather grave violation of “no immediate reporting of suspicious transactions”.

This transgression means that the Mozambican government cannot timeously investigate potential money laundering, illicit financial flows or cases of fraud.

While Nedbank claims to have informed all its stakeholders about the fine, no Stock Exchange News Service (SENS) announcement appears to have been released, itself a transgression of a basic regulatory requirement.

That Nedbank is the entity receiving these fines is somewhat ironic, since the bank prides itself on the ethics and social consciousness of its operations. In fact, it has an entire committee dedicated to this — the Group Transformation, Social & Ethics Committee (GTSEC). While the amounts are merely pocket-change for Nedbank, they highlight the questions: How were these transgressions not detected by this committee twice in one year? And if they were not detected, how many fines could they have received from the Mozambican government in the past, and what was the gravity of the legal violations?

It is unlikely that these were the first fines that Nedbank received for these breaches, since the governor made the information public out of frustration at a problem that had been going on for too long, says Thomas Selemane, Mozambican economist and independent consultant. He says that “banks have been receiving fines for these anti-terrorism violations for at least 20 years, and the only thing novel about these fines is that the governor took them public.”

After sending detailed questions to Nedbank regarding the fines, its media department replied with the vague non-response to whether it admits to committing these violations, why they were not picked up by the GTSEC, if there will be any repercussions for those responsible, if the board of executives had been made aware and if a SENS announcement had been released.

“Nedbank is committed to good corporate governance and is earnestly and seriously engaged with Banco Unico to improve operational controls where necessary,” the bank responded.

However, in this case, Nedbank clearly did not meet the four basic pillars of good corporate governance — transparency, fairness, accountability and responsibility.

When contacted directly, company secretary Thabani Jali said that he had nothing to add.

This writer also contacted other stakeholders to find out not only if they were made aware of it, but if there were any repercussions for, or admonishment of Nedbank.

Old Mutual, a 19% shareholder, declined to answer questions sent to it about whether it was informed, insisting that it was not their place to respond, but rather Nedbank’s.

The Johannesburg Stock Exchange (JSE) responded that it is not in its mandate to oversee the actions of South African banks internationally. It was not made aware of the fines and says the listings requirements do not require companies to disclose fines.

However, the response also said “the Listing Requirements do however require companies to disclose information that is regarded as price sensitive as defined in terms of the Listings Requirements. In this regard, price sensitive information is defined as ‘unpublished information that is specific or precise, which if it were made public, would have a material effect on the price of the issuer’s securities’ ”.

It appears that if the JSE made the decision that these fines were not “material”, it is likely that violations such as these in other African countries are not important enough for the JSE to invoke the company’s obligation to report.

When the South African Reserve Bank (SARB), was asked about whether Nedbank had been reprimanded or castigated, it responded that it has ongoing interactions with senior management at Nedbank Group level to resolve these issues, and engages with the Central Bank of Mozambique.

Regarding repercussions for Nedbank, it said:

“This forms part of the SARB’s ongoing supervisory interactions with the Nedbank Group and our monitoring of the group from a consolidated and cross-border supervision perspective.”

SARB would not disclose if Nedbank had received previous fines from the Central Bank of Mozambique.

The Department of Trade and Industry said the DTI “does not play any role”.

These responses raise a question: WHO is responsible for holding South African banks and companies to account for their actions internationally, and particularly in Africa, where so many major corporations do business and have entities?

There appear to be no local laws governing or monitoring their questionable activities elsewhere, and even if Treasury, the JSE and government are made aware, there are no repercussions for the company, or at least none that the public is made aware of. While authorities such as the SARB “engage” with Nedbank, the public and shareholders do not know what this entails, and if it has any productive outcome. DM


lham Rawoot works with JA!/ Friends of the Mozambique, where she coordinates the campaign against gas extraction in Mozambique. She was previously the co-ordinator for the Southern Africa Campaign to Dismantle Corporate Power, and also works as a freelance journalist, having written for Al Jazeera, the Mail and Guardian and City Press. She is based in Cape Town.