Case of how Bank of Ghana and other Regulators, Aided and Abetted Menzgold.
I read an Article today on Ghana web that purports that Bank of Ghana did not have the powers to intervene. This to me is quite ingeniously deceptive. (Menzgold saga; We don't have the power to intervene – BoG - Ghanaweb 9 Jan 2019)
It is indeed true that Menzgold did not have the license to take deposits as per BoG rules; however, The BOG's mandate is to ensure the sanity of Ghana's financial sector.
This mandate is not only limited to the issuing of banking license, It also includes the regulation/ supervision of banks and financial institutions. Acts as banker to the Government, Acts as a Banker of last resort to banks and financial institutions.
In fact, the whole stability of Ghana's financial system is in the hands of Bank of Ghana and other primary financial regulators like SEC. The remit of bank of Ghana is very broad.
For starters, it issues the cedi, Ghana's currency. Therefore, any activities that brings Ghana's currency and financial system to disrepute falls under the Bank of Ghana mandate.
In this quest, it regulates banks as well as savings and loans and other financial institutions.
Under our money Laundering Laws, banks are have adequate systems and controls and are required to conduct Customer due diligence on account openings and also to conduct periodic reviews of clients.
Money laundering is a process where individuals obscure/disguise the proceeds from illegal Activities to make them look clean. I.e. they engage in activities that are criminal in Nature (Ponzi scheme or fraud – in the case of Menzgold).
There are three stages involved in money laundering; placement, layering and integration.
Placement –This is the movement of cash from its source. On occasion, the source can be easily disguised or misrepresented. This is followed by placing it into circulation through financial institutions, casinos, shops, bureau de change and other businesses, both local and abroad.
Layering – The purpose of this stage is to make it more difficult to detect and uncover a laundering activity. It is meant to make the trailing of illegal proceeds difficult for the law enforcement agencies. I.e. buying assets like setting up affiliate companies like Zylofon cash, sponsoring the premier league, buying cars for artiste, donating funds to charities/churches etc.
Integration – This is the movement of previously laundered money into the economy mainly through the banking system and thus such monies appear to be normal business earnings.
Banks in Ghana also have corresponding banking relationships with other banks worldwide, including Europe. In order for banks in Ghana to qualify and to have access to the European financial system, Banks in Ghana must put in place certain controls and mechanisms, so that European banks will not be prone to the threat of money laundering (ML) and terrorism finance (CTF) .
I strongly believe and suspect that Menzgold/Brew Consulting/Brew marketing, as businesses would have bank accounts in Ghana.
From the moment Bank of Ghana started issuing notices to the Public and advised the public not to deal with Menzgold, (as they had no license from Bank of Ghana), One would have thought that;
A. The Bank of Ghana would have sent out a directive/circular to banks about the threat posed by Menzgold and its affiliates to our financial system in lieu of their suspected fraudulent operations.
B. Alerted other stakeholders to mount their own investigations.
C. In addition, on that basis, EOCO, and other financial crime watchdogs should have stepped in, frozen the accounts of Menzgold, their principals, relatives and Close Associates.
Someone may ask, but Menzgold has not been charged or convicted of a crime yet, so why say they are criminals? The simple answer is that under money laundering rules and regulations, there has to be “reasonable suspicion” of crime being committed or that proceeds are from an illicit activity.
By issuing public notices, that Menzgold did not have permission and license to operate as a bank or financial intermediary, all directives from BoG and SEC to the Public, met the “reasonable suspicion test” as per money laundering regulations worldwide.
Banks, mobile Money vendors and other financial services intermediaries, should also have been alerted, not to be conduits for AML violations, as there was the likelihood that Menzgold and their affiliates held bank accounts, within Ghana.
On this basis, most banks would have started reviewing their operations to ensure that Menzgold accounts were closed/frozen or were put on high alert. None of these actions were taken by BoG, SEC, Financial regulators and Security Agencies.
SEC only asked Menzgold to stop taking deposits and pay their customers. How were they going to pay their customers?
Through customer bank accounts via mobile money accounts, I suppose, and all these exacerbated the risk of money laundering in the Ghanaian banking system.
THE WAY FORWARD Nobody is advocating for restitution via tax payer funds.
Considering the gross negligence and lack of enforcement of our laws by of our regulatory bodies, customers of Menzgold can actually Sue BoG, SEC and others under our statutory laws.
By now, the following steps would have been taken:
A. All companies owned by Nana Appiah Mensah would have been shut down ala GFA route and Registrar General.
B. All his accounts and assets frozen pending a criminal trial of NAM 1, his business associates and cohorts - under fraud and money laundering offences (I believe the money laundering offences will nail him more than the charges of fraud – considering some or most customers benefitted in a way).
According to lawyer Maurice Ampau, “Look at this fraudulent and stupid charge levelled against Nana Appiah Mensah. Defrauding by false pretence, who has he defrauded?
The person was paying us, he was in good business and paid us our extra value every month. It is when the evil in the system decided to stop the business and damage the reputation of the business to a level that it was collapsing, that is when the payments stopped and so who has defrauded who”.
He is right, I agree with him entirely. Theft: depriving others of their property. Fraud: depriving others of their property, and then the culprit benefits.
So a charge of fraud, is not strong, as people like Maurice Ampaw, will actually testify that they were deprived of nothing.
We also have to understand that in criminal cases, standard of proof is beyond reasonable doubt. That is 100% guilt (Mens rea and Actus Reus must coincide). This charge of fraud in my view will be difficult to prove beyond reasonable doubt. And NAM 1 could be free.)
C. Commission of Enquiry (broadcast Live) to be set up to conduct a root cause analysis of such Ponzi schemes; With the object of educating and informing Ghanaians just like the Election Petition.
(This issue is pertinent as there are more people who have access to mobile money and other systems of financial inclusion. And they need to be trained and alerted on fraud, money laundering and other forms of financial crime etc.
To the aggrieved customers, I hope they continue to protest legally and within reason (to vent your frustration, and sue BoG and SEC).
Written by Kwadwo Kusi-Frimpong, a Financial Crime, Governance and Regulatory Expert, who has extensive experience working with banks and financial institutions in UK, Switzerland, and The Netherlands. He holds an LLM from University of Law and is a graduate of University of Ghana and Said Business School, University of Oxford. Affiliate member of (ICA) International Compliance Association.