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CBN and forensic audit: Calling EFCC…

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It is on record that the Economic and Financial Crimes Commission (EFCC) has made more resounding successes in taming the growing rate of financial crimes in public institutions than has been reported. This is because the regulations and guidelines on financial activities in the public sector are clearer. Moreover, the EFCC sees control and prosecution of public sector crimes as a great segment of its modus operandi. This is why prosecutions and evaluation of such crimes have been faster in coming in spite of our usually hackneyed legal system. Private sector crimes, though worrisome to EFCC, are burdened by various intervening issues that need long investigations, considering the ownership structure of such institutions. Suffice it to say that what makes most public sector crimes flourish today is the lack of revelation of such crimes to the EFCC not the much orchestrated lack of will with which the institution has been largely blackmailed.

Recently, an exposure of a court ordered forensic audit was awash in the media which exposed an alleged coverage by the CBN after the same apex bank had earlier approved same through the governor of the CBN. It is obvious that the report will interest the EFCC because after a petition was made to the apex bank on the infraction in a microfinance bank, the CBN was interested and immediately delegated its deputy governor in charge of supervision to follow-up the development with the intention of setting up a forensic audit. The directors of Hasal Microfinance Bank Limited, after waiting for some time, the CBN ordered report was not coming and they had to make an application to Federal High Court, Abuja which now ordered the apex bank to set up the forensic audit panel. Rather than setting up a forensic audit panel, the CBN decided to appeal the court order, thereby joining the accused management of the microfinance bank against the board of the bank which needed its protection as a regulator.

Even though hearing has not yet opened on the CBN appeal, it is worrisome that the apex bank can refuse to investigate an alleged fraud in a bank which is part of its primary duties, as well as renege on the earlier instruction of the governor, but preferring to back the position of the accused management which has vehemently opposed the board directives on forensic auditing. The duty for EFCC here is to ascertain the reason why the CBN must substitute its duties with an appeal in an order that was targeted at the management of a bank whose majority shareholders and other directors have levelled cases of misappropriation and unauthorised swapping of shares without the express permission of the board, CBN and the Corporate Affairs Commission.

As a matter of fact, the direct instruction by the court, ordering two top officials of the bank (Okwu Nnanna Joseph and one Emmanuel Zakari) not to be involved in the forensic auditing is a direct indictment which the apex bank should quickly review rather than engaging in a frivolous appeal. This becomes very serious based on the fact that some of the shareholders are foreign equity investors who are very conscious of every government interference in any investment in the country. With the slide in capitalisation of the Nigerian Stock Exchange largely attributed to the fears of foreign investors, strong words and actions must be extended to institutions and regulatory agencies that, in one way or the other intend to subvert the investment guidelines and regulatory timelines in the economy. Because the investment in this microfinance bank has a heavy dose of diaspora funds, the EFCC must note that the ripple effect of what CBN may have done could be a minus for our development drive.

It has been in the news that, two top executives of the Central Bank of Nigeria (CBN) have been ordered by a Federal High Court in Abuja not to carry out their supervisory functions in a forensic audit involving a microfinance bank, over their alleged role in sidelining an executive order from the governor. They were alleged to have frustrated the implementation of a forensic audit which was declared by the governor of the CBN after a petition by the owners of Hasal Microfinance Bank Limited. Sequel to a petition made to the CBN by the directors of Hasal Microfinance Bank Limited, the CBN governor had detailed the then Deputy Governor, Supervision, Dr. Okwu J Nnanna and one Emmanuel Zakari to supervise an audit in the bank so as to ascertain the nature of the alleged fraudulent practices in the bank. Having failed to carry out the CBN directive, a board member and majority shareholder petitioned the Abuja High Court to get an order of the court to implement the CBN directive which was sidelines for many months.

Delivering an order on the application few weeks ago, Honourable Justice B.F.M Nyako, after upholding almost all the applications made by the plaintiff in their affidavit to the court, ruled, “that an order is made directing the 2nd (Dr. Okwu J. Nnanna) and 3rd defendants (Mr Emmanuel Zakari) not to interfere directly or indirectly, participate or in any manner supervise the audit of the 4th defendant (Hasal Microfinance Bank Limited).” This order became necessary based on the alleged roles of the two CBN officials and the estranged Chief executive of the bank whom the petitioners accused of multiple financial frauds and conspiracy through which illegal swaps and forgeries were believed to have been perpetrated by the bank’s management.

It could be recalled that the CBN Governor had in December 2016 and February 2017, written a letter to the board of Hasal Microfinance conveying an approval pursuant to Section 33(1)(e)(i) of Banks and other Financial Institutions Act (BOFIA) for the conduct of Forensic audit of the entire books of the bank, an order which the two top official of the CBN were alleged to have delayed, frustrated, thwarted and undermined the forensic audit approved by the governor of the CBN.

The court upheld all the 17 applications made by the directors of Hasal and went further to indicate that the CBN has a duty to properly regulate, ensure best practices and to identify through careful and transparent audit, any form of corruption malfeasance of any nature in the management of Hasal Microfinance Bank Limited and any delay, refusal or failure to quickly, diligently and transparently carry out an audit approved pursuant to the relevant sections of the BOFIA for the conduct of a forensic audit of the entire books of the microfinance bank.

However, shareholders of the bank ere not amused as the CBN which ordered the forensic audit and for whose letters, orders and directives the court upheld the petitioners applications, has gone to court to challenge the position of court along with the estranged management of the microfinance bank. There are serious questions over the ordering of the forensic report by the apex bank and its sudden appearance to appeal the position of the Abuja High Court over the audit. Investors are worried that the Governor of the CBN ordered for Forensic audit, the court agreed, and the CBN then turned round to go to court again, after the court has ruled and granted the prayers of the applicant who was initially encouraged by the CBN. From the ongoing, it is worrisome to investors as to why the apex bank prefers the court as solution to a purely regulatory problem which alleged cases of official misdemeanour have been levelled against its key officers.

This could be a typical development which must attract the expertise of the EFCC as it tries to reduce corruption involving high-scale public institutions like the CBN and their officials, most of whom have insisted on the status quo ante. This could be an indication that a lot of such developments could have been happening in many regulatory institutions without the EFCC being aware of them.
Ogbulie, a financial journalist and Editor-in-Chief of BusinessWorld Newspaper, wrote from Lagos.


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