RBZ moves on illicit financial flows

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THE Reserve Bank of Zimbabwe (RBZ) has put in place stringent prudential measures to plug illicit financial flows, as it emerged that close to $2 billion was spirited out of the country last year by individuals and companies, worsening the liquidity situation.

BY NDAMU SANDU

The new measures include, among others, getting rid of the concept of free funds, reporting of suspicious transactions and use of plastic money. A customer who wants to withdraw above $10 000 will now be required, with effect from today, to give the bank reasonable notice of at least a day.

In his monetary policy statement delivered yesterday, RBZ governor John Mangudya said money was flowing out of the country dwindling the liquidity position of the economy.

John Mangudya
John Mangudya

He said $864 million was externalised in 2015 by individuals under the auspices of free funds for various dubious and unwarranted purposes that included remittance of donations to oneself, offshore investments and externalisation of export sales proceeds by corporates through individual accounts leading to pervasive tax evasion and externalisation.

He said $1,2 billion was externalised by companies in the form of export proceeds, high management and expert fees.

“We are exporting liquidity. We need to put a stop to this behaviour. There is need for a fundamental shift to protect the integrity of the multicurrency system,” he said.

Mangudya said those in the habit of externalising funds have to stop warning “there will be too many skeletons and I won’t be able to bury them”.

“Let’s draw a line in the sand and never cross it again,” he said.

Mangudya said banks have to report all suspicious transactions to RBZ before processing of the outgoing transactions.

He said the ex-post reporting system was not useful, as the country was continuously losing money.

Mangudya in jurisdictions such as the US, they have resorted to the management of currency or cash transactions by enforcing maximum reportable cash limits that can be carried on person or withdrawn from financial institutions to guard against money laundering.

He said an individual with authority or interest over one or more financial accounts or securities or investments in a foreign country should report, through normal banking channels, to RBZ if the aggregate value of such accounts or securities at any point in a calendar year exceeds $10 000. He said going forward, any offshore investments would require prior RBZ approval.

Mangudya said there has been an increase in service payments between related companies, especially holding companies and their subsidiaries or sister companies resulting in some corporates inflating service fees in order to externalise foreign currency.

To remedy the situation, Mangudya said service payments should not exceed an aggregate of 3% of revenue and now required RBZ approval.

Mangudya said any financial institutions found to be complicit by systematically turning a blind eye to any suspicious transactions or any of the prudential measures would be fined or penalised under the Money Laundering and Proceeds of Crime Act [Chapter 9:24].

Illicit financial flows occur in countries with weak legal and institutional frameworks. These outflows drain foreign exchange reserves, reduce tax revenues, cancel out investment inflows and worsen poverty.

4 COMMENTS

  1. AML must just be compulsory for all banks and a centralised system run in a similar way to the current RTGS must be put in place. In fact, this will afect only a handfull of individuals.

  2. Mr Governor Sir..if you failed to foresee that the US$ will be exported you do not deserve to preside over a bank. It was obvious the use of US$ was going to attract traders from China, Pakistan, India, Nigeria, Lebanon etc and whatever one makes one takes it out to a place where it is safe…come on silly dude. This is why the Americans are printing quite a bit of their currency. The US$ is on demand in China, Syria, ISIS, Iran. Who doesn’t know that you are a net importer of everything. Useless Zim education. Until you start exporting goods and services we will continue taking IN GOD WE TRUST Green paper out of the f%$#ng Zimbabwe. You will not win no matter what measures, you put in place. VIVA Mugabe he has given Africans an opportunity to make real money and to f%$#k up the Southern African country

  3. a mere civil servant or an average worker can not afford to own an offshore account…….ndezvenyu imi mashefu i don’t see any of our doing our hands are clean. FYI zvasikuzopera until pane a paradigm shift from the top, by top i mean from matibili himself……

  4. Noble idea to get full disclosure on foreign bank accounts,investments,etc but will the owners play ball ?,i see some pretty big toes being stepped on and in Zim when that happens promising careers end rather short.Best of luck to Rbz team though

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