The aim of this post is to share a few thoughts on The Savings loans fiasco in Ghana.
My very first article appeared on Daily Guide and Modernghana and the theme was on Menzgold
I have written extensively on Regulatory inertia in Ghana, following on from the collapse of Banks.
There is an article on Ponzi Schemes and the way to combat them in Ghana.
The Problem in Ghana is not that we are corrupt. Yes, every human being knows what is right from what is wrong. The issue Ghana faces is more about having adequate system and controls in place to ensure that there is no room for such things to happen.
Our laws and institutions particularly Companies Code, Registrar of Companies, Central Banks and other Financial Services Regulators need to continually evolve Companies Code, Registrar of Companies.
When directors and senior management are compliant with their fiduciary and reporting responsibilities things will look up.
For instance, in some Jurisdictions, if a company fails to submit annual returns and reports, they are struck off the register of companies. If such institutions are financial houses, they would have been struck off even before the financial regulator steps in.
Nothing compensates for lack of training and understanding of regulatory issues. If you want to be an entrepreneur, you must have knowledge or be able to access such key knowledge in law, finance, and accounting as a minimum.
From the key findings of the Central Bank, you can tell that most of these companies were not even on life support, they were walking Zombies. Perhaps a wrongful trading and fraudulent provisions should become part of our laws.
If we had wrongful or fraudulent Trading provisions most of the directors and senior management of insolvent banks and financial institutions could end up in prison, disqualified and or face financial penalties.
COMMON THEMES IDENTIFIED BY BANK OF GHANA REPORT ON SAVINGS AND LOANS COMPANIES 2019
Corporate Governance Lapses
- Weaknesses in corporate governance practices.
- Weaknesses in Board and Senior Management oversight, including the fact that the institution has been without a substantive Managing Director.
- The institution’s capital adequacy ratio is negative
- The Institution cannot meet the deposit withdrawals of its customers with many customer complaints received by the Bank of Ghana.
- The institution has breached the statutory cash reserve ratio requirement
Accounting and Reporting Obligations
- The company neither published nor submitted its Audited Financial Statements.
- The institution failed to keep accounting records in a manner that gives an accurate and reliable account of its transactions which constitutes unsafe and unsound banking practice.
- Poor loan underwriting standards resulting in the impairment of loans.
Related Party Transactions
- Paying high rent expenses paid to the majority shareholder for the use of its premises.
- The institution assumed the liability of a loan contracted by the majority shareholder.
Potential Money Laundering Violations
- A recent investigation conducted revealed that a significant amount (USD 62,255,516.93, GBP718,528.59 and EUR4,200) of depositors’ funds held, had been transferred to another company owned by the Group based in the U.S.A).
These series of transactions were made without any documentation to support such transfers in breach of section 19 of the Foreign Exchange Act 2006, Act 723, Section IV of Bank of Ghana Notice No. BG/GOV/SEC/2007/4, and subsequent Bank of Ghana Notices issued in August 2014 prohibiting such practices.
The Way Forward
I hope these regulatory challenges will spur us to innovate and streamline operations within our financial service sector.
Whilst we are looking at these issues, the directors and senior management should be brought into account. In addition, Regulators should be brought to book for their culpability in perpetuating such lapses.
These issues have been discussed previously in other articles; we hope they will be addressed to avoid contagion.
This article will be re-produced on the international news aggregation website www.thefinancialcrime.com
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 University of Ghana and Said Business School, University of Oxford.