Finance Bank, the institution owned by the controversial Indian multimillionaire Rajan Mahtani, was stripped of its banking license in neighbouring Malawi almost ten years ago in 2005. The reasons given at the time by the Reserve Bank of Malawi were non-specific claims of unlawful activity by the bank, however now Zambia Reports has obtained a dossier of more than 600 pages including details of alleged money laundering activities and alleged use of ghost accounts by Mahtani that led to his ban by the Malawian government.
Among other materials, the Malawi dossier obtained by Zambia Reports included copy of a forensic audit of Finance Bank Malawi by the respected accounting firm KPMG. The auditors discovered highly suspicious foreign exchange transactions that pointed toward money laundering, including 627 incoming transactions and 964 outgoing transactions posted at exactly the same amount of $9,090.91 – which is just barely below the mandated $10,000 reporting threshold set by the Federal Reserve Bank of the United States. KPMG also found that Mahtani’s bank recorded 3,196 accounts which were opened and closed within the same business day, and 4,164 accounts which were opened and closed within a 30-day time period. The auditors further noted 44,054 instances of the transactions occurring on the same days of matching values, with a high number of the foreign exchange transactions being directed toward a group of banks owned by the Pakistan-headquartered Habib Bank.
The revelations contained in the Malawi dossier indicate that Rajan Mahtani, as an individual who was banned from banking by a sovereign government over suspicions of money laundering, may be operating Finance Bank in Zambia in violation of BFSA provisions. In Zambia, it’s illegal for someone who has been banned and stripped of their license in another country to operate a bank. Specifically, under Article 31 of the BFSA relating to Qualifications of Directors and Senior Officers, it is illegal for a bank in Zambia to have either a director or senior officer who:
(a) is not a fit and proper person to hold the relevant office in relation to integrity and professional expertise;
(b) is not above the age of twenty-one years;
(c) is an undischarged bankrupt;
(d) has been convicted of a felony or any offense involving dishonesty;
(e) has been been declared or otherwise adjudged in any official proceedings to be mentally incompetent to manage one’s own affairs;
(f) is under suspension or has been removed from office under this Act; or
(g) has been a director, chief executive officer, chief financial officer or manager of a company which has been adjudged insolvent, entertered into a composition with creditors, gone into liquidation, declared bankrupt or has entered into any other arrangement with creditors or taken any other action with similar effect in Zambia or elsewhere unless that person shows that the person was not responsible for the insolvency, liquidation, composition with creditors, bankruptcy, other arrangement with creditors or other reaction with similar effect in Zambia.
The comprehensive Malawi dossier further confirms claims made about Mahtani’s bank in U.S. diplomatic cables released from the Lilongwe Embassy by Wikileaks, which stated: “FBM is widely thought to have been flouting banking regulations for years, mainly for moving money out of the personally using the bank for expatriating money. (In a recent conversation, the director of the Anti-Corruption Bureau (ACB) professed ignorance on this point.) Several years ago, Reserve Bank of Malawi shared information with post pertaining to falsified documents used by FBM to justify international transactions. Recently, one senior banking official told us that FBM had used counterfeit stamps from his bank on a number of documents.”
As the Malawian government has spent the past 9 years fighting in court to recover costs from the voluntary liquidation, Mahtani has as recently as March 2014 promised to reopen Finance Bank Malawi – however this has yet to occur.
Finance Bank, which claims a 40% strategic shareholding by Credit Suisse (though there are questions surrounding the nature of this stake), faced a suspension of its shareholder interests by the previous presidential administration in 2011, however Mahtani regained control of the bank with the election of President Michael Sata.
In the coming weeks as our investigative team digs deeper into the Finance Bank saga, full documents from the 600-page dossier will be released to the public for full transparency.