Killing the goose that laid the golden eggs (Part 8)
Using accounting to steal

It is easier to rob a bank from inside than from outside, and most bank managements try to create system to prevent internal thefts. In Mozambique this was often blocked at high level. Computerisation and tighter controls and audits were delayed until well after privatisation. It was only in 1998 that Banco Mello staff in BCM began to impose tighter controls, including daily reconciliations and a requirement for daily reports of all large movements of money.

In the previous parts of this series, we noted that money disappeared not simply as bad lending, but through accounting frauds. The continued use of paper files made various kinds of frauds easier. Loans were granted and then the original files simply "lost", so no one would know, for example, what guarantees had been promised. It was possible to create fake accounts which could be used as part of complex transactions, and then simply delete all record of the accounts.

It is also reported that bank officials stole money from accounts. Inactive accounts were drained or used for illegal transactions. Money was taken from government and project accounts which were not closely monitored.

In Mozambique, a weak point and central to most frauds has been the suspense, internal and balancing accounts (contas transitórias, contas internas e contas de regularização) which cover the business between branches, between branches and headquarters and between Maputo and foreign banks.

A "suspense account" is an account in which items are temporarily entered until a proper place is determined. For a bank, everything has to be accounted somewhere, so when a transaction is not yet completed, the item goes into a "suspense account". An uncleared cheque, for example, is put into a suspense account until a confirmation of the transfer of money arrives, at which point the money is paid into the depositor's account.

Under normal backing practice, including the rules of BCM, no item should remain in a suspense account (conta transitória) for more than 45 days - which should be enough time even for post from remote branches. And annual audits should check to see that there are no old items hanging about in the suspense accounts. Normal practice is to do a "reconciliation" in which various accounts and sets of books are compared, to ensure that all agree. In Mozambique this was not done.

An article in Savana (7 Apr 2000) by "an ex-director of BCM" said that BCM had billions of meticais, both in meticais and in forex, which stayed in suspense accounts for years and that this was a strategy of BCM and BdM officials, and of the auditors, to pretend that money was there when it was not. Several banking officials we talked with confirmed that no reconciliations were done. We noted in earlier articles that for Banco Austral KPMG suggested the write-off of $1.3 mn in the internal accounts of transactions between headquarters and branches and $1.7 mn in the suspense accounts, so the same thing was clearly happening with BPD and Banco Austral.

Suspense accounts and internal accounts can be used for fraud by intentionally not completing the transaction. In 1993 a fraud in Maputo involved Mt 4 bn, then more than $1 mn. Pedro Pinto and Julio Tandane were allowed to cash cheques without having money to cover them. BPD took over Pinto Group properties and Umberto Fusaroli Casade was appointed to run the businesses. But he was shot and wounded twice, on 22 April and 12 May 1993. Casadei blamed the Pinto Group for the attempted assassinations, and he then left Mozambique.

There was a similar fraud in the north in late 2000, involving Mt 68 bn ($4 mn). Cheques drawn on a Banco Austral account in one city were deposited in BSTM and BIM accounts in another city, and forwarded to the Banco Austral branch in that city, where the manager said they had been covered. But he did not forward the cheques to the issuing bank for collection. And in violation of normal procedures, no reconciliation of these accounts was done by Banco Austral.

Another fraud is to issue letters of credit without adequate cover, and when the letters are presented, simply take the money from the suspense account - which becomes a never empty honey pot. The "ex-director of BCM" claimed that between 1993 and 1996, $40 mn was stolen in this way, "on orders from above".

Most bank managements try to create system to prevent internal thefts. In Mozambique computerisation and tighter controls and audits were blocked at high level, and delayed until well after privatisation. Nevertheless, even in a bad system it is hard to hide millions of dollars - unless people are looking the other way. The "ex-director of BCM" argued that it was "completely impossible" to have a multi-million dollar fraud involving suspense and internal accounts without the knowledge or a director or administrator.

An important element in all of these frauds was the failure by the new owners to do a due diligence audit when BPD and BCM were privatised - and the failure of the Mozambican representatives on the boards to require such audits. This is very unusual, precisely because the new owners should want to know, and exclude, all old bad debts and questionable items in the accounts. By declining to audit, the new buyers and the Mozambican board members were explicitly saying they did not want to draw a line under the old bad practices, and wanted to continue them.

The "Mt 144 bn" fraud

The best known Mozambican bank fraud is the "Mt 144 bn" fraud. BCM was formally privatised on 26 July 1996, and the fraud took place during the prior six months. A series of bank accounts was opened at the Sommerschield branch, without proper identification, by Abdul Satar Carimo and family, friends and companies. Up to 77 cheques, with a value to Mt 144 bn (then $13 mn), were deposited in these accounts between 26 March and 9 August 1996. The cheques were issued on a series of different bank accounts outside Maputo, apparently without the knowledge of the account holders. In July, 35 cheques for Mt 72.5 bn ($6.6 mn) were deposited. In various ways, the branch manager, Vicente Ramaya is alleged to have allowed the money to be withdrawn from the Satar accounts, with a counter-entry going into the suspense account, and then destroyed the cheque instead of sending it back to the issuing branch (which would have bounced the cheque). So the entry simply remained in the suspense account.

The fraud seems to have been discovered relatively quickly. The Satar's were alerted and fled the country. Son Momade Assife Abdul Satar (known as Nini) returned and has been arrested, along with Ramaya, in connection with the killing of Carlos Cardoso.

The official view so far has been that Ramaya was sophisticated and experienced enough to have hidden a $13 mn fraud, not simply by destroying cheques, but also by falsifying various levels of accounts and reports. This view is stoutly maintained by current BCM officials, but is widely rejected elsewhere in the banking community. They argue it was not possible for $6.6 mn in cheques to suddenly appear in a set of accounts in a small branch, and not to be noticed at head office. Someone at higher level must have known and participated. And it was clear that the perpetrators were protected, because the investigation was blocked.

Ramaya clearly had more money than a simple branch bank manager and felt safe to continue his business activities. In 2000 he brazenly went to court in Pemba to try to recover $450,000 he had lent to Zulficar Suleman. As part of this process, Maria Cándida Cossa gave a declaration that she received a cheque for Mt 1.3 bn ($85,000) from Momade Abdul Assif Satar, which she then gave to Zulficar Suleman. (Demos, 30 May 2001) Maria Cándida Cossa has close links to the Chissano family, and is one of those cited by the departing Malaysian managers of Banco Austral as having a bad debt to the bank.

The failure to prosecute the "Mt 144 bn" case was constantly pressed by Carlos Cardoso, but really only began to move when it was raised in parliament on 14 March 2000 by Eneas Comiche. Until the December 1999 election, he had been Minister in the Presidency for Economic and Social Affairs, then he was elected an MP and shortly thereafter named chairman of the BCM board. He used his parliamentary position to denounce the attorney-general's office and name Ramaya and the Satar family as culprits.

But who else was involved in the "Mt 144 bn" fraud? The "ex-director of BCM" wrote in Savana that a director or administrator, in particular the director responsible for accounting, had to "permit the consummation of the fraud". At that time, the director responsible for accounting and organisation & methods was Teotónio Comiche, younger brother of Eneas.

Diamantino dos Santos was Maputo city prosecutor and he prevented the case from being investigated in 1996 and 1997; he was first transferred to Sofala and later was himself charged with fraud and fled the country. In an attempt to defend himself, he gave a series of interviews in which he said Eneas Comiche and the BCM lawyer, Albano Silva, were trying to cover up higher level involvement. In particular, he said Eneas Comiche was trying to protect his brother Teotónio, who was "strongly implicated" and who gave orders not to do a reconciliation which would have shown the fraud. (Savana 24 Mar 2000)

Asslam Abdul Satar, generally considered to be the organiser of the Mt 144 bn fraud, wrote a letter from Dubai to the prosecution on 20 July 1999 admitting the crime, but saying they did not act alone. The long letter was later published in Demos (23 May 2001). He says that in 1994 he had a problem with his accounts, and that he contacted Alberto Calú, the commercial director and number two at BCM, who cleared up the problem and gave him a loan of Mt 750 mn in exchange for a payment of Mt 50 mn. He goes on to claim that in 1995 he did an operation involving $800,000 in foreign currency, taking money out of dollar accounts that had not had any deposits or withdrawals for a long time. Finally he carried out the Mt 144 bn fraud with the involvement of Calú and Augusto Cándida, then BCM chair (Presidente do Conselho de Administração).

The Mt 144 bn fraud is always presented as a fraud carried out in local currency. And reports suggest significant expenditures inside Mozambique by the perpetrators. But it is clear that much of the $13 mn was taken out of the country. Demos (30 May 2001) claims that at least $7 mn in cash was taken out of Mozambique and some of it was deposited in a British bank. This would not be hard to organise, as the Satar family runs an exchange house, Unicâmbios. So it does suggest that that fraud also has a foreign currency aspect, discussed below.

There have been at least two shootings related to the Mt 144 bn fraud. On 29 November 1999, shots were fired into the car of Alabano Silva, just missing him. Silva is a prominent lawyer who was representing BCM in the Mt 144 bn fraud case and who was publicly criticising the attorney general's office for blocking prosecution of the case. He is the husband of Lúisa Diogo (then Deputy Finance Minister, now Finance Minister)

Albino Macamo was appointed assistant attorney general (Procurador-Geral da República Adjunto) on 28 December 2000. He had been investigating corruption in the attorney general's office and had been part of a commission on inquiry to investigate Diamantino dos Santos. On 14 Feburary 2001 he was shot and seriously wounded outside his mother's house in Maputo.

One other murder may be related. Passarinho Fumo, manager of a BCM branch in Maputo, was killed in strange circumstances. His alleged murderer, pastor Enoque Novela, was allowed to escape from prison twice, while his wife Amália was detained for two months in mid 2001. Amália Fumo said that as her husband had been under heavy pressure from certain individuals at the bank and had applied for retirement when he was killed, it seemed likely his murder was linked to some BCM fraud. (Savana 13.05.01, 13.07.01)

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metical - archives 2001