As part of its efforts to clean up the banking sector, the Bank of Ghana has examined the affairs of Heritage Bank and discovered a number of irregularities.
Justifying its reason for revoking the license of the bank, Governor of the Central Bank explained that its decision bothered on licensing, the sources of capital and related party transactions of Heritage Bank.
As it ends its two-year Banking Sector Reforms, the BoG Governor, Dr Ernest Addison said aside from the stated issues, “the bank failed to meet the ¢400 million capital required as of 31st December 2018.”
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REVOCATION OF THE LICENSE OF HERITAGE BANK LIMITED
The grounds for revocation of the licence are as follows:
1. 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. Specifically:
• The promoters of Heritage provided evidence to Bank of Ghana at the time of the application for a banking licence to the effect that an amount totaling GHC120.6 million was lodged with a local bank. The amount of GHC120 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 are 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 has 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 USD 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 GHc15.8m 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 GHC 20.6 m 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 confirm (i) the identity of the unnamed shareholder, (ii) the basis of valuation of the fixed assets, and (ii) 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.
2. 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 regulation 9 of the Anti-Money Laundering Regulations (L.I. 1987) which requires that beneficial owners are not fictitious.
3. 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.
4. 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.
5. The bank failed to meet the ¢400 million capital required as of 31st December 2018.
