The public is fed up with the closed culture, hypocrisy and apparent tolerance of wrongdoing that prevail in the banking sector. The Commission of Inquiry should be welcomed
It would be difficult to suss out the true intent of the Leader of the Opposition when he invited the Prime Minister to set up a Select Committee of the House to inquire into the way the cases of Teeren Appasamy and Robert Lesage have been “handled” by authorities concerned. Reacting promptly, the Prime Minister insinuated, with his usual political flair, that the opposition must be holding a brief on behalf of the MCB. He then informed the House that he will set up a full-fledged Commission of Inquiry presided by a person with the status of Judge with comprehensive powers to uncover the whole truth about the biggest financial scandal this country has ever known. The contention of the Leader of Opposition that the MCB has been ‘blanchie”, is grounded in the recent decision of the Commercial Division of the Supreme Court. In that case, the MCB, the Plaintiff, had claimed money from a number of defendants, in particular Mr Tereen Appasamy and Robert Lesage, which it asserts has been siphoned off or misappropriated via complex schemes by its former employee Robert Lesage. This was the only issue before the Commercial Court. The court found in favour of the Bank and ordered that Messrs Teeren Appasamy and Robert Lesage were liable. There was no question of the guilt of one party or the innocence of another. It was after all a civil case and the issue before the court was to determine the question of liability which it did, by ordering two of the defendants to refund the money misappropriated. It was also not the business of the Commercial Court to decide whether a crime has been committed or not. Incidentally, there is no finding of guilt in a civil case. Messrs Appasamy and Lesage are, as a result of the judgment, now liable to pay the amount claimed.
The question which arises however is not who stole the money or what amount was stolen but: how was it possible for an employee of a bank with or without the complicity of a client to embezzle almost a billion rupees when banks must, by virtue of the provisions of the Banking Act and the Financial Intelligence and Anti-Money Laundering Act, have in place internal control mechanisms to prevent such abuses? The question is important for many reasons.
First, because of the nature of banking as a business. Money is always on demand at short notice and a bank is always exposed to a run. All banks are interdependent and the problem of one bank has immediate repercussions on other banks in the sector. The collapse of the largest bank is likely to contaminate the whole banking sector and as a result may lead to the collapse of the whole financial sector. On that score we agree with the Leader of the Opposition that the matter was indeed sensitive and delicate and had to be treated, at the time it surfaced, with utmost care and a caution. His reluctance to go along with a Commission of Inquiry is nevertheless difficult to understand. The emphasis should not be on the form that the enquiring body (whether we call it a Select Committee or a Commission of Inquiry) but rather on the terms of reference of that future forum.
Second, the banking sector worldwide has just emerged from a financial crisis. If we were lucky in Mauritius to have escaped the consequences of the crisis we should remain vigilant and take immediate steps in line with the new Basel guidelines to consolidate our sector and more importantly to prevent the kind of abuses we have seen. The banking sector had cut a poor figure when the Sale by Levy scandal came to light. We recall that government had to intervene by enacting the Borrowers Protection Act to ensure fairness to borrowers.
Third, the role of the Bank of Mauritius has to be assessed anew following the MCB scandal.
Fourth, it is high time that the question of how was it possible to operate a bank within a bank and the role of management in the process must be answered.
The Executive Summary of the NTan Report is, fortunately for us, in the public domain. The pertinent investigation carried out by the consultant offers an important platform to a future Commission. Referring to a series of transfers carried out by the MCB allegedly without the knowledge of its clients, the consultant found that “the transfers took place because senior management staff at the MCB overrode or allowed the overriding of its existing internal controls. Calls by various parties, including BOM and MCB’s external auditors, for specific improvements to be made to enhance internal controls went substantially unheeded. (…) Possibly relying on the respected position held by MCB in Mauritius and the pedigree of the Board, MCB has taken certain liberties with the BOM.”
Soon after the scandal the Governor of the Bank in a speech on 28 November 2003 said: “The BOM will ensure that the steps taken by the MCB to fully revamp its internal controls and procedures are carried through to the finish and that internal controls are appropriately exercised and procedures are strictly followed.” The Governor was right. How much has changed remains to be seen. In the meantime, the public is fed up with the closed culture, hypocrisy and apparent tolerance of wrongdoing that prevail in the banking sector. The Commission should be welcomed.
* Published in print edition on 9 July 2010
65 years ago Mauritius Times was founded with a resolve to fight for justice and fairness and the advancement of the public good. It has never deviated from this principle no matter how daunting the challenges and how costly the price it has had to pay at different times of our history.
With print journalism struggling to keep afloat due to falling advertising revenues and the wide availability of free sources of information, it is crucially important for the Mauritius Times to survive and prosper. We can only continue doing it with the support of our readers.
The best way you can support our efforts is to take a subscription or by making a recurring donation through a Standing Order to our non-profit Foundation.