US lifts heavy US$385m sanctions penalty against CBZ

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Zimbabwe’s largest bank says the U.S Treasury Department has cleared it of having to pay a US$385 million penalty for processing transactions on behalf of a local lender that was under American sanctions.

The Treasury’s Office of Foreign Assets Control reviewed more than 15,000 transactions carried out by CBZ Holdings for ZB Bank between 2009 and 2014. Following the review, OFAC said in a letter dated August 24 that CBZ won’t face a penalty or sanctions.

“This removes a cloud over CBZ, the country and gives comfort to international partners,” bank Chairman Marc Holtzman said on Sunday.

Since his appointment last September, Holtzman, an American and 30-year banking veteran who has worked at Barclays Plc and ABN Amro Bank NV, has assembled a new management team and hired law firm Dentons to deal with the OFAC case. With that issue over, CBZ is free to develop its international business.

“As a result of the OFAC issues, CBZ has not had any correspondent relationships with any lenders in the western world,” Holtzman said. “Management now will begin to re-engage with them.”

Following the appointment of Holtzman, CBZ also appointed three other Americans to the board; New York lawyer Rebecca Gaskin Gain, San Francisco asset manager Louis Gerken, and Ted Galante, an American businessman who has been invested in Zimbabwe for years.

The government has a 21% direct shareholding in the bank. Nominee company Akribos holds the majority 30.76% while the Libyan Foreign Bank owns 18.51% and NSSA has 15.7%.

The fine, if it had been effected, would have been damaging to CBZ. At the official exchange rate, the US fine was almost double the value of CBZ’s assets and also its market capitalisation.

Sanctions regime

Under sanctions first imposed in 2002, and renewed annually since then, the US restricts the movement of money owned by Zimbabwean state firms and individuals on its sanctions list.

ZB Bank was removed from sanctions in 2016, after being listed in 2008.

In April 2019, Standard Chartered Bank plc reported it was to pay US$18 million in fines to the US government for violating American sanctions on Zimbabwe by handling transactions for state-owned firms and sanctioned individuals.

The bank was fined for allowing 1,795 transactions worth close to US$77million.

Earlier in 2016, to avoid offending the US treasury, Standard Chartered ordered the state-owned IDC to close its accounts with the bank. Standard Chartered’s fears were not unfounded.

Barclays plc had paid a US$2.5 million settlement to the US Treasury after processing 159 transactions worth US$3.4 million between 2008 and 2013. The transactions were mostly for its client IDC and its subsidiaries.

OFAC regulations are partly why many international banks have cut off Zimbabwe.

According to RBZ data, Zimbabwe has over the past decade lost 102 correspondent banking relationships (CBRs), the links that make it possible for a customer to make international payments.