OH NAZIR OH NAZIR, questions for the AOB

I asked around (two big 4 firms) and was told that there is no requirement for an AMLA review when undertaking an external audit. Ok if thats not a requirement, then its not a requirement. However there is a requirement that the Statement of Risk Management and Internal Controls need to be reviewed by the external auditor and a private report be issued.

Now bearing in mind that AMLA is a huge risk area, could the external auditors please clarify whether they had reviewed the compliance mechanism in CIMB and paid special attention to the accounts of depositors that were related to public and politically connected persons. Seems that there could be multiple failures, both internal and external.

Thinking aloud I am wondering whether AOB will be looking at the external auditors and the standards that it adopts since they were also the auditors for a large plc that lost lots of money in qatar, that not long ago their client in the transport business said there were misaproprations in their procurement process (taking place over a four year period) and now this. Surely AOB this cannot be mere coincidences, pure bad luck!

Oh I forget they had an Executive Director seconded to the AOB that may have created a process that results in every time that firm's name appears the system denies all knowledge!

OH NAZIR OH NAZIR, the saga continues!

Since the public announcement and the comment by the borrower and squash buddy that it was a "class act"the saga continues!

I recently heard the extracts from the Malaysia Kini video, so here are a few questions that maybe the good DS (Dato Seri) can answer,

1. "Since it came to public domain and is of concern to CIMB stakeholders", so if it was not leaked by the american papers, it would have been silence and business as usual, I suppose so since this happened three years ago.

2. Since you alluded to the internal compliance unit, the fact is that  all banks are required to look at AMLA closely, could you please provide a your answer as to whether the bank's internal compliance unit reviewed your accounts and if so did they raise this. If not would this not be a failure on the systems of compliance within the organisation, would you be reviewing the system and would the head of compliance be removed for shoddy work.

3. As the Group CEO and an experienced officer of the bank (and well aware that larger financial institutions like HSBC and Standard Chartered have been levied fines for such transactions) did you not think that what you were doing was wrong, if you say that it was a mistake etc, then I believe that makes you not a fit and proper person to be running the bank. What if someone else within your organisation had done it, I am sure you would not have hesitated to report them to the authorities and had terminated them.

Finally I noticed the article in the Edge, everyone has such nice things to say, is it a PR campaign? I am thinking out here and wondering why the need for this. Anyway you have a good week ahead.

OH NAZIR, OH NAZIR

There was an excited voice that asked me, did you hear what Nazir Razak("NR") did? I said no, and was promptly told that the gentleman ("NR") had taken an immediate leave of absence to ensure an independent inquiry as to whether he had done anything wrong in facilitating payments through his account. As the afternoon wore on, I heard that EY (formerly know as Ernst &Young, one of the mega big global professional services firm) had been engaged to undertake this "INDEPENDENT" review!

Now before I proceed to ridicule this perception of an independent review being undertaken, it is important to go back in history. In the late 1990s there were five big professional services firms, Arthur Andersen, Deloittes, Ernst & Young, KPMG and PwC, in the fallout of the Enron saga, Arthur Andersen was forced to cease, and the business of Arthur Andersen in most parts of the world was bought over by Ernst & Young, this also happened in Malaysia. The joke amongst those in the know in Malaysia is that EY bought AA, but today in Malaysia the significant positions of leadership are occupied by legacy AA partners.

So Dear Nazir Razak, could you please explain to us the following, not withstanding that you have taken an immediate leave of absence,

• Whilst you have taken leave, is the process truly independent considering that Datuk Zainal and Cik Habibah are members of the board within CIMB. Was not Datuk a Managing Partner of AA, and Cik Habibah a partner of EY (when E&Y bought AA)- based on google search. Is the current Managing Partner of EY not a product of AA.

• Is there not a senior person in your organisations that is married to a partner in EY?

• Considering the ongoing saga relating to this case and especially to absolve yourself, would it have not been better to have formed an eminent group of elders that would have communicated absolute independence, like Justice Harun, Justice VC George and even the Royal Prince that is winning the hearts and minds of ordinary Malaysians, imagine what the rakyat would say.

• Considering what transpired is a compliance and governance issue, would it not be better to have chosen a legal firm that would be better experienced in law and regulations than a firm that is better know for auditing and taxation.

• Should this not be a matter for regulators like BNM, whats the end game, EY says, "no compliance or regulatory issue with money flowing through NR's account". If that be the case then would it not make a mockery of all our banking rules and regulations, and would it not be a tacit approval for money laundering. I am just looking at the risk scenario.

To EY here are a couple of questions to sleep on,

• Did global risk management approve of this. 

• You guys do remember why AA ceased, don't you?, because in that case too it was a case of being pandai, pandai!

Finally Datuk NR, you really need better advisors, had no one done their homework before this charade was executed? Remember two things, in today's world there are no secrets, and what President Kennedy said,

You can fool some people all the time,

All the people some time

But not all the people all of the time!

What's with O&G SPACs

Can it even be true I asked, cause it was very surreal. Only the previous day I had posted my piece on the Cliq and Sona saga, and there early in the morning, blaring away on BFM Radio was the CEO of Reach Petroleum, non stop claiming that the qualifying asset they have is such a sure winner  etc etc and it would be criminal (not his words) for anyone not to buy into it.

So just like my previous question to Sona, so good bankers will fall over each other wanting to lend you money, no need to have SPAC, oh I forget you want to share this wonderful opportunity with everyone, so generous you are!

Also I am wondering whether the Dowager of Bukit Kewangan should not be reviewing the interview for falling foul of market making antics. Honestly it was so nauseating to list to the CEO, that I switched to the CD player and listened to Bowie!

A case of a Cliq and a Sona!

One of the standards that is used to assess the action of directors in discharging their duties is to judge them on par with the ordinary man on the street with similar qualifications and experience.

So today when I read in the newspapers that Cliq Petroleum was seeking a judicial review of the Securities Commission's rejection of their Qualifying Asset, I could not but feel elated, congratulations to the Board for this action.

Its about time that the regulators are challenged in their decision making. Too often the regulators sit on their high chairs and make decisions with impunity, totally ignoring their own edicts.

What puzzles in the case of Cliq Petroleum is that the SC had rejected their qualifying asset (and I am sure for many good reasons), I would not had anything to say if they had responded similarly in the case of Sona Petroleum. However with Sona I found it very peculiar that there is a sweetener (in the form of Capital Repayment) to the shareholders, that  is conditional on them approving the QA.

Hold on now, conditional on approving the QA, is that not(to the ordinary man on the street) sounding like a threat or bribe, er is that not shareholder's money in the first case. If the QA is so wonderful why the need to do this, if the QA is so wonderful and a sure winner, why not return all the shareholder's money and the director's borrow from the bank in their personal capacity. I am sure with such a good deal, the banks would be falling all over themselves wanting to lend, the directors and bankers can earn lots of money! However what is intriguing in all this is the fact that the Securities Commission is silent, pin drop silence some might say! 

So moral of the non action/action to us ordinary men on the street is that what is good for Sona is not good for Cliq. Thinking aloud, I wonder if I buy shares in Sona and it fails I could sue the SC, since by their silence one could assume that there is nothing wrong and that they are indirectly supporting the proposals by the Board and Management of Sona.

Yes  silence does not mean acceptance et al but there is a relativity test that I am sure a smart and crafty lawyer can use.

The Panama Leaks and the Dilemma for Boards.

I keep telling those that would listen, in today's world there are no more secrets. Whilst we toast the creators of the world wide web and all the ensuring information technology marvels, it does come at a price, NO MORE PRIVACY, NO SECRETS, everything is captured in zeros and ones.

The leaks or more importantly the revelations from the information from Messrs. Mossack Fonseca has already resulted in the resignation of one Prime Minister, and another in the space of a week had to come out with five press releases, with each more revealing. 

Fairly or unfairly, the perception associated with tax havens is that they have something to do with hiding, a negative or illegal connotation always being associated. Then there are those that would argue that having a tax haven is totally legitimate, solely for tax planning purposes, that there is nothing sinister. 

To many there is a very thin line between tax avoidance and tax evasion. Put simplistically, tax avoidance is using the various rules and regulations to mitigate the taxable income thereby reducing the amount of tax payable. On the other hand with tax evasion, it is hiding the income and not declaring it so that it is never subjected to tax, NO TAX IS PAID, one is legal the other illegal!

However if you were to study taxation, over the last twenty to thirty years many of the provisions for parking income from the prying eyes of the tax department have been plugged. In fact anyone submitting a tax return would notice that there is a declaration and not declaring all income is an offence. In other words there is no reason for having an entity in a tax haven, other than to possibly hide something. Admittedly there could be other reasons that one would need an entity in a tax haven, maybe to have a separate bank account so that the wifey won't know the amount spent at karaoke bars, or on new golf sets or on the girl friends!

When the list on Malaysia came out I was surprised to notice that there were a considerable number of public listed companies, theirs chief executives, their chief financial offices, all on this list. Naturally I could not help but wonder why these entities and the officers would want to have accounts in a tax haven especially since their businesses were/are primarily conducted in Malaysia. 

I had one CEO chappie quickly pronouncing that he could not understand why their name was there, naturally I laughed, I was told that I should be more trusting. My reply was that I looked forward to the company convening a Board of Director's meeting to discuss this affront to the company and the press release stating that they had appointed a reputable firm of lawyers to write to Mossack Fonseca to ask why their name was there. I reminded him that  if left alone it would cause unfair reputational damage to the company and its directors.

In fact I believe that all public listed companies should do similarly, however just keep in mind one thing, Do Not Do a David Cameron, on Monday of last week DC said it had nothing to do with him, by Friday he had to make another three additional press statements, and by Sunday he released his abridged tax filings that  revealed that he had not received Stg100,000.00 from his mother, as previously stated, but actually twice that amount. In other words if you wish to tell the truth make sure its the whole truth, don't leave anything out.

I wonder if the Inland Revenue Board, the Central Bank and the Securities Commission are forming a task force to look into this?. After all we are dealing with public listed companies and confidence and trust from time to time needs to be reinforced and assured.

In fairness to all, apart from companies and individuals, there were also lawyers and professional services firms (accounting firms).