The Central Bank of Liberia (CBL) has provided clarification of a local media report, entitled “Conspiracy Theories Abound As Liberia Revenue Authority Gives Central Bank Greenlight for US$15 Million Mutilated Banknotes Exchange” and subsequent discussions on a local talk show regarding receipt of monies via the Robert International Airport (RIA).
The media report said that several boxes containing millions of dollars in cash raised a few eyebrows. The report alleged, based on tip-offs, that CBL ‘had authorized the printing of additional foreign exchange dollars into the country.’
However, the CBL in a statement said that it has neither the authority nor the capacity, and neither does any country except for the United States, to print US dollars for infusion in the economy. CBL, rather, regularly exports mutilated US dollars to be replaced with US banknotes in a transparent and routine banking exercise that the CBL has been engaged in since the inception of the bank’s operations.
The media report further said that, ‘it is unclear why the CBL did not go through the US Federal Reserves instead of using a private company’.
CBL says it re-exported mutilated US banknotes through Travelex, a private company, because it is more cost-effective. Travelex already has the infrastructure in place to facilitate such transactions, and they use this same infrastructure for many institutions. It would be too expensive to set up, especially for the CBL that does importation and exportation on a seldom basis. Rather than incurring massive costs in setting up an infrastructure that will allow the bank deal directly with the FED on an ad-hoc basis, CBL uses Travelex’s already established infrastructure at a much lower cost to the CBL.
The media report speculates that Travelex might be discounting the mutilated bills presented to them and then getting the full value upon presentation to the Federal Reserve.
“That is not the case,” the CBL release says. “The Federal Reserve pays full value, after establishing the total value of mutilated notes and Travelex gets paid a commission for their service as the conduit through which the transaction was conducted.”
The media report stated that the printing of such amount ‘should go through the legislative process’. Again, it must be pointed out that this was not a case of printing any currency, in which case legislative approval would have been required.
Regarding the importation of US Dollar banknotes to meet the needs of the domestic financial system including the replacement of mutilated banknotes received from commercial banks, the below points are important to note: all the CBL USD banknotes needs are met through the importation of the notes from overseas via Travelex, which is paid a commission for facilitating the transaction; to carry out this process, several steps are taken. First, the CBL wire transfers the amount to be imported plus the commission charged to the agency responsible for transferring the physical cash, Travelex in this case; upon receipt of confirmation of wire transfer, Travelex prepares a shipment of physical banknotes, under its own security and insurance arrangements, and have same shipped to Accra, Ghana, for onward transfer to the CBL and When the shipment arrives in Accra, Ghana, the Bank of Ghana, under a cash custody arrangement with the CBL, takes custody of the shipment and lodges it in its vaults until the CBL is ready to take delivery.
CBL further said on the day that the shipment is to be flown to Monrovia, the Bank of Ghana takes it to the Kotoka International Airport where it is loaded onto the aircraft with CBL representatives, at which point custody shifts to the CBL; when the shipment arrives at the RIA, it is cleared through customs, loaded unto CBL vehicles, and escorted by both CBL security personnel and Liberia National Police personnel to the CBL headquarters; upon arrival at the CBL Headquarters, the actual value of the shipment is verified through a physical cash count and then placed in the CBL vaults and the banking department subsequently passes the required accounting entries to account for the receipt of the cash.