Looted Funds Traced to Stock Market

Source: Thisdayonline.com
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Mrs. Farida Waziri, Chairman of Nigeria's Economic and Financial Crimes Commission

The Chairman of Nigeria's Economic and Financial Crimes Commission (EFCC), Mrs. Farida Waziri, has accused Nigerian stock brokers of aiding and abetting money laundering.

And just as Nigeria is still grappling with the removal of the chief executives of five banks, the United States' bank regulators have closed four Midwestern banks and one in Arizona, bringing to 89 the number of US banks to fail this year as deteriorating loans continue to take their toll on financial institutions.

Waziri, who was speaking in her office in Abuja while receiving executives of Association of Stockbroking Houses of Nigeria, disclosed that current investigation of banks had revealed that looted funds were being laundered into the stock market through acquisition of shares.

“The stock market is the platform for the development of the economy and it is important that it sets in place, adequate rules to ensure that its members do not sabotage the economy. Concurrent with share manipulation, the initial indices show that looted funds are being laundered into the stock market through acquisition of shares,” she said.

Citing the example of Falcon Security Firm, which owes N90 billion, the EFCC's boss said what the current investigation of banks has revealed is the active connivance of stockbroking firms to manipulate share prices and distort the market.

“When we got this complain, we invited Falcon Securities' Managing Director and asked why his company was owing that much but do you know that he could not explain what went wrong. The general trend has been for banks to offer loans to stockbroking firms and these loans are then used to manipulate the share prices of the bank, and to mop up the shares of the same bank prior to a public offer. At the face value, granting a loan is a simple bank-customer relationship but the utilisation of the loan is a breach of the provisions of Section 20 of the BOFIA and the regulations of the Central Bank of Nigeria (CBN) and carries a jail term of between two and three years. It is also a breach of the Investment and Securities Act.

“Under Section 23 of the Money Laundering Act, firms carry on the business of investment and securities (this includes stockbroking firms) are designated as financial institutions and there is an obligation on them to file with the Nigerian Financial Intelligence Unit all suspicious transactions, and file with the Nigerian Financial Intelligence Unit all currency transactions above N500,000 for individuals and the N2 million for companies,” she said.

Waziri said the anti-graft agency would start the immediate enforcement of the provisions of the Money Laundering (Prohibition) Act 2004, and prosecute all stockbroking firms that default in their obligation to the suspicious transactions reports and currency transaction reports.

The EFCC boss also insisted that stockbroking firms should comply with other provisions of the Money Laundering (Prohibition) Act 2004, such as the ones requiring them to know their customers, take proper documents of identification, and set up anti-money laundering structures.

“All defaulting firms will be prosecuted,” she said.

Waziri, who revealed that the discovery of huge bank debt did not come to her as a surprise, said earlier petitions she got at different times were pointers to the fact that if something drastic was not done, many banks would go down the drain.

She said: “Some people have been saying that the current banking reform is a Northern agenda. When Prof. Soludo was there as the CBN Governor, people said he was pursuing Igbo agenda, I'm sure by the time a Yoruba becomes the CBN Governor, he would still be accused of pursuing Yoruba agenda. Rather than patting Sanusi on the back, some Nigerians are saying something else. If the man had not taken the drastic decision he took, many banks would have gone down the drain. This problem did not come to me as a surprise. I saw it coming. I even thought the banks would have collapsed but thank God it did not happen.

“I earlier got a petition from Intercontinental Bank, accusing a foreign company, Tanzila Petroleum Limited, of obtaining N14 billion loan, which the foreigner had refused to pay. After collecting this loan without any collateral whatsoever, he did the business, got his money and rather than come back to Nigeria to pay up the loan, he went to Dubai, where he bought property for himself. We got this man arrested and detained, hoping to recover the money. After much begging and promising that if released on bail, he would pay all the money, he was released, but what shocked me most was that after he was released on bail, he instituted a case of unlawful detention against us. Rahamaniya Oil and Gas, another company, collected N12.8 billion from the same Intercontinental Bank without any collateral. There is the case of an Indian businessman, who came to Nigeria without a dime, ended up getting loan facilities from different banks up to N23 billion. Sanusi should be appreciated and not given a bad name.”

She called on the fleeing Intercontinental Bank Plc former boss, Mr. Erastus Akingbola, to submit himself for interrogation by the officials of EFCC.

“I read it in a paper that Mr. Erastus Akingbola is back in the country. He should be bold enough to come to us with all necessary papers and his lawyers, so that we can hear him out,” she said.
Clearing the air on the invitation of former Rivers State Governor, Dr Peter Odili, and Dr. (Mrs.) Ndi Okereke-Onyiuke by the EFCC, Waziri said she only read in the papers that a court had stopped EFCC from arresting Odili and that she had not yet received any court papers to that effect.

She said Okereke-Onyiuke had earlier sent some people to the EFCC, but that when EFCC was not too convinced about their explanations, the commission decided to invite the stock exchange D-G herself.

The closed banks in the U.S., according to Reuters, are Vantus Bank in Sioux City, Iowa; InBank in Oak Forest, Illinois; Platinum Community Bank of Rolling Meadows, Illinois; the First Bank of Kansas City in Missouri; and the First State Bank of Flagstaff, Arizona, the Federal Deposit Insurance Corp (FDIC) said.

Vantus Bank was the largest of the five institutions to close, with total assets of $458 million and total deposits of about $368 million.
InBank had total assets of $212 million and total deposits of about $199 million, while the First State Bank of Flagstaff, Arizona had total assets of $105 million and total deposits of approximately $95 million as of July 24. The First Bank of Kansas City, which has one branch, had total assets of $16 million and total deposits of about $15 million.

The Office of Thrift Supervision said that Plati-num Community Bank had total assets of $148 million, while the Federal Deposit Insurance Corporation (FDI-C) estimated its assets at $345.6 million as of August 29, 2009.

The five failures will cost the FDIC deposit insurance fund an estimated $401.3 million, the agency reported.

In 2008, 25 U.S. banks were seized by officials, up from only three in 2007.

The insurance fund's balance dipped to $10.4 billion at the end of the second quarter, but that level does not include the additional $32 billion that the FDIC has set aside to cover the cost of bank failures over the next year.

In September, Seattle-based lender Washington Mutual became the biggest bank to fail in U.S. history, suffering from losses from soured mortgages and liquidity problems.

The FDIC will insure up to $250,000 per account at the closed banks.
The agency also has a tally of problem banks that its examiners closely monitor. At the end of the second quarter, 416 undisclosed institutions were on that list.

FDIC Chairman, Sheila Bair, said bank failures would remain elevated even as the economy begins to recover because the bank industry is continuing to recognise loan losses and clean up their balance sheets.
She said the industry's woes are migrating from residential loans and complex securities to more conventional types of retail and commercial loans that have been hit hard by the recession.

Bank failures in the U.S. last topped 100 in 1992, when at least 179 were seized, according to FDIC data. Blair has said more collapses are likely, and the agency's list of “problem banks” stands at 416, the most in 15 years.