How COCOBOD cash landed at Heritage Bank: The inside story
The Bank of Ghana (BoG) has described the source of funding of Heritage Bank, one of the failed banks, as dubious.
Last Friday, the BoG announced the revocation of the banking licences of Heritage Bank and Premium Bank with immediate effect.
The two banks were established in 2016 ahead of the general elections.
While Premium Bank was described as highly insolvent, the BoG said the sources of funding of Heritage Bank smack of money laundering.
The Heritage Bank is said to be owned by Seidu Agongo who is standing trial with Stephen Opuni, former Chief Executive Officer (CEO) of the Ghana Cocoa Board (COCOBOD).
Mr Agongo, who is a friend of the former First Family – the Mahamas – claimed funding for the bank came from proceeds of a contract with COCOBOD which the BoG has raised doubts.
“The bank’s capital appears to have come from sources which are suspicious. In the application for a banking licence, each shareholder of Heritage needed to demonstrate their “ability to subscribe to the shares of the bank. The Bank of Ghana is not satisfied that the original sources of the bank’s capital are acceptable, in terms of section 9 (d) of the Banks and SDI Act, 2016 (Act 930) and section 1 of the Anti-Money Laundering Act of 2008 (Act 749) which requires acceptable capital to be obtained from lawful and transparent sources,” BoG Governor, Dr Ernest Addison, disclosed this to journalists on Friday while announcing the revocation of the licences of the two banks, bringing the total number of failed banks to nine in the clean-up exercise.
The Central Bank has therefore appointed Vish Ashiagbor of PricewaterhouseCoopers as Receiver for the two banks.
The Central Bank also approved a Purchase and Assumption Agreement between the Receiver and Consolidated Bank Ghana Limited (CBG) under which the Receiver transferred some assets and liabilities of the two banks to CBG.
“All deposits (current, savings and fixed deposit accounts) of the two banks have been transferred to CBG with effect from the date of this notice. The Government of Ghana has issued a bond in the face of GH¢1.403 billion to CBG to cover the gap between the value of the good assets and liabilities of the two banks transferred to CBG”, it said.
Incorporated on 31st January, 2014, Heritage Bank was licensed as a universal bank on 4th October, 2016.
The promoters and shareholders of the bank were specified as Seidu Agongo, Fatima Adamu, Sarago Limited and Sylvanus Kotey, who together purportedly met the minimum paid-up capital of GH¢120 million.
After examining the affairs of Heritage, BoG discovered a number of anomalies relating to its licensing, sources of capital and related party transactions.
The BoG Governor said the promoters of Heritage Bank provided evidence to Central Bank at the time of the application for a banking licence to the effect that an amount totalling GH¢120.6 million was lodged with a local bank.
The amount of GH¢120 million was transferred to the bank from Agricult, a company wholly owned by Seidu Agongo, a promoter of Heritage, which funds appear to have been derived from contracts awarded to Mr. Agongo by COCOBOD and were currently the basis of criminal prosecution in the High Court of Ghana.
“Meanwhile, it has come to the notice of the Bank of Ghana that the bank is yet to respond to two High Court orders for disclosures relating to these and other contracts affecting the significant shareholder Mr. Agongo. While Mr. Agongo claimed that his sources of capital for the bank included proceeds of a $19.25m contract with COCOBOD, Bank of Ghana’s subsequent investigations have shown that there was no such contract between COCOBOD and Mr. Adongo.
“One or more contracts executed however existed between COCOBOD and Sarago Limited (Sarago). Documents submitted to the Bank of Ghana for licensing of the bank made no mention of the contract between COCOBOD and Sarago nor the fact that Sarago (also a shareholder of the bank) was owned by Mr. Agongo.”
“From its 2017 audited financial statements, an amount of GH¢15.8 million was transferred to the bank from an unnamed investor, which was attributed to unpaid called-up share capital, calling into question whether the minimum capital of the bank had been fully paid up at the time of licensing. From the same financial statements, an operating loss was booked resulting in a shortfall of GH¢20.6 million in the bank’s capitalization.”
This was expected to be repaid by an unnamed shareholder through a transfer of fixed assets (branches) to the bank.
Despite attempts by the Bank of Ghana to the identity of the unnamed shareholder, the basis of valuation of the fixed assets, and whether the terms of the transactions were at arms’ length and otherwise acceptable, the bank and its shareholders, directors and management have failed to clarify matters.
BoG revealed that certain shares of the bank were held by nominee shareholders, whose ultimate beneficial shareholders were not disclosed to the Bank of Ghana.
“The shareholder on record for Sarago is one Ruth Leena Abazerri, although the Bank of Ghana has reasonable grounds to believe that it is owned by Seidu Agongo. This is in breach of Section 9 of the Anti-Money Laundering Act, which requires the disclosure of beneficial ownership of shares, as well as 11 Regulation 9 of the Anti-Money Laundering Regulations (L.I. 1987) which requires that beneficial owners are not fictitious.
Several related party transactions were entered into between the bank and entities owned or controlled by its significant shareholder Mr. Agongo, such as Sassh Alliance, Moor Company Limited and Kedge Company Limited on terms and conditions that remain unclear and/or not transparent.
“The Bank of Ghana has determined, pursuant to sections 9 and 12 of Act 930 that the majority shareholder of the bank, Mr. Agongo, does not meet the “fit and proper person” test, as it also failed to meet the GH¢400 million capital required as of 31st December 2018.”