How SME Bank was looted
The brazen cooking of books, the cover-ups, and how the cookie crumbled.
07 March 2019 | Banking
Court documents set out the modus operandi of those involved in the misappropriation of N$247 million (or N$347 million if 20% annual interest is factored in), based on the paper trail left behind by the Zimbabwean fraudsters.
An intricate web of smoke and mirrors was devised to conceal illegal transfers of money, testified Tania Pearson, the legal advisor of the SME Bank who was retained by the liquidators to assist in tracing the stolen millions.
In her lengthy submission to court, Pearson said the fraudsters gave false recipient names and reasons for payments in internal records and on payment instructions, which created the impression that the transfers were in respect of genuine SME Bank business.
In fact, Pearson stated, the accounts to which transfers were made belonged to different entities.
“As a result, the details appearing on the SME Bank's bank statements (although false) also correspond with the SME Bank's internal, but false records, although the misappropriated funds ended up in the bank account of an entirely different person/entity involved in the misappropriation,” Pearson stated.
Virtually all of these fraudulent transactions were concocted in the bank's finance department, whose staff consisted exclusively of Zimbabwean nationals, or in the office of CEO Tawanda Mumvuma, also a Zimbabwean.
Former finance manager Joseph Banda and his fellow Zimbabwean assistant, Chiedza Goromonzi, were also given verification powers in the treasury back office, purportedly to stand in for people who went on leave.
Pearson pointed out that strict segregation of duties of the finance department and the treasury back office was introduced in the global banking sector after the collapse of a major European bank in the 1990s. That was done to prevent, or at least reduce, the possibility of fraud in banks. The precaution is contained in the Basel Accord, which the Namibian banking sector acceded to.
Among the 'cover-ups' detailed in Pearson's affidavit are fictional transactions with Mamepe Capital and Benoni-based model Kalandra Viljoen's Asset Movement and Financial Services (AMFS).
On investigation it was found that Mauwane Kotane's Mamepe Capital in truth only received N$30 million of the SME Bank money. It was initially claimed that Mamepe Nominees (a non-existent entity) had received N$150 million for investment and purportedly invested it with the notorious VBS Mutual Bank in South Africa.
AMFS, a cash transfer outfit, received N$78.9 million of the stolen SME Bank money.
AMFS entered into a service-level agreement with 'heist mastermind' Enock Kamushinda's company, Crown Finance Corporation, on 13 July 2016.
This agreement was signed by SME Bank CEO Mumvuma.
While Kalandra Viljoen did not sign the agreement, the SME Bank millions were nonetheless transferred to AMFS, of which AMFS delivered N$64 million in cash to a certain George Markides, who in turn “delivered” cash to various recipients. Kamushinda's companies, Crown Finance Corporation and Heritage Investments, received direct EFT transfers of N$2.8 million and N$2.27 million from AMFS.
All these payments, it is alleged, were initiated from Mumvuma's office, and were indicated in the internal systems as 'investment Mamepe Capital Asset Managers'.
Although Mamepe Capital only appeared on the scene on 7 April 2015, in hindsight earlier fraudulent transactions were ascribed to it and recorded as if they were “investments” - not with Mamepe Capital but with a non-existent entity called 'Mamepe Capital Asset Managers'.
These fraudulent transactions were first recorded as building costs, computer equipment, computer software costs, freight charges, marketing consultancy costs, professional fees and security expenses.
On 18 July 2016 Mumvuma completed an application for investment, purportedly on behalf of the SME Bank, in VBS Mutual Bank in South Africa, which was also robbed of N$1.8 billion.
The investigations found that only N$10 million of the SME Bank's money was ever transferred to VBS Bank, and not the N$150 million that was claimed.
And yet, Mumvuma, Banda and Kotane left a trail of false documents indicating that N$150 million had been 'invested' with VBS by Mamepe Capital Asset Managers on behalf of the SME Bank.
Pawpaw hits the fan
Despite numerous queries and demands by external auditors BDO Namibia for information on these so-called investments, things came to a head in September 2016 when the Bank of Namibia (BoN) questioned the SME Bank's inability to repay N$140 million to NamWater.
The BoN also questioned the SME Bank's liquid asset ratio that was below the prudential limit of 10%. The BoN then warned of an impending targeted risk-based examination of the SME Bank, mainly focusing on its liquidity risk management. Mumvuma then wrote to VBS requesting a transfer of N$37 million to the SME Bank. VBS did not comply with this request.
With pressure mounting, Mumvuma, Kotane and VBS Bank's CEO Andile Ramaphunga devised a scheme in which the managing director of JM Busha Asset Managers was asked to transfer N$60 million to the SME Bank.
This N$60 million was then transferred into the SME Bank's account held at VBS Bank. VBS in turn then transferred various amounts to several entities and institutions.
These transfers included N$37 million to the SME Bank, N$10 million to Peregrine Equities and N$20 million to Mamepe Capital, which it in turn transferred to the SME Bank, purportedly as a matured investment.
These transactions, Pearson stated, had “zero sum effect”, but in fact created further liability for the SME Bank.