It is incredible that the Reserve Bank of Malawi (RBM) has granted a banking license to Finance Bank (FB) to resume its operations in Malawi after its license was revoked in 2005 after being involved in serious malpractices and flouting banking procedures.
In its 2005 report, RBM unequivocally documents its reasons why it revoked Finance Bank license. Among the serious criminal activities that Finance Bank was involved in include opening ghost accounts which were used as conduit to externalize scarce foreign exchange to Pakistan, failure to comply with the Banking Act and Exchange Control Regulations and money laundering activities. For example, more than 3,000 accounts were opened and closed on the same day, and more than 4,000 accounts were opened and closed within one month. Another shocking example relates to 75 accounts that were opened in Lilongwe Branch, but were all operated by one person of Asian origin.
A forensic audit by KPMG, a highly-reputable worldwide auditing firm, found that “44,054 instances of the transactions occurring on the same days of matching values, with a high number of the foreign exchange transactions being directed toward a group of banks owned by the Pakistan-headquartered Habib Bank”.
RBM further noted in its report that these illegal activities started way back in 1999. “From 1999, FBM Limited repeatedly engaged in practices which violated the Malawi banking laws, the Exchange Control Regulations, directives and guidelines issued by the Reserve Bank of Malawi. FBM was on several occasions warned by the Reserve Bank about banking malpractices and was advised to change but did not despite several warnings”FM was also under investigation by the Anti-Corruption Bureau for its shady deals.
The current government and RBM administration should have upheld the decision taken against FM. The previous RBM administration, under Governor Victor Mbewe and General Manager Neil Nyirongo, did excellent work to unearth shady dealing of FM. The decision to close FB was taken to preserve the integrity of the banking sector and to uphold relevant statutes. The criminal activities that FB was involved in should have landed some of its officials in jail. But government was lenient with them. What has changed for FM for to be re-registered?
The government through the Minister of Finance Goodall Gondweand RBM Governor Charles Chuka owe Malawians an explanation why they have allowed Finance Bank to re-open. Allowing such a dishonest bank with an appalling track record of criminal activities to re-open renders people who make decisions to speculation that they have been palm-oiled.
Speculation heightens when media reports filter through that FB chairperson RajanMahtani, who has been in trouble with the Zambian authorities overmalpractices and corruption allegations, made several visits to Malawi after the death of BinguwaMutharika to meet government officials including the then president Joyce Banda and minister Goodall Gondwe.
Certainly, Finance Bank (whether it is trading under a news name) does not deserve to re-open in Malawi. The re-opening of Finance Bank will undermine the ability of institutions like the Anti-Corruption Bureau to fight corruption. It would be difficult for ACB to investigate such as a bank because it has the backing of the powers that be. Its reopening shows it is untouchable!
Secondly, it is also doubtful whether RBM would be as professional and dutiful as the previous RBM management under Mbewe and Nyirongo to takestern action against FB should it lapse into money laundering and criminal activities. The failure of RBM to detect money laundering activities and embezzlement of government funds in cashgate scandal gives little hope that it would work in the interest of the nation.
No patriotic Malawian should open an account with this bank. It needs to be boycotted. Why allow a foreign bank that has been stealing our forex, violated our Exchange Control Regulations and Banking Act to resume operations. Do you think a Malawian bank operating in Zambia would be allowed to resume its operations if it was closed for criminal activities?
In Zambia, it is illegal for someone who has been banned and stripped of their banking license in another country to operate a bank. Why are Malawian authorities letting its people down?And why should FB come back to Malawi? Why not open a branch in Zimbabwe, Botswana or Namibia? Through background and credibility checks, Mahtan knows that his bank cannot not be allowed to be registered in these countries. But he also knows that it is only in Malawi where leaders are easily manipulated because they accept anything (perhaps because of poverty) even from institutions involved in criminal activities as long as they are promised something in return. This is the worst decision RBM and government have made relating to the banking sector.
Malawians can read an abridged 2005RBMreport on Finance Bank illegal activities on the links below:
- Lowani Mtonga is former national director of MISA (Malawi Chapter). He holds an MA in Journalism and Media Studies.