The aftermath of the collapse of the BAI (BA Investment) Group in 2015, the closure of the Bramer Bank and the issue of repayment of the people who have been lured to invest in the schemes such as Super Cash Back Gold is far from over. Mr Basant Roi, Governor of the Bank of Mauritius (BOM) had commissioned a report on the BAI Group from nTan Corporate Advisory Pte Ltd for a sum of Rs 100 million. He had described the value of the report, published in January 2016, as “inestimable” and made a redacted version of the report available to the public. The report has been endorsed by the Bank of Mauritius and the government.
Schedule 1 of the report made provision for any revision thereafter in light of additional information. Reportedly, the final report has been submitted in August 2016, and if there would have been material changes, they would have been made public, but so far, nothing. To prevent recurrence of such a calamity, in his speech of 29 July 2016 at the IMF’s Africa Training Institute at Ébène, the Governor of BOM has spelt out his strategy: additional regulations and rules, including “consolidated supervision” He added that, ‘‘…Those who fail to learn from history are doomed to repeat it.” This could be a self-fulfilling prophecy because of Bad Accountability and Integrity (BAI) syndrome! A (non-exhaustive) summary of the findings of the nTan Report is given in the table below. One thing comes out clear from it: the catastrophe could have been averted! (...)
Adding more rules, regulations and layers of even more ineffective bureaucracy without looking at the root causes is a classical reaction to problems. There are already too many unregulated regulators. The existing laws are enough, suffice that we have people capable of acting with integrity and are held accountable for their actions or inactions. Section 43 of the nTan Report: “...round tripping transactions of 3.6 billion during a single day should reasonably have been de- tected…” This is not the first time that a money transfer of such a scale went undetected. The same thing happened in the NPF-MCB scandal of the year 2003. There is a pattern.
Section 81 of the nTan Report reveals another pat- tern. The internal and external auditors did not raise any issue over the fact that the evaluation of the Apollo Bramwell hospital at Rs 2.5 billion was benchmarked on the value of hotels instead of using the proper methodology to evaluate a health care business. The final selling price of the Apollo Bramwell “hotel” has to be contrasted with price of Rs 2.2 billion obtained when the sprawling 218 rooms Indian Resorts hotel of the Appavou Group was sold.
Rotation of external auditors, a measure proposed by the first Deputy Governor of the BOM, is not a panacea, due to professional in-breeding among the accountancy firms. Some faces will change but the patterns will continue…Many factors contribute to such environment: greed, megalomania, strategic mistakes, cowardice and political interferences… These will never disappear. That is why we need strong institutions headed by individuals of highest integrity standards to provide the necessary safeguards and to enforce the fundamental principles such as Independence, Integrity, Objectivity, Professional Competence and Due Care.
The IESBA Handbook governs Mauritius Institute of Professional Accountants’ (MIPA) Code of Ethics. Section 100 of the Handbook highlights the fact that a distinguishing mark of the accountancy profession is its acceptance of the responsibility to act in the public interest. “Therefore a professional accountant’s responsibility is not exclusively to satisfy the needs of an individual client or employer.” Section 100.10 of the Handbook is clear about what a professional accountant should do in case of a breach of any provision of the Code of Ethics: “The accountant shall report the breach, for example, to those who may have been affected by the breach, a member body, relevant regulator or oversight authority”! The Red Flag Indicators for Reporting Entities of the Financial Intelligence Unit (FIU) mentions first: “High investment returns compared to market rate of returns with little or no risk”.
Section 14(1) of the Financial Intelligence and Anti Money Laundering Act is also clear about the responsibilities and offenses. And shouldn’t the FIU have more of a deterrent role instead of doing postmortems? Several armies of licensed accountants were involved in the audits, accounting and financial management of the targeted organizations. It is sad and horrific that no one noticed anything along the chains of commands and did nothing to raise an alarm, even anonymously! Look at the outcome of our Education, Values & Human Resources Development programs...
“The BAI case is a crying lesson to be learnt where deceptive practices enabled the group to mask the huge losses… since December 2010…In furtherance of a more effective and efficient oversight, the Bank of Mauritius holds trilateral meetings with the banks and their external auditors on an annual basis after the publication of the audited financial statements to review the financial results….” – excerpt of the speech by the First Deputy Governor, Mr Y. Googoolye at the Forum of Accountants organised by the MIPA on the 11th August 2016. If only there had really been an effective oversight and reviews… In spite of the powers invested by the Banking Act 2004, the Bank of Mauritius did not act in time.
Instead of adding layers of bureaucracy, the Governor of BOM should end the overprotection and not delay accountability at the BOM any further. He should make accountability at the BOM re-soundingly transparent for the stakeholders, the public being the principal. Being fully aware of the nTan Report findings and endorsing them but not taking any action, chairpersons and board/council members of institutions/regulatory bodies could be committing at the least the offense of dishonesty (ref: Section 47 of the Banking Act 2004 & Section 8 of Financial Reporting Act).
Sending a few persons to premature retirement is at most a disgraceful reward which reinforces the BAI syndrome and creates fear in people who wish they could speak up feely and exercise their professionalism safely! And if the accountants and businessmen ever had to report something, who would they trust? There is no trust because there is no accountability, only misdirected over-protection. Until and unless accountability is imposed, integrity will wither. Leadership in this domain is lacking.
In Part 2 we will further investigate the root causes of the BAI Syndrome. (...) But what is even more dangerous and pernicious is that apart from such high-profile cases, deceptive practices may be happening at this very moment in other businesses!
In the midst of the lack of leadership and systemic institutional failures, we need a platform for whistle blowers where people could raise the alarms on issues of national/ public interests resulting from professional malpractices, violations of professional Code of Ethics and the laws, not only in the field of accountancy, but in other fields also. The platform is under construction. Interested individuals, NGOs and even institutions are invited to join in the effort to heal the country.
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