Guilty As Charged Or A Miscarriage Of Justice?

GUILTY as charged or a miscarriage of justice could have been how some lawyers interpreted the Reserve Bank’s decision to effect the arrest of several bank employees and officials on allegations of violating the Reserve Bank Act.

Nine employees from NMB Bank, CFX Bank and POSB this week appeared before the courts on allegations of offloading trillions of dollars of the new money on the parallel market a day before the issuance of the higher currency denominations.

Management at the Zimbabwe Allied Banking Group (ZABG) were also accused of the same “crime”.

However, legal practitioners and economic analysts alike have questioned the central bank’s actions that were subsequently followed by the lifting of an earlier jointly imposed five year ban it had imposed on the CFX Bank executive and non-executive directors.

Gono had earlier publicly criticised the team for being unfit to run the bank only to retract the statement saying “they were not responsible for the day-to-day running of the bank”.

This, analysts said raised questions about the relevant regulations, which ostensibly sought to ensure good corporate governance at financial institutions. The bank’s executive directors and top management however remain banned for five years.

 
POSB withdrew $4 trillion from the Reserve Bank and is alleged to have diverted $50 billion onto the parallel market before the money became legal tender. NMB was given $2 trillion and is said to have channelled $20 billion onto the parallel market. ZABG was given $5 trillion and is alleged to have released $400 billion onto the parallel market.

CFX is said to have received a total of $900 billion and diverted $260 billion on the parallel market.

While what the banks did was not justified analysts said it was not a question of whether Gono could fire the board of a financial institution, rather it is whether the process has been followed in reaching that decision.

“It is normal for a financial services regulator, which RBZ is, to have powers to bar or remove undesirable persons from involvement in the financial sector if it considers that they are not fit and proper. Nevertheless, the exercise of the regulator’s powers must at all times meet the requirements of due process,” analyst Alex Magaisa said.

Magaisa said his understanding was that in such cases, the Reserve Bank gathers evidence and can invoke its “many” powers to get information from the accused persons and other sources.

Thereafter, it should give due notice of the allegations to the accused, affording him the right to be heard and to be defended by a lawyer of his choice. That, in a nutshell conforms to the requirements of due process.

“But as so often happens in Zimbabwe, someone can make a decision in the middle of the night whilst recovering from a nightmare. The accused is given no fair hearing at all. As it is, the governor’s decision is prone to challenge on the ground that it failed to adhere to the normal standards of natural justice.

“Whatever good intention he might have had is therefore defeated in the end because of a failure to do the most basic and simple things in enforcing the Reserve Bank’s powers,” said Magaisa.

Bank executives who spoke to the Independent on condition of anonymity said while what happened at the four financial institutions was unacceptable, the Reserve Bank was also guilty of the same crime.

“The most important tasks of any new government is to revamp the Reserve Bank and transform a culture of impunity that seems to be the hallmark of its regulatory enforcement activities,” said a commercial bank board member.

Bankers said Zimbabwe needs a strong regulator to curtail the admittedly unethical and immoral activities in the financial sector but a strong regulator was not necessarily an oppressive one that does not respect due process.

“It must be able to enforce the law in a fair and just manner, respecting the rights of individuals and corporate persons. The Reserve Bank does not lack powers. It has a lot of them. They seem to be just used irresponsibly most of the times,” the board member said.

Bankers said they looked forward to a day when there was leadership at the Reserve Bank whose modus operandi was not characterised by grandstanding.

“The efficient ones do their work and command the respect, not fear, of those whom they regulate. I am certain that day will come as there are many good men and women at the Reserve Bank of who with the right captain, can help steer the ship properly and more efficiently,” a banker said.

   
Market watchers said the Reserve Bank should have reported the case to the police for further investigations and hearing all the accused’s side of the story before making a public announcement that it had fired an entire board and management only to reinstate them the following day.

Said Magaisa: “My experience and understanding of enforcing financial regulations is that whenever a matter involves both a criminal and a regulatory offence the normal course is to liaise with the police authorities to determine the gravity of the offence and whether it is necessary to give priority to police investigations or to allow the regulator to pursue the regulatory offence.”

He said the rationale was that where the matter is sufficiently grave to require police investigation, and then the regulatory authority would work to ensure that its own regulatory process did not undermine the criminal matter.

“There is nothing however to stop the regulator from pursuing the regulatory offence, to the extent that in liaison with the police, pursuance of that matter does not undermine police investigations,” he said.
But was Gono justified? A corporate lawyer told the Independent that the justification of the governor’s actions could only be determined on the basis of information that was not at present fully available.

“He may well have sufficient evidence to justify his conduct in this matter but then again he may not and without the benefit of what is available, it would be preposterous to pass judgment on the merits of his actions,” the lawyer said. “Nevertheless, I find the manner in which the powers were exercised rather hasty and ill-considered, given that the requirements of due process do not appear to have been satisfied,” he added.

He questioned if the executives had been given a fair hearing.  “I would not be surprised if the executives launch legal action challenging the manner in which the governor’s decision was made.

There is a mechanism called judicial review, whereby the decision-making process of an administrative organ or public authority, such as the Reserve Bank, can be challenged in a court of law,” the lawyer said.

BY PAUL NYAKAZEYA

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