Kroll suggests that Credit Suisse may have violated British Law by failing to undertake an adequate due diligence enquiry on the loans to ProIndicus and Ematum. It calls on the attorney general's office (Procuradoria-Geral da Republica, PGR) to "request, under the Mutual Legal Assistance arrangements in criminal matters, that the UK Authorities request the details of enhanced due diligence documentation from Credit Suisse." Kroll also calls on the PRG to formally request the security services (SISE, Servico de Informacoes e Seguranca do Estado) to provide all such documents. It says both Credit Suisse and SISE have so far refused to provide any information on the due diligence.
The UK agency is the Financial Conduct Authority (FCA). Kroll's view that the apparent failure of Credit Suisse to do an enhanced due diligence investigation is a criminal matter will increase the pressure on both the FCA and the bank.
Under IMF and donor pressure, Kroll was contracted to do a forensic audit of $2 bn of secret 2013-4 loans to three new state companies controlled by SISE. Kroll's summary was released by the PRG on 24 June and the full report was finally given to donors last week. The full report is significantly stronger than the summary.
Kroll says: "Credit Suisse, as a UK financial institution, has an obligation under the UK Money Laundering regulations to undertake enhanced due diligence where there is the prospect of Politically Exposed Persons ("PEPs") being a party to the financial transaction - in this instance the Mozambican Companies are recognised as state-owned companies and consequently those responsible officers i.e., Person A, should be regarded as PEPs. Further, Credit Suisse has an obligation under the UK Money Laundering regulations to establish the Ultimate Beneficial Owner(s) of the Mozambique Companies."
Kroll warns of the "risk" that "Credit Suisse has not undertaken adequate due diligence" and that loans may have been used "contrary to stated purpose".
Subsequently, Antonio Carlos do Rosario, a SISE senior official and CEO of MAM, ProIndicus and Ematum, confirmed that he is the Person A. Kroll notes that he personally refused to provide any of the due diligence documents.
Indeed, the full report makes clear the unwillingness of parts of the government to cooperate with the audit. Kroll asked for and did not receive management, operations and training plans. The companies only "provided limited financial data, including incomplete trial balances and bank statements, and incomplete supporting documentation."
In particular, "the Mozambique Companies, despite repeated requests, have not provided Kroll with any evidence that comprehensive due diligence was undertaken to assess the suitability of the Contractor(s) for the Mozambique Project." The "Contractor" is the Privinvest Group, which includes Privinvest Shipbuilding and Abu Dhabi Mar.
Kroll did analyse business plans and feasibility studies, which said that the three companies "were expected to generate combined operating revenues of $2.3 bn by December 2016." Instead, "negligible revenue has been generated". Kroll recommends "an independent review of the business plans and feasibility studies … undertaken by an appropriately qualified expert." And it says "there is a significant risk that the Mozambique Project will not become operational."
At least $713 million overcharge
Kroll admits that it could not undertake a full valuation of the assets supplied because documentation contains no details. A ProIndicus invoice for $611,986,800 was just one page. No documents were provided for MAM.
But it did undertake a price comparison "with the support of an industry expert" of assets and services provided to Ematum and ProIndicus and it found the price charged was $713 mn more than the prices estimated by the independent expert.
In addition, do Rosario and the ministries of defence and finance gave inconsistent explanations of the use of $500 mn from the Ematum loan and gave unsatisfactory documentation, so "at least $500 mn of expenditure of a potentially sensitive nature remained unaudited and unexplained".
The actual loan proceeds, after commissions, of $1.8 bn were directly transferred "to the Contractors bank account in the United Arab Emirates, in advance of the corresponding assets and services being delivered." This means the Mozambican companies "have no control or leverage over the delivery of the supply contracts" and the contractor and the Mozambique companies can "enter into a closed arrangement enabling funds to be transferred without transparency."
Kroll also finds a series of unexplained financial transfers. It says Ematum had an account at Moza Banco which was not recorded in the company's accounts, and that SISE transferred $53 mn into the account in 2014 which was used to make interest payments to Credit Suisse. In turn, Kroll says that the Ministry of Finance made significant transfers to SISE, which "indicates that the Ministry of Finance has funded several principal and interest payments for the Mozambique Companies".
There are also unexplained payments to two individuals, Quilua Holdings, and SEN Consultoria. And $31.4 mn in fees paid for restructuring the Ematum debt do not appear to represent value for money.
Finally, Kroll calls for a review of "all existing contracts" with the Contractor (Privinvest Group) and with Palomar, a Privinvest company, because their involvement in structuring the project and arranging the loans means there is a risk that the contracts are "disadvantageous" to Mozambique.