“Potential for money laundering” spotted in CDC Gov’t measure
-Significant funds unaccounted for, forensic auditors recommend more investigation
By Frank Sainworla, Jr. fsainworla@yahoo.comf
The report released on Thursday by the independent forensic investigation team funded by the United States government says discrepancies have been discovered in the CDC government carried out the US$25 mopping up exercise on the money market.
“Kroll was not provided with documentation setting out how the USD MopUp Exercise was structured or implemented, or which organizations were targeted by the CBL,” the report says.
President George Manneh Weah in In July 2018, announced that USD 25.0 million would be “infused” into the Liberian economy to “mop-up” excess LRD banknotes in an attempt to address the depreciation of the Liberian Dollar.
At the time the Liberian leader said the infusion of US$25 million into the Liberian economy would help stabilize the exchange rate in the volatile money market.
But when President Weah announced, a number of pundits raised several questions to how will infusion of the millions of US dollars be done to ensure that the bulk of this money doesn’t end up outside of the country’s banking system?
How far will this measure go in reducing the high exchange rate and then translating into the drop in the hike in prices of essential commodities?
To prove the pundits right, the Kroll and Associates Scooping report says “the approach taken by the CBL to implement the USD Mop-Up Exercise, whereby small teams of bank personnel directly purchased LRD banknotes from local businesses and foreign exchange bureaus in exchange for USD notes, created an enhanced level of risk.”
The report spots the “potential misappropriation of banknotes; potential opportunities for money laundering and potential execution of transactions with illegal businesses. Consequently, there is a risk that significant funds were unaccounted for by the CBL, and Kroll therefore recommends that this matter merits further understanding.”
The report also says “CBL advised Kroll that the USD Mop-Up Exercise involved CBL Banking Department representatives undertaking the physical purchase of LRD banknotes from local businesses and foreign exchange bureaus, with the seller being reimbursed for the value of purchased LRD banknotes with new USD banknotes.”
However, the report says “Kroll was not provided with documentation setting out how the USD MopUp Exercise was structured or implemented, or which organizations were targeted by the CBL.”
This latest forensic audit report of the implementation of the US$25 million mop up exercise comes as no surprise to many Liberians, as Finance Minister Samuel Tweah explanation months ago that the first US$15 million of the amount were dished out to money changers in various communities such as West Point and New Kru Town. No concrete records were provided to the public as to who actually received the millions, which were not channeled through the banking system.
Finance Minister Tweah’s US$15 million randomly dished out later turned to over US$17 million in President Weah’s State of the Nation Address in late January this year.
How Foreign exchange intervention was done in the past
Back in July 2018, President Weah said the US$25 million mop up exercise plus other “measures will include, but not be limited to:
- An immediate infusion by the Central Bank of US$25 million into the economy to mop up the excess liquidity of Liberian dollars.
- A mandate to the Central Bank to provide more effective supervision and regulation of money changers or foreign exchange bureaus.
- A mandate to the Central Bank to provide more robust oversight of banks under its supervision.
- Conduct a comprehensive review of regulations on the hoarding of both Liberian dollars and U.S. dollars outside the banking system, and provide incentives and safeguards to encourage the utilization of the banking system, including financial instruments,” the President told the nation.
Yet in the Tweah-led mop up exercise that was not seen. The past problem the CDC government said it had set out to solve had little impact. In fact, none of the US$25 million was channeled through the banking system.
In the last Central Bank foreign exchange auction, only US$750,000 of over US$5m CBL June 2018 CBL FX auction went to commercial banks.
The latest independent forensic audit report on the implementation of the US$25 million FX mop up exercise was shrouded in multiple discrepancies.
“Kroll has reviewed documentation that showed an order was placed on July 10, 2018 to draw down funds totaling USD 20.0 million from the CBL’s Federal Reserve Bank of New York account to fund the USD Mop-Up Exercise. The date of the order (July 10, 2018) was made several days in advance of the Board of Governors decree (July 16, 2018). It is not clear if the draw down was made earlier than approval was provided for the USD Mop-Up Exercise.
“Kroll’s analysis of information provided by the CBL identified that LRD banknotes totaling LRD 2.3 billion (USD 15.0 million) were purchased for the USD Mop-Up Exercise between July 2018 and October 2018.”
This Public Report does not constitute a recommendation, endorsement, opinion or approval of any kind with respect to any transaction, decision or evaluation, and should not be relied upon or disclosed as such under any circumstances.
Limitations to Kroll’s work:
“Certain information provided by the CBL in respect of the movements of new banknotes into and out of the CBL vaults was not immediately available, contained inaccuracies and was incomplete.
In order to fully complete the agreed scope of work, Kroll used the four-week period following the initial two-week scoping phase to explore certain issues in further detail to obtain clarity on the key findings set out in this report.”
Key findings identified by Kroll:
“Kroll has identified discrepancies at every stage of the process for controlling the movement of banknotes into and out of the CBL during the Independent Review, including: the Legislature approval for printing new banknotes; the procurement and contracting of Crane AB; the shipping of new banknotes to Liberia; the delivery of new banknotes to the CBL, and; the movement of funds within and out of the CBL’s vaults.”