Financial Crime World

Mozambique’s $2 Billion Financial Fraud Scandal: Ex-Minister Manuel Chang’s Arrest and the Implicated Executives

The arrest of Manuel Chang, Mozambique’s former finance minister, and several international bankers by U.S. authorities last December has cast a long shadow over the political and economic landscape of Mozambique. This section provides an overview of the largest corruption scandal in sub-Saharan Africa since the 1960s, involving an estimated $2 billion.

Arrests and Indictments

Manuel Chang was taken into custody at Johannesburg’s O.R. Tambo Airport in South Africa on December 29, 2018. [Note: This is where the original text mentions “shortly after” but does not specify a time.] Three former Credit Suisse bankers—Andrew Pearse, Surjan Singh, and Detelina Subeva—along with Jean Boustani, an executive at the Russian-owned holding company Privinvest, were also arrested.

  • Manuel Chang: Former finance minister of Mozambique
  • Andrew Pearse, Surjan Singh, and Detelina Subeva: Former bankers at Credit Suisse
  • Jean Boustani: Executive at the Russian-owned holding company Privinvest

These individuals are under indictment for their roles in a complex fraudulent scheme that began with loans for Mozambican state-owned companies—EMATUM, ProIndicus, and MAM.

Loans and Corruption

The loans, which totaled $2 billion, were granted ostensibly for securing patrol vessels for these companies but were actually a cover for large-scale corruption and money diversion. American prosecutors allege that at least $200 million was syphoned off to the defendants and Mozambican officials. The French-Lebanese businessman Iskandar Safa, the primary shareholder of Privinvest, has also been implicated in the scandal.

Companies Involved

  • EMATUM: State-owned tuna fishing company
  • ProIndicus: State-owned fisheries development company
  • MAM: State-owned maritime intelligence and security company

Fraudulent Activities

  • Granted loans ostensibly for securing patrol vessels
  • Involved in large-scale corruption and money diversion
  • At least $200 million syphoned off to defendants and officials

Timeline of Discoveries and Consequences

The EMATUM debt of $850 million was revealed in 2013, and the remaining loans to ProIndicus and MAM were uncovered in 2016 when Mozambique’s hidden public debt of $1.4 billion was discovered during the IMF’s assistance program.

  • 2013: EMATUM debt revealed
  • 2016: ProIndicus and MAM loans uncovered

The consequences of this sprawling financial fraud case have been severe, compromising Mozambique’s financial credibility and causing significant damage to its economy.

International Response

The International Monetary Fund froze its loans to Mozambique, and international donors suspended aid, which had been crucial for balancing its budget for years.

Ongoing Investigations

The arrests so far have only involved those connected to the EMATUM and ProIndicus cases. The investigation involving Russia’s VTB Capital Bank regarding MAM’s debt remains ongoing.

Economic Impact

From 2015 to 2016, Mozambique’s public debt rose from 86 percent to 130 percent of its gross domestic product.

Raised Concerns

The fact that European banks, specifically Credit Suisse and VTB, were involved in the scandal has drawn intense scrutiny and discussion about the role Western financial institutions play in the corruption of African leaders.

Upcoming Trials

Manuel Chang is currently facing extradition proceedings to stand trial in the U.S. for wire and securities fraud as well as money laundering charges. His defense team has appealed the decision, but the court has approved extradition and is considering Mozambique’s request.

Potential Implications for the Future

The widespread corruption and its potential impact on the upcoming October elections has raised concerns about the potential involvement of other high-ranking officials within Mozambique’s political hierarchy. It remains to be seen whether and how this significant corruption scandal will be exploited for political gain, either by internal forces or the international community.

  • RENAMO and Democratic Movement of Mozambique (MDM): Opposition parties that have remained relatively quiet about the situation
  • October elections: Future course of Mozambique’s political and economic landscape might depend on the resolution of this issue.