Continued from last week
The current state of play
Although there have been no offshore banking services in Ghana since 2011, the overall legal framework establishing the IFSC still exists. As a result, it would be easy to revive the IFSC. Since the inception of the new government9 in January 2017, there have been a series of institutional events, policy statements by government officials and new programmes/regulations which suggest that the (re) establishment of an IFSC is imminent.
The second most powerful person in Ghana, Vice President Dr. Mahamudu Bawumia, also head of government’s economic management team, who was a former Deputy Governor of the Central Bank (2006-2009), revealed plans to revive the establishment of the IFSC in a meeting with the Chartered Institute of Bankers. He declared “we have stated in 2018 we are reviving it [IFSC] and the law is still there. We’ll revive and implement that policy framework”.
The first official policy statement on paper by the government towards reviving the IFSC appeared in the 2018 Budget Statement to parliament by the Minister of Finance and Economic Planning in November 2017. Page 151 of the Budget Statement reads:
“Mr. Speaker, positioning Ghana as an international financial services centre is intended to make it the preferred headquarters for all international banks operating in the sub-region. Ghana is also becoming the hub for the financial technology and payment systems for the region. The Hub is intended to host the international private equity and venture capital firms to support entrepreneurship and access to long term capital by the private sector in the subregion”.
Interestingly, the current Minister of Finance and Economic Planning, Ken Ofori-Atta, is not new to the scheme to set up an IFSC. Ofori-Atta was the cofounder and former chairman of local investment banking Databank Group in Ghana from 1990 to 2012.12 Databank Financial Services13 was one of the institutions that pushed for Ghana to establish an offshore centre in 2006 during a meeting of the Ghana Investment Advisory Council which was headed by former President Kufour.
Ofori-Atta has personally used secrecy jurisdictions including for Databank Financial Services. His name was found among the Paradise Papers.14 Ofori-Atta Ken Nana Yaw is listed in the International Consortium of Investigative Journalist (ICIJ) offshore leaks database as a Co-director (2001-2012) and President (2001-2012) of Songhai Financial Holdings Limited, an entity registered in tax haven Bermuda.
Songhai Financial Holdings is a subsidiary of Databank Financial Services in Ghana.
The selection of the new governor for the Central Bank was telling. In 2017, Dr. Ernest Addison was appointed. He had provided general direction in the Central Bank’s 2008 research titled “Offshore Banking and the Prospects for the Ghanaian Economy”. Government’s interference in the selection of governors is not new, and the trend seems to be continuing with the new government under President Nana Akufo-Addo, although the bank insists it is independent. Addison, too, has indicated Ghana’s intention of setting up an IFSC. He remarked at an annual general meeting of the Ghana Association of Bankers in 2017 that “Ghana cannot have an international financial services centre with weak banks that have weak capital, thus, the issue of disclosure requirements expected of banks under the new governance regulations are very key within that international financial services framework”.
Despite the moves to position itself as an IFSC, Ofori-Atta expressed government’s commitment to implement the automatic exchange of financial accounts information under the common reporting standard in 2018. He notes in the 2018 Government Budget Statement that “Mr. Speaker, to improve transparency and deepen the fight against tax evasion, the Automatic Exchange of Financial Information Bill will be laid before Parliament.
The Automatic Exchange of Financial Account Information is the new standard for exchange of information through the use of the Common Reporting Standards. The Standards provide reporting and due diligence rules that are to be imposed on financial institutions to collect and report financial account information to the Competent Authorities in their jurisdictions for onward exchange with other jurisdictions”.
Most significantly, in 2016, Ghana amended its companies law to require registration of beneficial ownership, including name, address and date of birth (new Section 27 of the Companies Act 179).
Other measures the government has taken to regulate the financial sector include increasing the minimum capital requirement for operation of banks in the country from GHC 120 million to GHC400 million in September. The Central Bank justified the increase by saying this is “to further develop, strengthen, and modernize the financial sector to support the government’s economic vision and transformational agenda.” Furthermore, there have been moves to digitise Ghana’s economy by the current government.
Conclusion
It is puzzling that Ghana is pursuing an agenda of establishing itself as an IFSC considering that it woefully failed in its quest to become one a decade ago. Beyond the dangers of IFSCs, such as facilitating money laundering and other illicit financial flows, the ability of the Central Bank to effectively regulate the financial system is questionable. The country’s huge debts led to an IMF bailout programme three years ago (and due to be completed this year). Alongside rising unemployment and the depreciation of the local currency (the cedi), two local banks – the UT Bank and Capital Bank – were insolvent in 2017 and had their licences revoked by the Central Bank; this was done almost too late and could have had spill over effects on the financial system.
Furthermore, given the secretive nature of IFSCs and the inability of the government and lawmakers to pass the right to information bill – a bill which has been in and out of parliament for over a decade – one must rightly question the state of transparency and access to reliable and timely information in Ghana. Most telling, however, is that the Central Bank has to date not undertaken or made available a rigorous impact assessment to understand how the country and economy fared when BBGL was granted offshore banking licence. This calls into question the potential benefits of an IFSC that are being promoted by government, including increased employment and expansion of the entire financial system. – END
