RBZ must nip money laundering in the bud

OVER the years, we have seen city and town councils across Zimbabwe demolishing houses built illegally on land not owned by the builder, or without initial planning approval.

What has, however, puzzled us is that city councils would wait for people to put up structures, even finishing the house, before moving in to demolish the structure.

Since most of these houses are built in broad daylight, one would want to believe city councils are duty bound to move in, the moment they see illegal activities.

Unfortunately, we are witnessing a similar situation in the financial services sector where illegal activities are allowed to flourish for years unabated and reaching levels where the value of the local currency is being decimated.

The forces, some of them we believe are known by the monetary and fiscal authorities, attack and undermine national currency with impunity and the carnage it causes to people’s livelihoods is unbearable.

In the last couple of weeks, we have seen the Financial Intelligence Unit (FIU) of the Reserve Bank of Zimbabwe coming down hard on what it called abuse of national payment systems, mobile money and the Zipit platforms.

The FIU accused EcoCash, which has a market share of more than 90 percent of mobile money transfers, of letting illegal activities conducted on the system.

The FIU identified more than 1 000 agent lines that it said lacked proper know-your-customer records that it proceeded to block. On the Zipit platform, the FIU said the system has shortcomings that make it difficult for banks, regulators and law enforcement agencies to speedily identify those sending and receiving the funds or to identify multi-banked users.

While the decision to freeze accounts and also put limits on payment systems, EcoCash and Zipit are well within the FIU mandate, what is baffling is why potentially illegal activities were allowed to go on for such a long time without anyone lifting a finger.

The FIU is not a new institution that has to wait until suspicious money laundering activities are deep rooted to start taking action. Currency manipulation and illegal foreign currency trading has been going on for a long time that one would expect an organisation such as the FIU, which was established as far back as 2004, to have taken action earlier

New systems will also allow the creation of database elements for monitoring of transactions and the subsequent separation of the honest from the potentially dishonest.

Both the EcoCash and Zipit platforms have been around for years and any shortcomings in terms of compliance should have been dictated a long time ago. It was a case of lack of technology and skills the authorities could have rectified that long back.

As it has been said in other discussions, Zimbabwe has all the policies and economic strategies for a strong economy, but is let down at implementation or, in this case, at the enforcement stage.

Monitoring, investigating and putting a stop to transactions that are illicit should be an ongoing process and is the sole reason the FIU exists.

The FIU was established in 2004 in terms the Bank Use Promotion and Suppression of Money Laundering Act. The unit bears the primary responsibility of ensuring there is no money laundering and of compliance to the measures for combating the financing of terrorism.

But over the years, in particular the last two years, the FIU has been found wanting as illicit foreign currency transactions have been taking place unabated, even in broad daylight.

If the FIU had been vigilant and doing its work by the book, probably the local currency would not have been hammered as badly as it has now on the black market.

As the saying goes, a stitch in time saves nine. These illicit financial transactions should have been nipped in the bud at the very beginning.

Investigating and prosecuting cases of money laundering should be a regular exercise since delays might be a little too late.

The Bank Use Promotion Act, which compels traders to deposit in an account with a financial institution no later than the close of normal business hours on the day following that on which the cash is received, or on the next banking day, should be enforced rigorously. If it means capacitating the FIU, so be it.

We also challenge the authorities to also extend their investigations into the operations of many businesses that are indexing their prices to US dollars.

What pains many Zimbabweans is that the shops are actually using rates that are way beyond black market. This has caused serious erosion of most workers’ incomes. Just at the weekend a leading furniture shop was indexing prices at 85, while a leading hardware was indexing at 100. This indexing of what someone believes might be a future rate creates the self-fulfilling conditions of reaching that rate.

The authorities need to do more now to end this speculative pressure and then keep on doing it instead of reacting only when there is a severe crisis.