Leaked EIFU documents put Eswatini at risk - economists
MBABANE – With the over 890 000 leaked EIFU documents on alleged money laundering activities, some economists say the kingdom is at high risk of being shunned by prospective credible investors.
These are strong observations by economics experts, who say the alleged leaking of the internal records from the Eswatini Financial Intelligence 8nit (EFI8) to the International Consortium of Investigative Journalists (ICIJ), will be reviewed by both global credible investors in the short to medium-term and money laundering and terrorist financing watchdog bodies.
Expounding on the short to medium-term risk factors to Eswatini, triggered by the leaked documents, the economics experts said: “The leaks have characterised Eswatini as a financially compromised and secrecy jurisdiction pigeonholed by elements of money laundering and this has the high likelihood to deter potential foreign investors, and that will imperil the development of the economy.”
Disruptive
One of the experts, who works in one of the Bretton Woods institutions, but asked to remain anonymous, because he is not mandated to speak to the media, said the leaked documents portrayed Eswatini as a country that is disruptive and undesirable, and one that engages in intolerable and unethical behaviour or activities.
Over and above the probable money laundering signposts in Eswatini, the expert said the reports alleged that there were syndicates who formed shell companies used as conduits to launder money.
As a consequence of this, the expert said a country with trademarks of money laundering because of its perceived weak financial systems is at high risk of being blacklisted, which would consequently scare existing and prospective investors.
“As a country, you don’t want to be in a position where you are known to be run by syndicates, because legitimate businesses frown upon such. They prefer to invest in a country which is not tainted by elements of money laundering and terrorism financing, perpetuated by some individuals within the economy,” the economic expert said.
He further said legitimate businesses were bound to shun suspicious countries, because they relied on capital markets to raise capital. This is why they will not come to invest in a country that is allegedly mired in money laundering and terrorism financing suspicions.
Furthermore, the expert said credible investors naturally stayed away from countries which were a haven for crooks and a breeding ground for money laundering. “They would fear settling in the country because they would not be able to mobilise resources from legitimate financial markets,” the expert reiterated.
In the economist’s view, if credible investors frown upon such undesirable practices, the country will attract mostly distrustful investors. “But the issue with tainted people or businesspeople is that they are naturally greedy and not keen to play by the rules. If they are the only people you are attracting into the economy, it means your economy will remain very strained because, by their nature, they don’t believe in circulating the money, but in amassing it for themselves and spending it in maintaining their extravagant lifestyles,” the expert said.
Coming to the long-term risk factors of the leaked documents, which partly detail how some suspicious transactions were carried out by politicians, businesspeople and other high-profile people, the economist said: “The alleged leaked documents will trigger the keen interest of both regional and global money laundering and terrorist financing watchdog bodies, who will want to probe further the serious allegations contained thereof and if they find compelling evidence, they will not hesitate to greylist Eswatini.”
Eswatini is a member of the Eastern and Southern Africa Anti-Money /aundering Group (ESAAM/G), a regional body subscribing to global standards to combat money laundering and financing of terrorism and proliferation.
Corruption
According to the expert, ESAAM/G’s main concern about Eswatini’s financial viability could be centred on money laundering, perceived high levels of corruption and terrorist financing.
The economist further mentioned that in the context of Eswatini, the consequences of greylisting could be far-reaching, affecting not only its financial stability but also the country’s overall reputation and prospects.
Economist Thembinkosi Dlamini, CANGO Executive Director said one of the potential impacts of greylisting would be the increased cost of borrowing. The Eswatini Government and State-owned enterprises could find it harder to borrow money, which could lead to higher interest rates on loans, Dlamini highlighted.
“This will make it more expensive for people to borrow money to finance mortgages, buy or lease a car, or get a personal loan. Eswatini’s greylisting could also lead to an increase in banking and asset-management fees. Banks and other financial institutions are likely to pass on the costs of compliance with the ESAAM/G regulations to their customers. This could lead to higher fees for services such as bank accounts, credit cards, and investment accounts. This could have a particularly negative impact on low-income households that rely on these services.”
Dlamini also mentioned that greylisting could also have an impact on Eswatini’s international trade and investment relationships. “Investors may be more hesitant to invest in Eswatini.
Compliance
“International companies may be more cautious about doing business with Eswatini firms due to concerns about compliance with anti-money laundering and counter-terrorism financing regulations. This could mean a decrease in foreign investment and trade, with negative effects on the economy and job market,” Dlamini said.
The observations of the economic experts are at the backdrop of this publication reporting last week Thursday that more than 8 0 000 internal records from the EFI8 were purportedly leaked to the ICIJ, an elite investigative media company.
These documents include financial records allegedly obtained from the EFI8 and were used to compile reports that were published under the banner of ‘Swazi Secrets’ or ‘Open Secrets’.
They touch on politicians, businesspeople and other high-profile people, who are linked to financial transactions which they purportedly carried out over a period of about six years, from 2016.