Bank of America Corp., which provides most of the dollar notes dispensed by banks in Angola, is halting the supply of greenbacks to the African country, according to two people with knowledge of the matter.
Dollar notes from the U.S. bank were distributed in Angola by Rand Merchant Bank, a unit of Johannesburg-based FirstRand Ltd., the people said, asking not to be identified because they weren't authorized to publicly comment on the matter. Bank of America wasn't under government pressure and stopped sending the cash from a distribution facility in London to the South African bank after reviewing its money business, one of the people said. Elizabeth Wood, a London-based spokeswoman for B of A, declined to comment.
Rand Merchant Bank said Nov. 13 it would have to stop providing dollars to client banks in sub-Saharan Africa's third-largest economy at the end of this month. The U.S. lender supplying the notes had notified it in late October that it was ending the service, RMB said, without identifying its partner.
The move is already constraining supplies of dollars, used by residents of Africa's second-largest oil producer for purchases of cars and other imported goods. Banks are limiting the amount of dollars customers can withdraw and encouraging them to use euros and South African or Chinese currency instead. Moneychangers on the streets of the capital, Luanda, say dollars are scarce and are asking almost 20 percent more in exchange for kwanzas than two months ago, when they have any to sell.
"We are advising our clients to use more euros, rands and even renminbi," Fernando Teles, chief executive officer of Banco BIC SA, Angola's biggest private bank by branches, said Thursday from Luanda.
The euro may soon become a major foreign currency in the nation, according to Teles, a transition that could be supported by Angola's historical links with Portugal, from which it gained independence in 1975.
Angola is a member of the Organization of the Petroleum Exporting Countries and gets almost two-thirds of its government revenue from the sale of crude. It has devalued the kwanza twice this year as it struggles to cope with a slump of 40 percent in the price of oil in the past 12 months. The kwanza's official rate has dropped about 24 percent against the dollar this year. On the black market, $1 is now worth as much as 270 kwanza. That's a 17 percent increase from September when $1 was valued at 230 kwanza.
The Office of the Comptroller of the Currency, the regulator of U.S. national lenders, said in response to questions this week that it doesn't comment on particular banks and said it clarified its expectations on risk management in currency businesses in a November 2014 statement sent to bank chiefs.
"The safety and soundness of an institution can be threatened when a bank lacks appropriate risk management systems and controls for the products or activities it provides or the customers it serves," part of the OCC's statement reads. "Moreover, the failure to implement and maintain such controls can provide money launderers, fraudsters, terrorists, and other criminals with access to our financial system."
Five years ago, Bank of America was criticized in a U.S. Senate report for not raising enough questions about how an Angolan arms dealer moved millions of dollars to the U.S. Some of the world's biggest banks have been fined billions of dollars for misconduct including manipulating interest rates, helping clients avoid taxes, and funneling money to countries like Sudan. With increased regulation, some lenders are severing partnerships and business links that put them at risk of contravening various laws.
Angolans traveling abroad should use credit, debit and prepaid cards, the country's banks association said on its website on Nov. 5, citing the impact on supplies of cash of steps to fight money laundering and the financing of terrorism. It warned of the "continued reduction in the delivery of banknotes" and advised travelers to buy the currency of their destination country, rather than dollars.
Banks need to have greater control over the use of cash to comply with international rules, the association said. Since Angola imports cash from other countries, especially the U.S. and the European Union, it needs to comply with these measures, it said.