21 May 2018

Nigeria: Court Slams CBN Officials Over Forensic Audit

Two top executives of the Central Bank of Nigeria (CBN) have been ordered by a Federal High Court in Abuja not to carry out their supervisory functions in a forensic audit involving a microfinance bank, over their alleged role in sidelining an executive order from the governor. They were alleged to have frustrated the implementation of a forensic audit which was declared by the governor after a petition by the owners of Hasal Microfinance Bank Limited.

Sequel to a petition made to the CBN by the directors of Hasal Microfinance Bank Limited, the CBN governor had detailed the then Deputy Governor, Supervision, Dr Okwu J Nnanna and one Emmanuel Zakari to supervise an audit in the bank so as to ascertain the nature of the alleged fraudulent practices in the bank.

Having failed to carry out the CBN directive, a board member and majority shareholder petitioned the court to get an order of the court to implement the CBN directive which was sidelined for many months.

Delivering an order on the application, Justice Binta Murtala Nyako, after upholding almost all the reliefs made by the plaintiff in their affidavit to the court, ruled: "that an order is made directing the 2nd defendant (Okwu J.Nnanna) and 3rddefendants, Mr Emmanuel Zakari, not to interfere directly or indirectly, participate or in any manner supervise the audit of the 4th defendant, Hasal Microfinance Bank Limited."

This order became necessary based on the alleged roles of the two CBN officials and the estranged chief executive of the bank whom the petitioners accused of multiple financial frauds and conspiracy through which illegal swaps and forgeries were believed to have been perpetrated by the bank's management.

The CBN governor had in December 2016 and February 2017, written a letter to the board of Hasal Microfinance conveying an approval pursuant to Section 33(1)(e)(i) of Banks and Other Financial Institutions Act (BOFIA) for the conduct of forensic audit of the entire books of the bank, an order which the two top official of the CBN were alleged to have delayed, frustrated, thwarted and undermined the forensic audit approved by the governor of the CBN.

The court upheld all the 17 applications made by the directors of Hasal and went further to indicate that the CBN has a duty to properly regulate, ensure best practices and to identify through careful and transparent audit, any form of corruption malfeasance of any nature in the management of Hasal Microfinance Bank Limited and any delay, refusal or failure to quickly, diligently and transparently carry out an audit approved pursuant to the relevant sections of the BOFIA for the conduct of a forensic audit of the entire books of the microfinance bank.

However, shareholders of the bank are not amused as the CBN which ordered the forensic audit and whose letters, orders and directives the court upheld the petitioners applications, had gone to court to challenge the position of court along with the estranged management of the microfinance bank.


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