Tanzania to probe massive Standard Bank bribery scam

Stanbic Tanzania HQ in Dar es Salaam, Tanzania

Stanbic Tanzania HQs in Dar es Salaam, Tanzania

Standard Bank -Tanzania a subsidiary of South Africa-based ICBC Standard Bank is under scrutiny once again following this week’s British court landmark ruling over a US$6 million bribery scandal involving Tanzanian officials.

The Tanzania announced Tuesday it is investigating the high profile case in bid to hold the officials responsible and recover the funds in question.

In a media communiqué issued by State House Tuesday, Tanzania commends UK authorities for uncovering, investigating and prosecuting the massive bribery scam.

Monday ruling in the UK was about Standard Bank Tanzania 2012/2013 $600m private sovereign debt agreement to finance various development projects in the East African nation.

The mega deal was to help Tanzania fund water and electricity among other development infrastructure projects as per the government’s 5-year development agenda.

Under the bank’s settlement with UK’s Serious Fraud Office (SFO), ICBC Standard Bank conceded it failed to stop senior executives at Standard Bank Group’s Stanbic Bank Ltd in Tanzania from allegedly paying a bribe to a Tanzanian government official to win a huge bond contract.

Under the original agreement, Standard Bank was to charge the government a 1.4 percent interest (about US$8.40million).

But, due to what Ambassador Ombeni Sefue, the Chief Secretary described as “cleverness” standard bank requested an additional 1 percent to hire a local agent; Enterprise Growth Market Advisors (MA) Ltd making a total fee of 2.4 percent (about US$14.4million).

“Just after due payment, EGMA withdrew all the US$6million in cash raising concerns among the central bank auditors. The officials reported the questionable transactions to Stanbic (T) ltd Board, Standard Bank, SFO and London court,” Sefue told reporters at the State House in Dodoma.

In Monday’s ruling in London, the bank was ordered to pay the government a fine of $6 million plus interest of over $1 million, a $8.4 million penalty in disgorgement of profits and a $16.8million fine to be paid to UK’s SFO. Together the total fine comes to $32.6 m.

The embattled bank has also separately agreed to pay $4.2 m to the U.S. authorities regarding how the Tanzania bond transaction was advertised to American investors, and the U.S. Department of Justice has reportedly closed investigations into the matter.

Deferred prosecution agreements (DPAs) were announced last year in the UK. They allow prosecutors to suspend and eventually expunge prosecution if companies meet the agreed upon terms and requirements. Companies must however, pay a hefty fine, repay profits and cooperate with the investigation into individuals responsible and their subsequent prosecution.

Standard Bank bribery case is the first since the introduction of DPAs by the Serious Fraud Office.
EGMA and Stanbic (T) Ltd have not made any formal statements, but the State House insisted the company along with former Tanzania Revenue Authority Chief Harry Kitillya, Mr Mboya (now late) and Mr Gasper Njuu, Managing Director with EGMA should cooperate with investigation team.

The case comes a year after the 2014 multimillion-dollar corruption scandal which involved a controversial withdrawal of $122 m at the Bank of Tanzania (BoT) Tegeta escrow account by government officials. The saga prompted multiple resignations and sackings of top government officials including ministers, and donor nations suspended aid packages amounting to over $500 m.