Laughing all the way to the bank
Controversial Zambian businessperson Rajan Mahtani says he promised former Malawi president Joyce Banda a $150-million biothermal energy plant in a bid to regain his banking licence, which was withdrawn 10 years ago after accusations of money laundering.
Mahtani also said he promised Banda he would broker a loan for her government from the Swiss bank Credit Suisse.
A media report at the time claimed he offered Banda a $30-million loan to buy maize and fuel. Banda confirmed meeting Mahtani, but denied using her influence to have his licence restored.
“During my tenure, I met many people that wanted to invest in different sectors in Malawi, just like any other head of state would do … Dr Mathani just happened to be one of the many.”
Banda said Reserve Bank technocrats did “a risk-based due diligence” assessment of all would-be investors and that “no investment would take place until and unless the [Reserve Bank], as a regulatory body for commercial banks, completes this process”.
Mahtani’s image took a battering in 2005 when the government of then president Bingu wa Mutharika revoked the licence of his Finance Bank of Malawi (FBM) after the Reserve Bank found it was involved in money laundering.
His New Finance Bank will open its doors in Lilongwe on Monday next week, despite the fact that his promises to Banda have not yet materialised. A senior Reserve Bank source said the bank had no record of a Credit Suisse loan.
Previous claims of flouting banking laws aplenty
Mahtani told amaBhungane last week that his aim was to restore the Finance Bank of Malawi’s integrity and clear its image.
He claimed that the revocation of his banking licence in 2005 was politically motivated and ill-conceived.
In 2011, Mahtani’s Zambian banking activities also ran into stormy waters. The Bank of Zambia suspended shareholder interests in his Finance Bank of Zambia after an inquiry discovered that he owned more than 56% of the institution through intermediaries in violation of banking law.
But, within three weeks of taking power in September that year, Zambia’s then president, Michael Sata, handed the bank back to Mahtani, who was apparently one of his main financiers.
In Malawi, Mahtani challenged the withdrawal of his banking licence in the commercial court, but lost the case.
In responding papers filed in 2014, the Reserve Bank alleged that, as far back as 1999, the Finance Bank of Malawi repeatedly violated banking laws, exchange control regulations and Reserve Bank directives and guidelines.
Audit report points to “potential” money laundering
“Simply put, FBM was involved in money laundering,” the bank said. “It … concealed the true state of affairs of the bank, failed to observe the ‘know your customer’ concept [and] opened ghost accounts, which were used to siphon foreign currency out of Malawi. Several accounts were opened in different names but operated by one person.”
A KPMG audit report, tabled in court, noted cases that “might be indicative of potential money laundering activity”, including 3196 accounts that were opened and closed within a single day; 388909 cases in which there was a correlation between the inflow and outflow of funds in these accounts, and “44053 [cases of] exact potential matches in terms of the value and date of the transaction”.
KPMG also noted 4320 accounts in which more than 65% of the funds deposited into them was withdrawn as foreign currency, which could contravene Malawi foreign exchange regulations.
The Reserve Bank recommended that Finance Minister Goodall Gondwe should revoke Mahtani’s banking licence, which he did in May 2005. Despite a court ruling in favour of a judicial review of the licence decision, the bank filed for voluntary liquidation.
Subtle wafts of political intervention
Mathani’s comeback plan was first revealed in May 2012 when the Zambian media quoted him as saying he planned to open five branches in Malawi following high-level discussions between him and Banda.
“We held some very fruitful discussions with President Joyce Banda and she invited us to resume business in Malawi,” he was quoted as saying.
Banda’s role may explain why the government of Peter Mutharika, who toppled her last year, seemed to balk at the relaunching of Mahtani’s bank.
In March last year, the Zambian tycoon complained that he could not start operating because Gondwe had not issued him a foreign exchange dealer’s licence.
But, after a meeting between Mahtani and Gondwe in Lilongwe late last year, the licence was granted.
Gondwe confirmed that he had delayed issuing the licence, but said he could change his mind because of the “enormous” legal implications of withholding it.
Mahtani “simply” wants to restore his bank’s integrity
In a phone interview, Mahtani said that he had obtained a new licence “to ensure that the injustice that happened years back has been clarified. Malawi is a small market and cannot make profits. The motive was simply to restore our integrity.”
On his pledges to Banda, he said: “We promised to carry out international banking business under internationally acceptable standards of integrity, ethics and best practice, assisting Malawi in its economy, employment and economic growth.
“Credit Suisse is a shareholder of Finance Bank of Zambia and would have provided appropriate assistance. We have only commenced operations now.”
Mahtani said the allegations in the Reserve Bank’s court papers in 2012 were “vehemently” denied and appeared to be manufactured to justify ill-conceived action. “Simply put, the bank was never involved in money laundering.”
He said he would keep his promise to establish the biothermal plant, using cassava to produce ethanol for export to China. “The project will work with 20000 growers in Malawi, who will produce industrial alcohol.”
Mahtani brushed aside his banking problems in Zambia in 2011, saying they were caused by a few disgruntled borrowers and their conspirators. “Court cases upheld my bona fides and those of the bank,” he said.
* Got a tip-off for us about this story? Click here.
The M&G Centre for Investigative Journalism (amaBhungane) produced this story. All views are ours. See www.amabhungane.co.za for our stories, activities and funding sources.