By Collins Mtika
Malawi’s eight state agencies have finally ended an almost three-year turf battle regarding the launch of a vital government project aimed at intelligence sharing, investigating and prosecuting of financial crimes in Malawi.
While the agencies fought over the wording, terminology and phrasing of the memorandum of understanding (MOU), a planned crackdown on the fraudulent externalisation of foreign exchange suffered a setback – it stalled.
This was a blow to the ruling Democratic Progressive Party (DPP), which is seeking re-election this year and was trying to plug financial holes occasioned by a donor freeze in the wake of the Cashgate scandal.
At the close of 2018, Malawi lost in excess of K500 billion due to illegal externalisation of foreign exchange coupled and transfer pricing, the Reserve Bank of Malawi (RBM) said.
““The issue of foreign exchange externalisation is very serious in the country. At the moment, we have cleared 38 cases and we have as much as 48 cases outstanding…,” RBM Governor Dalitso Kabambe told the media in the commercial city of Blantyre.
A statement from the Reserve bank of Malawi signed by Mbane Ngwira, Director, Communication and Protocol confirmed both the cease fire and immediate operationalization of the MOU as of Monday 11th February, 2019.
The Reserve Bank of Malawi, the Malawi Revenue Authority, the Anti-Corruption Bureau, the Financial Intelligence Unit, the Malawi Police Service, the Immigration Department, the National Intelligence Services and the Directorate of Public prosecutions will now append their signatures to a memorandum of understanding that will kick-start the operation.
The memo relates to the investigation and prosecution of offences under the Money Laundering, Proceeds of Serious Crime and Terrorist Financing Act, the Exchange Control Act; the Customs and Excise Act; and the Penal Code of Malawi.
The memorandum of understanding recognises “the damage done to the economy of Malawi by the depletion of its foreign currency reserves” and notes “the high probability that proceeds of crime have been laundered and sent out of the jurisdiction of Malawi’s courts”.
In terms of the memorandum, the signatories would agree to “co-ordinate, co-operate and collaborate at all stages of the investigations and prosecutions of the individuals and companies implicated in the criminality”.
In one of the pending cases in Mzuzu four Mzuzu based businesspersons of Asian origin are facing the prospects of life imprisonment sentences, MK500m fines and the revocation of their business licences if the High Court in Mzuzu convicts them for the alleged cases of money laundering, forgery and breach of the exchange control regulations.
Between January and July 2017 and in eight separate transactions processed at NEDBANK Mzuzu Branch, the quartet – Junaid Muhammad Ibrahim, Shehza Abdul Aziz Muhammad, KashifIqbar and Muhammad Zubair Khan – obtained foreign currency amounting to approximately USD 6 million (MK5 billion) on the pretext that they would import Salt making machines and Tan Salt.
Under criminal case number 734 of 2017, Director of Public Prosecutions Mary Kachale nodded to RBM to go ahead with the prosecution of the four.
Weak controls over Malawi’s banking system and delays in prosecuting cases when money-laundering has been discovered are allowing foreign companies, including some Indian ones, to take millions of dollars out of the country illegally and with impunity, according to court documents and interviews with experts and officials.
In the capture of banking system and financial institutions, it has been discovered that between January and November 2017, the Finance Intelligence Authority (FIA) uncovered 63 unsupported forex transactions worth US$7.4 million (approximately K5.4 billion), remitted without imports being returned into Malawi, according to information from the Reserve Bank of Malawi (RBM) and the FIA itself.
Broadly, the offences involve the making and use of false documents and deceptions by persons applying for permission to remit large sums of foreign currency abroad.
In one instance, between January and July 2017 at NEDBANK, Mzuzu Branch in the city of Mzuzu using account numbers – 011990004554, 061000012717, and 061000012962 obtained US$2,192,292.50 but no imports were made.
Both Reserve Bank of Malawi and the Finance Intelligence Authority have evidence that huge sums of illicit funds are possibly being laundered using the Malawian banking system under the disguise of import payments being made by what appears to be legitimate businesses.
And in unresolved cases at the Malawi High Court dating back to 2014, 13 Indian owned companies allegedly externalized $4 million in eight separate transactions. Indian companies have long played an important role in Malawi’s business world and now control about 60 percent of the economy through various companies ranging from manufacturing to banks and hotels.
The cases against the 13 Indian companies are known because they have been brought to court by the RBM and FIA.
The companies and individuals are: AMAD, M R – Intertrade Agency and Mozimpex, USMAN, S and BILAL, S – Hasbro Ltd and Verizon, ARIF, M – Noor General Distributors and TS Distributors, RAZZAQ/RAZAQ, M and MANJARA, A S I – ZamZam Import &Export, GANI, S G and RAZA, N – Premium Commodity Traders Fawa Products; Tarar Enterprises Hong Kong: Vic Charm Ltd, RAWANI, S S [FRS Co Ltd; BT Trading Co; Al Johara; Nantong JunloveInt; HK Polymers], Musa KariamIbrahiam of Zambezia Traders, KaramatUllahChaudhry and Naeen M. Iqbal.
For instance, Mahomed Rafiq Amad Managing Director of Intertrade Agency faces nine counts involving the externalization of a total of US$2,058,000.