Criminal proceedings against ‘Chinese Bank’

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Criminal proceedings against ‘Chinese Bank’

7:56 CAT | 07 Mar 2017

File photo / Attorney General's headquarters in Maputo

The Mozambican Attorney-General’s Office (PGR) announced on Monday that it is prosecuting seven people, one Chinese citizen and six Mozambicans, believed to be the ringleaders in the “Mutual Aid Credit Association”, better known as “the Chinese Bank”.

But the Association was not a legitimate bank at all, since it had no authorization from the Bank of Mozambique to undertake banking activities. It accepted deposits from citizens, who were apparently unaware of the illegal nature of its activities, and reimbursed them at high levels of interest.

Depositors had to deposit at least 20,000 meticais (294 US dollars, at current exchange rates) into bank accounts specified by the Association, and at the end of each month they would receive interest of 30 per cent (far higher than anything that real banks pay on deposit accounts).

This appears to be a Mozambican version of a pyramid scheme in which people are persuaded to part with their money against promises of payment unavailable through normal channels. The initial depositors get the promised payments, but the scheme inevitably runs out of money and collapses, with the later depositors losing everything.

In this case, collapse was avoided because of intervention by the Bank of Mozambique. In July 2016, the central bank froze the Association’s accounts, and since then the depositors have been trying to recover their money, without success.

According to the PGR, this illicit operation involved 482 million meticais, and 16,000 depositors. This banking fraud cost the state over 29 million meticais in lost taxes.

The prosecution is charging the seven suspects with fraud, the illegal collection of deposits, money laundering, and membership of a criminal association. “During the investigation”, said a release from the PGR, “it was found that the association is not registered in Mozambique, and has no authorization to exercise financial activity”.

Prosecutors have now sent the case to the Kampfumo district court in Maputo, where a judge will decide if there is sufficient evidence to hold a trial.

Source: AIM