The Bank of Ghana (BoG) in furtherance of its supervisory powers under the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930) has embarked on a ‘house’ cleaning exercise within the banking and financial sector with the aim of, among others, sanitizing and bolstering confidence in the sector. This exercise has led to the BoG revoking the licences of not less than five (5) banks within a period of one year.

The posturing of the BoG in recent times has been met with mixed reactions from some depositors in particular and the public as a whole. Some have blamed the BoG for failing in its supervisory duties hence the ‘rot’ that persist in the sector. Others have called on the BoG to be proactive and not just reactionary in order to protect depositors and investors from losing their funds.

In the spirit of protecting the public from investing their funds in ‘dubious’ and unauthorised/unlicensed entities, the BoG on the 6th of August, 2018 issued a notice to the public which urged members of the public to refrain from dealing with Menzgold Ghana Ltd.

In the notice the BoG stated as follows:

“The Bank of Ghana wishes to notify the general public that in spite of a caution to Menzgold Ghana Company Limited to desist from the solicitation, receipt of money and payment of dividends to its clients, the company is still engaged in these activities, contrary to section 6 (1) of the Banks and Specialized Deposit-Taking Institutions Act, 2016 (Act 930).

The general public is hereby informed that Menzgold Ghana Company Limited is NOT LICENSED by the Bank of Ghana and has no authority to engage in the solicitation, receipt of money and payment of dividends to its clients…”

From the contents of the notice issued, it is beyond contest that the BoG has taken the position that MenzgoldGhana Company Limited is into the business of deposit-taking and it is doing so without a licence from the BoG.

As it was to be expected, Menzgold boldly and expressly rebutted the assertions of BoG and emphatically stated for the benefit of its customers/clients that it was not in the business of deposit-taking and also not subject to the supervisory control of the BoG. For the benefit of the reader a portion of the rebuttal is quoted below:

“…We hereby state emphatically that we DO NOT accept deposits from customers or carry on a deposit-taking business in Ghana. Our activities are not within the scope of the Banks and Specialized Deposit-Taking Institutions, Act, 2016, Act 930. It, therefore, CANNOT be said that we are in breach of the Act.

The activities of Menzgold Ghana Limited is restricted to allowing customers to purchase gold or deal in gold as an alternative investment. The Bank of Ghana is clearly aware that these activities are outside the scope of The Banks and Specialized Deposit-Taking Institutions, Act, 2016, Act 930…”

Clearly, by this strong rebuttal, Menzgold has called the bluff of the BoG and many will expect that instead of issuing warning notices to the public, the BoG will step in and just shut down the business to avert any looming danger.

In this piece, I will attempt, based on the relevant law(s), to answer some of the questions that have arisen from the rival positions taken by the primary actors in this saga i.e. BoG and Menzgold.

The Bank of Ghana and the scope of its supervisory powers?

The BoG was set-up pursuant to the Bank of Ghana Act and empowered to, among other things, supervise the banks and other financial institutions. Embedded in its supervisory powers is to power to issue relevant licences to entities to operate a banking business or a financial institution.

In 2016, Parliament enacted the Banks and Specialized Deposit-Taking Institutions, Act, 2016, Act 930 to amend and consolidate the laws relating to deposit-taking to regulate institutions which carry on deposit-taking business and related matters. Act 930, is applicable to all institutions operating a depositing-taking business with the exception of credit unions and institutions. The latter are subject to the Non-Bank Financial Institutions Act.

Notwithstanding the expansive powers given to the BoG under Act 930, the Act is not applicable to entities not in the deposit-taking business hence the BoG is not empowered to invoke its powers under Act 930 against these institutions unless it can show that those institutions are within the scope of Act 930.

In its notice to the public, BoG claimed that it was acting on the strength of section 6 of Act 930 which deals with the licensing of deposit-taking institutions among others. It is, therefore, necessary to understand what is a deposit-taking business is to help us determine who and what the BoG can regulate under Act 930 and to answer the ultimate question whether Menzgold is subject to Act 930.

What is a Deposit-Taking Business?

A deposit-taking business under the law means taking money on deposit and making loans or other advances and financial activities prescribed by the BoG for purposes of deposit-taking.

From the black letter of the law, BoG can only apply Act 930 to institutions that are engaged in the practice or business of taking money on deposit, making loans or other advances. In effect, where an entity is not engaged in taking money deposits or advancing loans, it will be outside the scope of Act 930 and the provisions therein shall not be applicable to that entity.

The operative word in the definition of deposit-taking is ‘deposit’. Hence it is important to understand the legal definition of deposit. Under Act 930 a deposit means a sum of money paid to a person on condition that it is to be repaid by that person, with or without interest or premium either on demand or at an agreed time under the legal and contractual conditions applicable and not referable to the provision of property or services or the giving of security.

It appears from a cursory and literal reading of the law that deposit under Act 930 is restricted to the taking of money. Although money is the defining feature of a deposit, the law does not provide a definition for it.

It is important for us to be guided by this legal definition in determining whether an entity is subject to the control of the BoG under Act 930 or not.  

What is the business of Menzgold Ghana Limited?

According to Menzgold Ghana Limited, its activities are restricted to allowing customers to purchase gold or deal in gold as an alternative investment and that it is in the business of bullion (gold) investment and investors or customers get a maximum ten percent (10%) monthly returns on their investment. It allows members of the public who wish to buy, trade and store gold to be liquidated over time for extra value or to be processed into finished collectibles.

I do not proffer to have a detailed understanding of the business model of Menzgold Ltd, hence the analysis is based on information provided by it on its website and its rebuttal to BoG’s public notice.

Is Menzgold in the business of deposit-taking within Act 930?

Menzgold Ltd has stated unequivocally that it does not accept deposits from customers or carry on a deposit-taking business in Ghana. It states further that its activities are not within the scope of Act 930 and therefore not in breach of the Act.

This position is without a doubt informed by Menzgold’s strict and literal application of Act 930. This strict and literal interpretation of the law enables Menzgold to make a strong case. But will this literal application of the Act 930 suffice in this case?.  

In an era where Courts are enjoined by law to give broad and expansive meaning to words used in statutes in order to achieve the purpose and rationale behind a law, can this position of Menzgold stand the test of time?  

It is not in dispute that Menzgold does not take money deposit in the strict sense of the word money. It is also not in dispute that Menzgold trade in gold for and on behalf of its customers who deposit gold purchased from Menzgold with Menzgold and get a 10% monthly return on the cash equivalent of the gold deposited.

What is money?

Deposit-taking within Act 930 refers to taking sums of money on deposit. The use of the word “money” can lead one to the quick conclusion that, the taking of anything other than money is not deposit-taking and hence Menzgold is not taking deposits. This divergence in views will naturally require us to examine what exactly is money.

Money is a generic term and embraces descriptions recognized as a representative of value in effecting payment for services or goods. Many are likely to think of money in a narrow sense to mean a medium of exchange (anything generally accepted as payment) in the form of coins and banknotes or legal tender.

The Black’s law dictionary, however, defines money to mean one of four things namely;

The medium of exchange authorized or adopted by a government as part of its currency especially domestic currency.

Assets that can be easily converted to cash

Capital that is invested or traded as a commodity

Funds; sums of money

The fact that the word “money” has more than one meaning supports the view that a simplistic and literal approach to Act 930 may not suffice in the battle between Menzgold and BoG

In what context then is money used in Act 930? Is it used as a medium of exchange? Or does Act 930 include assets that can easily be converted to cash, capital or funds?

In order to speak to these issues, one must understand the purpose of Act 930 as well as the specific sets of facts before us. The purpose of Act 930 is to consolidate the laws relating to deposit-taking; regulate institutions which carry on deposit-taking business, and provide for related matters. Unfortunately what constitutes the ‘related matters’ is not mentioned in the law.

It is my humble view that money, as used in the definition of deposit in Act 930, is not limited to cash/currency (coins and banknotes) but also applicable to other convertible assets or instruments which Banks generally are permitted to take as deposit and pay on demand with or without interest.

An expansive construction of the word “money” to include assets not necessarily in the form of cash will give effect to the purpose of the law and give the BoG the legal backing to regulate institutions which take assets from the public and use that asset as the underlying medium of its trade or investment and pay its customers an agreed interest based on the cash equivalent of the asset at the time of investment.

It is also instructive to note that, the lawmaker in defining deposit preferred the generic term ‘money’ instead of the specific word ‘cash’ or ‘currency’.  The question one may ask is, if the focus of the law is only on cash or currency taking institutions, then the lawmaker could have saved us all the trouble by using the word currency/cash as the defining character of deposit.

It is my view that, the use of ‘money’ as the defining character of deposit in Act 930 is deliberate and intended to give the BoG the room to expand the frontiers of activities that may be classified as deposit-taking. This view is strengthened when one considers the legal discretion given to the BoG under section 6(2) and (3) to in some instances classify some liabilities as deposit. For instance where it is established that, a bank in receivership took gold or diamond with a cash value from its depositors as deposit, in paying out its liabilities, the BoG is empowered to determine whether the gold and diamond deposited by the customers is a deposit to enable the payment of the cash equivalent of  the gold or diamond to the depositor.

It is my contention that to insist that ‘money’ in the context of Act 930 should be given its ordinary meaning may lead to a situation where the BoG will be unable to regulate activities of entities that are operating in the financial sector as deposit takers in substance. Such an ordinary meaning will create a situation where BoG cannot step up to the ‘rescue’ of  innocent and ‘naïve’ members of the public who may be victims of entities cleverly crafted to put them out of the reach of the black letter law leaving us with a potential recurrence of the DKM saga

One may argue that the law could be amended to expressly provide for such a situation. Yes, I agree with such an argument. But while we wait for parliament to amend the law, must the BoG just fold its arms and watch?

Is Menzgold taking deposits?

Now to answer the question whether Menzgold is in the business of deposit-taking within Act 930, it is my view that having regard to the nature of its operations,  the various definitions of money, Menzgold is essentially in the business of taking deposit.

I am of this view because Menzgold under its Gold Vault Market offers clients an alternative investment portfolio by accepting gold (a form of money in the nature of asset) deposits instead of cash. The gold so taken becomes the underlying asset for the money invested by the client and when it matures Menzgold pays an interest on the gold invested.

The defining characters of Menzgold’s business which in my view puts it within the scope of a deposit-taking business under Act 930 are that:

It takes money in the form of gold which is given a fixed cash equivalent on the date on investment;

It keeps the gold as deposit for and on behalf of the customers who can demand it at any time subject to the terms of the agreement

It pays interest on the cash equivalent of the gold deposited on periodically to the client.

It must be noted that Menzgold pays interest on the cash equivalent of the gold a customer deposits with it. In substance, it takes cash/money in the form of gold from customers who are its depositors and makes payment on the cash equivalent of the gold. If indeed Menzgold is in the business of the purchase and sale of gold as it claims, why then is it paying interest (dividend as it prefers to call it) on the gold deposited at a maximum of 10%?

Did BoG act within its mandate when it issued the public notice?

Earlier in this piece, I indicated that the BoG views the activities of Menzgold as a deposit-taking business within the meaning of Act 930. The notice was issued on the strength of this viewpoint by the BoG.

Based on my earlier stated conclusions, I am of the view that the BoG acted well within the confines of the law by issuing the notice.

I will, however, add at this point that a mere notice to the public is not enough and the BoG must exercise its powers under Act 930 to curtail the recurrence of loss of investment as was the case in DKM, Onward Investment among others.

The activities of Menzgold, in my view, falls within the authority of several regulatory divisions of the State and therefore requires a harmony of the relevant institutions to ensure compliance with the relevant laws. There is a need for synergy between the BoG, Minerals Commission and the Securities and Exchange Commission to mention a few in addressing the activities of Menzgold.