Lack of prosecution has led to weak economic foundations – Pension Expert

By Kweku Antwi Jnr

An audit and risk management expert has attributed Ghana’s weak economic foundations in the pension trustee industry to lack of willingness to prosecute people in authority who break the laws of this country.

Mr. Emmanuel Mensah-Appiah who is the Head of Audit And Risk Management of the Securities and Exchange Commission of Ghana said  “I hold the view that in weak economies, it is generally the people in positions of trust that tend to break the law with impunity, making compliance very challenging”.

The audit and risk management expert made the observations at the 'First Trustees’ Summit' held in Accra.

It was under the theme: “Building a Network of Effective Trusteeship: Industry, Governance and Investments”.

The aim of the summit was to educate stakeholders on the proper management of pension funds for their clients.

Penguard Business Solutions and Consulting together with its partners and sponsors were lauded for putting this annual Summit together where trustees will engage with other stakeholders in the pensions industry to learn, share and network.

The event was well attended by trustees and players in the pensions industry.

Mr. Mensah-Appiah who spoke on his capacity explained that “when such people are entrusted with the safety and soundness of our institutions, they abuse the trust”.

“It is also such people who will have access to the millions and billions of dollars that are being hidden in international financial institutions from poor countries. Compliance is therefore made more difficult because the powerful people also tend to be the biggest covenant breakers and are either slow and/or are unwilling to invest in the development of the right systems in the first place”.

He asked “why? Because they will usually be the ones to be caught in their own acts. Making and amending processes in some instances have therefore been made a deliberately slow, costly and frustrating process. Outmoded legislation that is obviously out of sync with best practices makes regulation less responsive to the dictates of the times capacity to enforce the rules tends to be weak among some institutions”.

“Strong institutions tend to engender strong compliance systems. This is true for both the regulator and the market operator. In an environment where the handlers of the law and law breakers tend to be in the same group, and it is also these same people who dictate the resources of the law enforcement agencies and the criminal justice system, there tends to be little incentive by these powerful individuals for the empowerment of those law enforcement agencies”, he explained.

Mr. Mensah-Appiah said “state institutions that are to enforce the law tend to be weak and beggarly and therefore allow many of the big law breakers to go scot free while they worry the little fishes in the enforcement waters. Strong enforcement should cover the full hog of administrative, criminal and civil sanctions in an equitable manner”.

“It is my view that underdevelopment is mostly the result of a deliberate and intentional effort to keep and widen the gap between the privileged and underprivileged in society”, he added.

He noted that “seven banks have collapsed and as usual in Ghana, the blame game is still on. But everything that stands well stands on the right foundation. It is therefore imperative that we look at building not only a good foundation for the economy but the right foundation. The integrity of our professionals and our processes is critical to developing the economy and the country”.

The expert explained that “even though currently the macro-economic fundamentals are pointing in the right direction, a lot more work needs to be done to improve various aspects of the economy, and the financial markets in particular”.

“Also the list of financial crimes is growing and now includes money laundering, terrorist financing, proliferation financing, cybercrime, transnational organized crimes, corruption, fraud including fraudulent acquisition of synthetic identity documents, promotion of conflict and instability and promotion and/or collusion for illicit activities”, he said.

He added that “in an increasingly complex and changing world, these and other matters have brought governance, compliance and risk management to the fore. Why do we have these issues when more and more professional staff are in place? This is a question we must answer today at this conference".

Education

Mr. Mensah-Appiah noted that “another challenge to developing financial markets is the poor education, training and human capital development by both the public and private sector. Education of the regulators, market participants and the general public, is inadequate in most cases”.

He said “I believe that a person’s interest in a matter can be seen not only by his or her talk about it, but also the amount of investments s/he is willing to put into it. Some managers in the financial markets, including gate keepers, are not empowered through education, training and development, thus reducing their strategic influence. Where the human capital is low, compliance fatigue can set in at the point where the perceived marginal cost of compliance is higher than the perceived marginal benefit, due to the high cost and/or inconvenience of compliance”.

Electronics

He called on regulators to modernize their operations to suit the current trend in the economy.

“The application of technology including digitization, robotics, automation and artificial intelligence, generally fintech and regtech, to aid the client service process. In a complex banking environment with many moving parts that keep changing quickly and with less certainty, the need for frequent update of systems goes without saying”.

He said “apart from the need for being updated to cover the risks introduced in bringing up new products and services, serving new markets in changing ways and providing updated services to all customers who keep demanding greater attention, constantly upgrading electronics is a must. The finance professional must be strategically involved in the development of software from the initiation stage”.

The Director, Planning, Monitoring and Evaluation, Research at the National Pension Regulatory Authority (NPRA), Eric Amartey-Vondee, said “trustee must act in good faith and in the best interest of the Pension Scheme Members, beneficiaries and other stakeholders of the pension scheme”.

“Prevent personal interests from conflicting with those of the scheme ensure that scheme members and beneficiaries receive the promised benefits”, he explained.

He said “pension scheme governance is also about delivering on the pension promise, consistent with the Pension Scheme documents and pension legislation”.

Mr. Amartey-Vondee noted that “good pension scheme governance is essential if the scheme members are to both receive the benefits and values they are entitled to and to understand their rights and responsibilities under the pension scheme”.

"A pension trustee expert, Andrews D. Agblobi, speaking on the challenges facing the pension sector in the country said “bad governance has to do with weaknesses and inconsistencies in the management, supervision and monitoring of entire pension system”.

“Weak technical capacity, ineffective monitoring of defaulting employers and lack of transparency and disclosure to members have been a challenge which occur across pension as benefits may not be payable until about 30 years”, he noted.

Mr. Agblobi noted that “inaccessible by contributors and beneficiaries, inaccurate maintenance of records and apathy, unsatisfactory incentives system has also contributed to the bad policies of pensions.

He suggested to the industry player “to exercise care, diligence, and skill that a reasonably prudent person would exercise in comparable circumstances”.

“To see that the law is upheld, bear in mind the interest of those who you represent and to ‘declare and take no part’ in potential discussion conflict of interest discussion”, Mr. Agblobi urged.

Expert in the pension sector, Elizabeth Brago Yeboah, expressed gratitude to all for participating in the maiden edition.
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