Ghana Closes In on Watchdogs, Execs at Center of Banking Crisis

(Bloomberg) --

Ghana is seeking to prosecute a former finance minister, industry regulator and deputy central bank governor in a bid to stamp out alleged collusion with company executives that helped contribute to the West African nation’s biggest banking crisis.

The former officials are being charged along with nine other banking executives on charges ranging from money laundering to defrauding depositors in the aftermath of a three-year industry clean-up -- the costs of which could escalate to 20 billion cedis ($3.7 billion). The indictments follow an industry overhaul that resulted in a third of the nation’s banks being shut down.

“There was a fine, thin line between the regulator and the board of governors at the various banks,” said Lord Mensah, a senior finance lecturer at the University of Ghana Business School. Until authorities prosecute those who broke the law, there is “no way we can avoid the recurrence of it.”

The charges, filed last week in the High Court in the capital, Accra, highlight the allegations of poor corporate governance, related-party transactions and weak oversight that Bank of Ghana Governor Ernest Addison has vowed to prevent since taking office in 2017. As part of the revamp, he has replaced banking supervision staff, acquired a new IT system to monitor compliance, bolstered risk buffers for lenders and tightened up on criteria for shareholders and executives.

“Everyone was doing whatever he wants and that’s what brought about the failure we had,” Mensah said. “We forgot to notice that the corporate governance and the relationship does not start from the corporate level, but it starts all the way from the regulator.”

Here are some of the parties being charged:

  • Kwabena Duffuor, who served as minister of finance between 2009 and 2013, is accused of receiving 663 million cedis ($122 million), “knowing it had been obtained by means of a criminal offense” and contravened money laundering rules, according to the court filings. Duffuor also served as governor of the Bank of Ghana from 1997 to 2001, and founded Unibank Ghana Ltd. The firm was one of the country’s biggest lenders until it was declared insolvent after shareholders and related parties took 5.3 billion cedis in loans and other withdrawals without following due process, the central bank said at the time.
    • “My client is not guilty of these charges,” Charles Puozuing, Duffuor’s lawyers, said by phone. “We believe that if indeed proper investigations are conducted they would have been clear in their mind that they are not supposed to make these charges.”
  • Johnson Asiama, a deputy governor at the Bank of Ghana between 2016 until 2018, is being held answerable for allegedly granting liquidity support to UT Bank Ltd. to the sum of 460 million cedis without satisfying the prescribed conditions, according to the filings. He is also being accused of waiving limits on the maximum amount of credit that could be granted to a single company totaling 141 million cedis by UT Bank, which lost its license in 2017 after failing to meet capital adequacy thresholds. Asiama is also being accused of providing similar liquidity support amounting to 300 million cedis to Unibank Ghana through Universal Merchant Bank Ltd., of which 150 million cedis remains unpaid.
    • “I deny the charges,” Asiama said by phone. “I am innocent.”
  • Raymond Amanfu, a former head of banking supervision, is facing charges for abetting Asiama, according to the filing by the state attorney. He declined to comment when contacted by phone.
  • Prince Kofi Amoabeng, the former CEO, co-founder and shareholder of UT Bank, is facing various charges including dishonestly appropriating depositors funds totaling 45.7 million cedis and $8.8 million.
    • “I’m innocent,” Amoabeng said by phone. “How can I build a company from scratch to the status of UT, and steal from it, it doesn’t make sense.”
  • Kwabena Duffour II, the son of Duffuor who became managing director of Unibank before its demise, has been accused of misappropriating over 1 billion cedis of depositors’ funds and falsifying the accounts of the lender to reflect over 930 million cedis in loans.
    • “All we ask for is a fair trial,” Godwin Tamakloe, his lawyer, said by phone. “Those charges will crumble one after the other. Let’s see how it pans out.”

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