According to a report published by the Mozambican civil society coalition, the Budgetary Monitoring Forum, a Dutch appeals court has upheld a fine imposed by the Dutch central bank “De Nederlandsche Bank (DNB)” against the TMF group for failures in due diligence related to the scandal of Mozambique’s “hidden debts” (FMO).
The term “hidden debts” refers to three fraudulent, security-linked Mozambican companies, Proindicus, Ematum (Mozambique Tuna Company), and MAM, which received over two billion dollars in loans from the Swiss banks’ Credit Suisse and VTB of Russia in 2013 and 2014. (Mozambique Asset Management).
The negotiations leading up to the loans involved at least three corrupt officials from Credit Suisse, who have admitted to taking bribes, and officials of the Abu Dhabi based group Privinvest , notably Jean Boustani. Between them, they ensured that the Mozambican government of the day, led by Armando Guebuza, issued illegal loan guarantees, covering the entire two billion dollars.
The effect of the guarantees was that, if the companies defaulted (as they have done), then the Mozambican government would be held liable for repaying the loans. But the guarantees violated the budget laws of 2013 and 2014 and the Mozambican constitution. The loans and their guarantees have been declared unconstitutional by the Constitutional Council, Mozambique’s highest body in matters of constitutional law.
Privinvest, which became the sole contractor for the three fraudulent companies, sat at the heart of a network of corruption. According to US prosecutors investigating the case, Privinvest used at least 200 million dollars of the loan money for bribes and kickbacks.
Unlike the loans to Proindicus and MAM, which were clandestine, and only came to public knowledge in April 2016, the Ematum loan had to be public since it took the form of bonds issued on the European market. But for this to happen, Ematum needed European collaborators. It hired the TMF Group, which is a Dutch-based supplier of fiduciary services, to act as its agent.
Service providers such as TMF serve foreign business clients by, for example, offering them a Dutch business address. So in 2013, TMV registered a company calling itself “Moçambique EMATUM B.V.”
Even today, according to FMO, the Dutch commercial register shows that TMF acts as the sole general director of “EMATUM B.V.”.
This Dutch company was the vehicle used to issue the Ematum bonds. Using the illegal loan guarantees signed by Guebuza’s Finance Minister Manuel Chang, Ematum obtained 850 million dollars from Credit Suisse and VTB. The role of “EMATUM B.V.” was to issue the “notes of participation” (bonds), which were due to expire in just seven years, in 2020.
The stated purpose of the Ematum loan was to build up a tuna fishing fleet and for coastal protection. The fishing boats sold to Ematum by Privinvest at vastly inflated prices did put out to sea a couple of times but never sold enough fish to make a dent in the loan repayment.
As early as 2015 it was clear that Ematum was heading for bankruptcy and 2014 was the last year for which Ematum published a financial report.
The only way to continue the fraud was to restructure the debt, and this was done in April 2016 – just weeks before the whole house of cards came tumbling down with the exposure of the Proindicus and MAM loans, and public knowledge of the true scale of Mozambique’s foreign debt.
When the auditing company Kroll audited Ematum in 2017, it found that TMF Management B.V. was one of the companies paid for its role in restructuring the Ematum debt.
The DNB began investigating TMF’s role in the Ematum bonds in 2016. It found that TMF had committed “serious” violations of trust and fined it 594,000 euros (about 696,000 US dollars, at current exchange rates).
TMF took the case to appeal, arguing that DNB was not the appropriate body to impose fines arising from violations of banking prudential rules. But it admitted that the Mozambican dossier had not been adequately monitored. It also claimed it could not be held responsible for the use of the Ematum funds.
The fine was upheld, but reduced in value to the equivalent of 644,500 dollars.
The FMO is far from satisfied with this outcome and argues that TMF should also have faced criminal charges. The behaviour of TMF “as a facilitator of an international fraud” was not a matter of regulation, but “a criminal act which should have been dealt with in the system of criminal justice”, it said.
The FMO urged the Dutch authorities to ensure that the Public Prosecutor and not just DNB investigates TMF. It points out that, without facilitators, schemes such as the “hidden debts” could never have happened.
It called on TMF to make reparations for its role in the scandal, by returning to Mozambique any income it earned from the scheme and by compensating Mozambique for the damage caused.
