BoT slaps Sh4bn fines on banks in two months

Dar es Salaam. The Bank of Tanzania (BoT) has slapped fines totalling Sh3.88 billion on seven banks for various regulatory offences in the last two months.

In July and August Diamond Trust Bank (DTB) Tanzania Limited and the National Bank of Commerce (NBC) were each fined Sh1 billion for failing to implement a directive to establish data centres in Tanzania.

In 2014 the BoT directed banks and financial institutions to set up primary or secondary data centres, and warned of hefty fines for non-compliance.

A few weeks ago, the BoT, which is the industry regulator, issued a new directive requiring all banks and financial institutions to establish primary data centres within three months, or face a Sh5 billion fine.

As the directive was sinking in, the central bank last week fined five banks a total of Sh1.88 billion over what it said were suspicious transactions.

In a statement dated September 19, the BoT said African Banking Corporation, Equity Bank, I&M Bank, UBL Bank and Habib Africa Bank had been sanctioned for filing suspicious transaction reports with the Financial Intelligence Unit (FIU).

“The Bank of Tanzania (BoT) has imposed monetary penalties on five banks for breach of regulations 17, 22 and 28 of the Anti-Money Laundering Regulations, 2012 for failure to conduct proper customer due diligence and filing suspicious transaction reports with the Financial Intelligence Unit (FIU),” the statement said.

The highest fine of Sh655 million has been imposed on I&M Bank, while Equity Bank has been ordered to pay Sh580 million. UBL, Habib and African Banking Corporation (which been rebranded BancABC) have been fined Sh325 million, Sh175 million and Sh145 million, respectively.

Although I&M Bank and Equity Bank are profit-making entities, the fines will make big holes in their profits.

During the second quarter of 2019, I&M Bank registered a net profit of Sh1.1 billion, down from Sh1.95 billion during the corresponding period in 2018. Its total assets stood at Sh511.466 billion as of June 2019.

Equity Bank, on the other hand, registered a net profit of Sh1.6 billion during the second quarter of the current calendar year. The bank’s total assets stood at Sh564.7 billion during the same period.

For UBL Bank and BancABC, the fines would be particularly painful.

During the second quarter of 2019, UBL Bank registered a loss of Sh327 million compared to the Sh421 million the bank lost during a similar period in 2018. The bank’s total assets were valued at Sh76.342 billion as of June 2019.

As for BancABC, which had Sh314 billion in total assets as of June 2019, the fine could not have come at a worse time after the lender registered a net loss of Sh835 million in the second quarter of 2019.

Apart from the penalties, the BoT said it has directed the five banks to implement four corrective measures within three months.

They include making a fresh review of their Know Your Customer (KYC) compliance statuses and ensure that proper documentation is in place.

They must also report suspicious transactions which were supposed to be communicated to the FIU.

The lenders must also make an assessment of adequacy of internal controls and take necessary measures to ensure that the controls are robust.

The banks’ employees who were involved in opening dubious accounts contrary to KYC requirements must be taken to task, the BoT directed.