In a landmark ruling in Britain, a judge has approved the first of its kind plea deal between the UK’s Serious Fraud Office (SFO) and the London arm of South Africa’s Standard Bank to defer prosecution on bribery charges involving its Tanzanian unit in exchange for a total of $32.6 million in penalties.
SFO alleges that Standard Bank’s London office failed to prevent bribery at Stanbic Bank Tanzania thereby running afoul of the UK’s Bribery Act. The penalties consist of a $16.8 million fine, $8.9 million for disgorgement of profits and $7.05m compensation to Tanzania.
The case centers around the actions of two figures at Stanbic: Former chief executive officer Bashir Awale and Shose Sinare, the bank’s former head of corporate and investment banking. They are accused of authorizing payments of $6 million to a local consulting firm to show favor to the bank on a ”proposal for a US$600 million private placement to be carried out on behalf of the government. The chairman of said firm is Harry Kitilya, at the time the head of Tanzania’s tax authority.
The Tanzanian government had been looking to raise money to finance key development projects. Stanbic was bidding for the mandate to help raise the funds initially for a 1.4% fee of the loan. But after the deal stalled, the fee was raised to 2.4% with the explanation that the extra 1% be paid to a third party, the consulting firm. Yet it was never clear what role the third party played in the deal, SFO alleges. But soon after they came on board, the deal went through.
“[Two] months after an indication that a local partner would be engaged and paid the 1%, the [Tanzanian government] formally granted [Stanbic] the mandate to raise the sum of US $550 million,” SFO’s statement of facts from the case (pdf) says. The figure for the loan would later rise to $600 million.
Within days of the $6 million being deposited into the consulting firm’s account, Awale allegedly authorized the withdrawal of ”large cash amounts” from the account. “The cash withdrawals prevent any further tracing of the US $6 million,” SFO’s statement of facts goes on to say. This raised suspicions within the bank with certain officials who alerted their bosses in London and South Africa. Following an internal investigation, the bank reported itself to relevant authorities.
Awale was sacked by the bank in 2013 and Sinare resigned. Meanwhile, Kitilya also resigned from his role in 2013.
Attempts to reach both Awale and Sinare for comment were unsuccessful.
Stanbic “has cooperated fully with all investigations,” the bank said in a statement. “The Group and its subsidiaries take the risk of corruption very seriously and deeply regret that this issue arose on a transaction with which they were involved.”
In addition to the British fine, a separate $4.2 million will be paid to the US Security and Exchange Commission (SEC) for charges that the bank was negligent and did not inform its investors about the role of the third party consultants and the $6 million payout.
While the South African bank will be liable for the fines, Standard Bank is no longer the majority owner of the London unit after selling its 60% stake to the Chinese bank ICBC earlier this year.
The Tanzanian government, which is set to receive $7 million compensation from the London settlement, has said it is launching its own investigation into the incident. “We want to know where the money went and what it was used for,” Ombeni Sefue, chief secretary to the president, told reporters. “And once we have gathered enough evidence, legal measures will be taken against those involved.”