President Emmerson Mnangagwa on Wednesday met with United States assistant secretary of State for African Affairs Mr Tibor Nagy where he begged the US to consider dropping the staggering US$385 Million fine imposed on the country’s top bank the CBZ in 2017.
The meetings took place on the sidelines of the 12th edition of the US-Africa Business Summit, to which Zimbabwe was invited following years of being snubbed under the previous regime.
Finance and Economic Development Minister Professor Mthuli Ncube, who took part in the meeting, said Zimbabwe — in addition to updating the US official on progress made through the ongoing reforms — also raised the issue of CBZ Bank’s punitive US$385 million fine imposed for ostensibly violating sanctions laws.
“Yes, we met with Tibor Nagy, who is the head for Africa in the US State Department, and we had a wonderful conversation,” he said.
“I think we are beginning to find common ground, step-by-step, so basically His Excellency (President Mnangagwa) was able to share with him, Mr Nagy, the progress that we are making on legislative reforms, the progress that we are making on economic reforms through the TSP (Transitional Stabilisation Programme).
“We were also able to thank him and the United States for supporting Zimbabwe directly, giving us financial support regarding the Cyclone, but also the World Bank and the African Development Bank (AfDB) encouragement to support Zimbabwe at that level.
“So, we really had a wonderful discussion, but also His Excellency was able to convey to American companies that; ‘Zimbabwe is open for them, we are open for business’.”
Prof Ncube said the Government wanted to move to a position where it could engage freely with the US.
“We recognise the way General Electric is trying to play in the economy, trying to get involved in various infrastructure projects,” he said.
“We also raised the issue of CBZ Bank; as you know CBZ was fined US$350 million, it is our largest bank and perhaps we need some assistance if they have to pay that amount of money; it is a lot of money.
“I think there was sympathy from the other side of the table that we were really able to make progress on all these issues. Of course the biggest elephant in the room is the issue of sanctions, the issue Zidera.
“Again, we were able to explain that a lot of progress has been made in terms of restoring those issues that have been troubling our colleagues in the United States. And we want to move to a point that we are able to interact freely and engage freely with the United States. I think this meeting is a milestone in terms of re-engagement with the United States.”
Zimbabwe’s biggest bank by asset base, CBZ Bank, was slapped with a staggering US$3,8 billion fine by the United States Treasury’s Office of Foreign Assets Control (Ofac) for thousands of financial transactions done on behalf of ZB Bank then under economic sanctions imposed by the world’s largest economy.
However, after mitigation and negotiations, the penalty was reduced to US$385 million.
In a pre-penalty notice to CBZ through its American lawyers Ferrari Law Partners, Ofac said CBZ had perpetrated 15 127 violations of US sanctions on Zimbabwe.
“Accordingly, the base penalty for the apparent violations equals the applicable schedule amount for each apparent violation, capped at US$250 000 per apparent violation, which in this case totals US$3 856 505 460,” Ofac deputy director Andrea Gacki wrote in March. The case has been ongoing since then.
Ofac said it had arrived at the figure after CBZ failed to make voluntary self-disclosure of the violations.
After some CBZ mitigation, Ofac reduced the amount to US$385 million.
“Ofac has determined that these factors taken together support a reduction of 90% (US$385 650 546) from the base penalty amount,” the Ofac letter said.
The sensational claimed the scalp of CBZ group chief executive Never Nyemudzo. Although he had said he voluntarily decided to take a rest, the Ofac case was the root cause of the problem, not insider loans, shareholder displeasure or alleged fraudulent activities.
CBZ is the largest bank in the country by deposits and assets. According to an internal presentation which processes US$50 billion in transactions in a year, accounts for 35% of the value of national transactions. The bank, which boasts of 408 000 active accounts, has assets worth US$2,2 billion, representing 14% of gross domestic product.
Outside the central bank, CBZ is government’s main banker with most state-owned enterprises and the bulk of civil servants transacting through the institution.
CBZ offers a wide range of financial services solutions to personal and corporate customers, including current accounts, term deposits, corporate banking, investment banking, treasury services and trade finance.
CBZ majority shareholders include CBZ Holdings Limited 24,59%, Government of Zimbabwe 16,01%, Libyan Foreign Bank 14,06% and Nssa 11,71%.
The US Treasury has airways said pursuant to guidelines, the fine could either be increased or reduced.
CBZ, according to the Ofac letter, took remedial action by closing the internal account used to conduct transactions on behalf of ZB customers. Ofac also considered other mitigating factors as the bank has no prior sanctions history, including receipt of penalty notice or finding of violation in the five years preceding the date of the earliest transaction giving rise to the apparent violations.
CBZ’s lawyers claimed that most of the transactions in question between ZB and CBZ were “in-country”, arguing these may not be subjected to Ofac compliance requirements. The lawyers also argued that the transactions were not carried out by persons or entities facing sanctions.
Zimbabwe has lost more than 100 correspondent banking relationships, making movement of funds and financial intermediation offshore even more difficult.
Mr Nagy was coy to discuss details of the meeting.
“We discussed a full range of issues between our countries, but you can ask His Excellency the Ambassador over there,” he said.