Risk & Compliance

Standard Bank to Pay $32M in Bribery Case

In a Tanzania government bond deal, Standard failed to disclose a $6 million payment to a firm with government ties.
Matthew HellerDecember 1, 2015

ICBC Standard Bank Plc has agreed to pay nearly $37 million to settle U.S. and U.K. charges relating to a bribery scandal over a $600-million Tanzania government-bond deal.

Under a first-of-its-kind deferred prosecution agreement with the U.K.’s Serious Fraud Office (SFO), the bank admitted it failed to prevent its Tanzanian affiliate from paying $6 million of the bond issue proceeds to a Tanzanian firm in March 2013. One of the directors of the Enterprise Growth Markets Advisors (EGMA) firm was a Tanzanian government official.

Standard Bank will pay $32.6 million to resolve the U.K. investigation and another $4.2 million to settle related U.S. charges that it failed to disclose the EGMA payment to investors. The U.S. Securities and Exchange Commission said U.S. bribery laws did not apply to the bank’s alleged misconduct.

Drive Business Strategy and Growth

Drive Business Strategy and Growth

Learn how NetSuite Financial Management allows you to quickly and easily model what-if scenarios and generate reports.

“Standard failed to disclose EGMA’s involvement in the bond offering to investors despite red flags suggesting some of the proceeds of the offering were going to EGMA for the purpose of influencing the Tanzanian government’s selection of bankers for the transaction,” Gerald W. Hodgkins, associate director of the SEC’s Division of Enforcement, said in a news release.

The SFO, which alleged violations of the U.K.’s Bribery Act, said the EGMA payment was intended to induce Tanzanian government officials to show favor to Standard Bank’s proposal for the bond deal.

According to the SEC, Standard and its Stanbic Bank Tanzania affiliate began in 2011 to propose a deal to Tanzania’s Ministry of Finance. As part of a September 2012 proposal, they allegedly agreed to a total fee of 2.4% of the proceeds, with Stanbic paying 1% (or $6 million) to the “local partner.”

“Standard was negligent in not taking any steps to understand what role EGMA would be playing in the transaction in return for its $6 million fee,” the SEC said in an administrative order disclosing the settlement.

The SEC also alleged that a document describing the offering to investors failed to disclose the involvement of EGMA, its ties to the Tanzanian government, and its $6 million fee.