Shareholders of Nigeria’s quoted companies have slammed Guaranty Trust Bank, a member of Guaranty Trust Holding Company (GTCO) Plc, over the recent multi-million dollar penalties against its United Kingdom (UK) subsidiary for running afoul of the country’s anti-money laundering regulations.
The Financial Conduct Authority (FCA), Britain’s financial watchdog, had in January 2023, fined the UK subsidiary of Nigeria’s Guaranty Trust Bank, 7.6 million pounds ($9.3m) for what it said were further failures in the bank’s anti-money-laundering systems and controls.
“These weaknesses were repeatedly highlighted to GT Bank by internal and external sources, including the FCA, but despite this, GT Bank failed to take appropriate action to fix them,” FCA said in a statement on January 10, 2023, and a 50-page Final Notice to GT Bank seen by THEWILL.
The fine was net of 30 percent discount considered by FCA following GT Bank’s decision not to dispute the findings and agreeing to settle the penalties promptly; thus making it eligible for a discount on the fine, down from the original 10.96 million pounds ($13.3m).
The shareholders who reacted through the leadership of their various investor groups, were livid that the same GT Bank UK subsidiary was punished about 10 years ago for a similar offence. The concerned investors recalled that Britain’s financial services regulator had in August 2013 fined the UK subsidiary of Nigeria’s Guaranty Trust Bank 525,000 pounds ($627,323) for failing to have adequate controls to prevent money laundering.
“Banks are at the front line in ensuring the proceeds of crime do not enter the UK financial system,” Tracey McDermott, the FCA’s director of enforcement, said at the time. “GT Bank’s failures were serious and systemic and resulted in an unacceptable risk of handling the proceeds of crime.”
GT Bank said then that it had complied with the fine and addressed the issues. But the recent case suggests that the bank may have failed to satisfactorily address the issues in a sustainable manner which earned it the anger of the regulatory authority.
“GT Bank’s conduct is particularly egregious as this is not the first time that the bank has faced enforcement action in relation to its AML controls,” the FCA said in its January 10, 2023 statement.
Stakeholders and investment experts stressed on this point in their reaction to the recent development. Many claim it stamps a dent on the corporate reputation of the bank and worsens Nigeria’s degraded image abroad. The negative impact on the Group’s balance sheet was another point the stakeholders noted.
The National Co-ordinator, Pragmatic Shareholders Association of Nigeria (PSAN), Ms Bisi Bakare, expressed displeasure with the repeat contravention of the UK anti-money laundering regulations by GT Bank. She noted that the huge fines would impact on the bank’s balance sheet and deplete return on investment. She urged the bank to re-appraise its internal control systems.
“As shareholders, we are very displeased with the repeat contravention of the UK anti-money laundering regulations by GT Bank resulting in huge fines that would impact on the bank’s balance sheet.
“We know that the fines will be paid from shareholders’ fund, thereby depleting investors’ returns. Going forward, the bank must address its internal control weaknesses. It should hold the staff responsible for the lapses accountable,” Bakare said in a note to THEWILL.
In his reaction, Chairman, Shareholders Association of Nigeria, Ibadan Zone, Mr Eric Akinduro, condemned the corporate governance culture of GT Bank which he said “leaves much to be desired”. He expressed disappointment that the failure of someone to do the job for which he is paid has thrown the bank into a spate of disrepute.
“This calls for concern on the part of the bank. It shows a serious weakness on the anti-money laundering control of the bank and, as investors, we cannot continue to lose such monies.
“It is a flaw on the part of the board who seems to be losing control of the bank; something drastic has to be done to prevent such occurrence which could plunge our bank into distress,” he said.
Akinduro added, “It is unfortunate that GTB known for the culture of best practice and corporate governance is found wanting in the anti-money laundering systems and control measures because somebody failed to perform the duty he is being paid for.”
The National Chairman, Trusted Shareholders’ Association of Nigeria (TSAN), Alhaji Mukhtar Mukhtar noted that such laxities would not be tolerated in a particular Tier-1 bank (name withheld) because of the strict corporate governance in place. He urged GT Bank to be better focused on its corporate governance policy implementation.
In a note to this newspaper, the National Coordinator, Independent Shareholders Association of Nigeria (ISAN), Prince Anthony Omojola, described the penalties as unavoidable in today’s financial services industry. He however noted that incurring the wrath of regulatory authorities could impact on occupational integrity.
“Ideally, it is bad for any bank to incur the wrath of any regulatory authority because of the occupational integrity involved. However, these days, it is very difficult to completely escape regulators penalties. A fine of 7.6 million pounds is relatively small given the level of their activities. I consider it an isolates offence.”
In his perspective, National President, Progressive Shareholders Association of Nigeria (PSAN), Mr Boniface Okezie, it is not only in Nigeria that operators look for how to legitimately take money from the operators. He however cautioned GT Bank to improve in their systems and controls to avoid regulatory penalties.
“In the course of doing business, you must contravene one infringement or the other, just the way the Central Bank of Nigeria (CBN) penalises Nigerian banks. It is not only in the UK that regulators penalise operators.
“My advice to GT Bank and others is to be careful in their activities outside the country to avoid paying out such a huge amount to regulatory bodies who are always looking for how to legitimately take money from the operators,” Okezie told THEWILL in a note.
“The UK is not Nigeria where things can be manipulated. They (GT Bank) must watch out against heading to the rocks because UK is not a place to escape from infringement consequences”, Doyen of the Stockbrokers and Director at UIDC Securities Limited, Sam Ndata, observed.
THEWILL contacted FCA headquarters in London through e-mail for comments. In a response signed by Max Clements of the Press Office, Communications Division, the UK financial regulatory body said, they would not comment on individual firms but confirmed the 525,000 pounds fine issued GT Bank in 2013.
“We cannot comment on individual firms. Regulated firms are subject to ongoing risk-based supervision to ensure they fulfil their requirements under the Money Laundering Regulations.
“Repeated misconduct is unacceptable and will not be tolerated. Firms must play their part in the fight against financial crime by ensuring they have effective Anti-Money Laundering systems and controls in place.
“Where improvement is required, this should be completed in a timely manner and monitored appropriately,” FCA stated in a background document to the Final Notice issued GT Bank on January 10, 2023, seen by THEWIL. The 50-page document contains the following excerpts in paragraphs 2.4-2.6:
“GT Bank should have played its part in the fight against financial crime by ensuring it had in place effective anti-money laundering (“AML”) systems and controls. These are required in order to mitigate the risk of individuals and organisations using financial institutions to circumvent restrictions designed to prevent them benefitting from assets obtained by illegal means.
“Instead, GT Bank failed to ensure compliance with its regulatory obligations in respect of its systems and controls relating to AML during the relevant period.
“This is not the first time GT Bank has been disciplined by the Authority for serious weaknesses in its AML systems and controls. By a Final Notice, dated 8 August 2013, GT Bank was fined £525,000 by the Authority for similar failings in relation to its AML systems and controls.
“The Authority considers this repeated misconduct to be a direct result of the inability of the senior management within GT Bank, over a prolonged period of time, to formulate and implement an effective plan capable of addressing the weaknesses identified within its AML and financial crime systems and controls.
“As this behaviour mirrored previous misconduct, the Authority has significantly increased the penalty to be paid by GT Bank.
“GT Bank breached Principle 3 (management and control) of the Authority’s Principles for Businesses (“the Principles”) between 21 October 2014 and 12 July 2019 (“the relevant period”) by failing to take reasonable care to organise and control its AML processes responsibly and effectively, with adequate risk management systems.”
When contacted, Relationship Manager at Guranty Trust Holdings Company Plc, Charles Eremi, referred this newspaper to the Group’s statement on the recent penalty, indicating the steps it had taken to address the regulatory gaps.
Commenting on the issue, Managing Director of GTBank UK, Mr. Gbenga Alade, said: “As a responsible financial services institution that is committed to best practices, GTBank UK takes its AML obligations extremely seriously. We note with sincere regret the FCA’s findings regarding AML control gaps in our operations in the past and we are very sorry for this.”
He further stated; “We would like to assure all our stakeholders and the general public that necessary steps have been taken to address and resolve the identified gaps.
“Whilst there was no direct customer impairment arising from the period under review and the FCA’s findings do not include any instances of suspected money laundering, we have since reinforced our AML control framework and implemented changes in our AML processes in line with best practice with a view to ensuring that the highest standards are maintained in our operations.”
“The Guaranty Trust Banking Group, including GTBank UK, is fully committed to the fight against all forms of financial crime and to continuing to meet all applicable financial crime regulations and legislation globally. Our AML policies and controls, together with our overall risk management strategy, are regularly reviewed and revised to ensure that they remain relevant and current in line with the evolving regulatory requirements.”
About the Author
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
