BoG, EOCO uncover further irregularities in financial sector clean-up

A new report published by the Bank of Ghana has revealed further details regarding the resolved microfinance companies and savings and loans institutions, with new information indicating most of these companies diverted funds into other ventures – thereby leading to their insolvency.

In a collaborative effort by the Joint Receivers, Bank of Ghana and Economic and Organised Crime Office (EOCO), the report shows there was a mismatch in the assets and liabilities as reported by the defunct 347 microfinance companies and 23 savings and loans and finance houses.

Furthermore, the report adds that there were transactions that required further investigation to determine their legitimacy; hence, the Joint Receivers engaged EOCO’s assistance to jointly investigate operators of the resolved Special Deposit-Taking Institutions.

Again, the Receiver in collaboration with EOCO has so far identified 100 landed properties for further investigations to ascertain their ownership status. These comprise 68 landed properties relating to five microfinance companies, and 32 relating to nine Savings & Loans. Out of these, 88 of the assets have been frozen.

According to the report, the purpose of obtaining freezing orders is for EOCO and the Receiver to: “Ascertain the ownership status of the properties; ascertain whether the properties were acquired with resources of the defunct institutions; obtain all relevant documents for the said properties; conduct searches at the Lands Commission to aid potential transfer of these assets to the Receiver; and to prevent owners from dissipating the assets before the Receiver starts the realisation process”.

Related party transactions

With regard to related party transactions, approximately GH¢1.09billion was uncovered among eight Savings & Loans companies – which include GN, Accent, First Allied, CDH, First Trust, Alpha Capital, Midland and IFS.

Of the total loan portfolio of GH¢900million of GN Savings & Loans, 85 percent went to related parties. The next is Accent which gave out 83 percent of its GH¢75.9million loans to related parties, while First Allied Savings & Loans used 64 percent of its loans for the same purpose.

Four microfinance companies also engaged in related party transactions, to the tune of GH¢33million. These are Cypress, Nationwide, Goldman Capital and Dwadifo Adamfo. Cypress Microfinance recorded the highest amount of related party transactions, with 42 percent of its loans falling into this category. It was followed by Nationwide with 23 percent; Goldman Capital – 18 percent; and Dwadifo Adamfo – 2 percent.

Untraceable investments

With regard to untraceable investments, the report said GH¢116.7million of such transactions have been identified.

“We have identified placements that were made by SDIs with other investment companies. All attempts to trace the whereabouts of these investment companies have been unsuccessful. We are in the process of transmitting a formal request through the BoG to EOCO to trace these non-operational institutions and assist with recovery of the funds,” the Receiver said in the report.

The Bank of Ghana is assuring the public that together with EOCO and the Joint Receivers, all efforts are being made to prosecute the offenders and retrieve as much as it possibly can from the defunct financial institutions.