Hidden debts: Credit Suisse forgives 200 million dollars of Mozambique’s debt – AIM report

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Hidden debts: Credit Suisse forgives 200 million dollars of Mozambique’s debt – AIM report

7:59 CAT | 21 Oct 2021

FILE PHOTO For illustration purposes only. Ministry of Economy and Finance, Maputo. [File photo: Wikimedia Commons]

According to the British Financial Conduct Authority (FCA), the bank Credit Suisse has agreed to cancel 200 million dollars of debt owed by Mozambique.

This is part of the deal reached by Credit Suisse, the FCA and the Securities and Exchange Commission (SEC) of the United States, under which Credit Suisse has been fined around 475 million dollars for what the SEC described as “fraudulently misleading investors and violating the Foreign Corrupt Practices Act (FCPA)”.

This is the latest stage in the saga of Mozambique’s “hidden debts” – the corrupt scheme whereby Credit Suisse and the Russian bank VTB lent over two billion dollars to three fraudulent Mozambican companies, Proindicus, Ematum (Mozambique Tuna Company) and MAM (Mozambique Asset Management).

An FCA release on Wednesday said that part of the agreement is that Credit Suisse must forgive 200 million dollars of debt which Mozambique owed the bank “as a result of these tainted loans”.

This was not an act of charity – Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, said “The fine would have been higher if not for Credit Suisse agreeing to provide the debt write-off of 200 million dollars”.

He added that the FCA’s fine “reflects the impact of these tainted transactions which included a debt crisis and economic harm for the people of Mozambique. The FCA will continue to pursue serious financial crime control failings by regulated firms.”

Giving background to the fine, the FCA said “between October 2012 to March 2016, Credit Suisse failed to properly manage the risk of financial crime within its emerging markets business. It had sufficient information from which it should have appreciated the unacceptable risk of bribery associated with the two Mozambican loans and a bond exchange related to government sponsored projects”.

Credit Suisse, it continued “was aware Mozambique was a jurisdiction where the risk of corruption of government officials was high and that the projects were not subject to public scrutiny or formal procurement processes”.

The contractor engaged by Mozambique on the projects, it added, was described as a “master of kickbacks”.

The FCA delicately declines to name the contractor – but it is the Abu Dhabi based group, Privinvest, owned by the Lebanese tycoon, Iskandar Safa. Privinvest, the FCA added, “secretly paid significant kickbacks, estimated at over 50 million loans, to members of Credit Suisse’s deal team, in order to secure the loans at more favourable terms”.

The three Credit Suisse bankers are Andrew Pearse, Detelina Subeva and Surjan Singh. They all admitted to receiving bribes from Privinvest before a New York court in 2019, but have not yet been sentenced.

While those three bankers “took steps to deliberately conceal the kickbacks, warning signs of potential corruption should have been clear to Credit Suisse’s control functions and senior committees”, the FCA said. “Time and again there was insufficient challenge within Credit Suisse, or scrutiny and inquiry in the face of important risk factors and warnings”.

The FCA said Credit Suisse had been cooperative. The bank “agreed to resolve this case with the FCA, qualifying it for a 30% discount in the overall penalty. Without the debt relief for Mozambique, and this discount, the FCA would have imposed a significantly larger financial penalty”.

While 200 million dollars is far from a negligible sum, the Mozambican Attorney-General’s Office (PGR) is aiming for much more – it is suing Privinvest and Credit Suisse in the London courts, and hopes to have the loan guarantees signed by former finance minister Manuel Chang declared illegal, which could wash out the entire debt. But no final ruling is expected on this case before 2023.

Source: AIM