Malawi authorities need action against perpetrators of illegal forex externalisation

This is one of the several articles I have written urging fiscal agencies like the Financial Intelligent Authority (FIA) and Reserve Bank of Malawi (RBM) to be bold enough to take action against corporates and individuals involved in financial crimes. But they turn a blind eye to the malpractice instead of taking action against economic saboteurs.

This is hardly surprising because it is a reflection of the DPP leadership led by President Peter Mutharika. Since President Mutharika is not serious in tackling corruption or running the country or demanding accountability from those that serve him, Malawians should not expect those running state institutions to be serious with their work. That is the way it is!

For example, the barbaric DPP young democrats caused commotion during the State of the Nation address and beat up a Daily Times photographer a few weeks ago. The police are failing to arrest the terrorists! A Mozambican police officer shot dead a Malawian a few months ago in Makanjira, Mangochi where a border dispute has ensued with Mozambique. Minister of Information and Civic Education Nicholas Dausi only consoled the family. He failed to demand justice through the Ambassador of Mozambique to Malawi that the murder be investigated and the police officer concerned should face justice.  

Last year scores of innocent children were killed and others injured in a stampede at Bingu National Stadium during the Independence Celebrations. No one was held accountable for the decision to open the gates late. Malawi is leaderless!

Every year Malawi loses billions of kwacha through illegal externalisation of foreign exchange (forex) while regulatory institutions just sit and watch!  The FIA and RBM, through the transaction analysis, uncovered last month that a syndicate of foreign nationals siphoned off more than $7.4 million (about K5.4 billion) in 2017 through dubious import payments. The racket to illegally externalize forex has been going on for decades; it is not new. According to the Global Financial Integrity, Malawi is among the 25 worst countries in the world where money laundering is flourishing with over K200 billion being illegally moved out of the country annually. Such a staggering revelation would naturally give financial regulators and policy-makers food for thought to devise ways to strengthen exchange controls to halt illegal externalisation of forex. Unfortunately, in Malawi where many people sleep on the job, authorities are doing nothing about it.

Appearing on Bottom Line programme on Times Television recently, Indigenous Business Association of Malawi President Mike Mlombwa said Malawi is a centre of money laundering activities and illegal externalisation of funds. He was dead right!  Malawi has become a haven for foreign criminals, masquerading as foreign investors, because it is easy to siphon off forex. They have realised that they can easily beat the system and use corrupt bank officials and get away with their criminal behaviour because enforcement agencies like RBM and FIA are equally weak.

Both the FIA and RBM have handled issues of the illegal externalisation of forex with laxity. They do not take their work seriously. One cannot believe that the FIA Director General Atuweni Juwayeyi Agbermodji only “advised the banks and other deposit-taking institutions to avoid being used as conduits for money laundering. She also warned “employees working in financial institutions that those who aid a customer in such illegal transaction could be prosecuted for money laundering which carries a maximum of life imprisonment.” Really?For such a serious offence banks can only receive advice while their employees can only receive a warning?

Surely, FIA must have been more serious!  Why not prosecute the perpetrators including banks and their officers? Externalising K5.4 billion illegally and do nothing about it is tantamount to negligence of duty. FIA should prosecute everyone involved in the racket. What are they fearing or who are they protecting? Certainly, these criminals have contact details be it business address, residential address, phone /cell numbers, email address etc. These and other leads should have been used to track down the foreign criminals and have them prosecuted. The bank clerks who were processing import payments without relevant documents should also have been arrested. The bank as an institution should also have been punished for aiding the criminals. And the banks involved in the malpractice must be named.  

If FIA is unable to live up to its mandate, it will lose its relevance and it is as good as not having the organisation at all. It also gives the impression that the people in charge of the institution are not up to the task. Udindo wakula! Money laundering and illegal transfer of forex are serious economic crimes which should not be treated with levity. FIA and RBM need to be reminded a bank was actually closed down in Malawi some years ago because of illegal externalisation of forex and money laundering activities.  Illegal forex outflows destroy the economy, undermine the country to build its foreign reserves and deprive the country of development resources.

In November 2017 Zimbabwe President Emmerson Mnangagwa issued a three-month ultimatum to all those who illegally externalized money to return it or face arrest. This is how serious some countries take illegal externalisation of forex. Even the highest office in the land takes an interest. But in Malawi it’s business as usual.

I have always argued that men and women who work in regulatory bodies should be courageous, stand firm and take action against any violations.  If they fail to implement the law, they are failing in their duties and failing Malawians. As regulatory bodies, FIA and RBM should not compromise their work. They should arrest and prosecute anyone involved in illegal forex transactions. RBM need to revise exchange control regulations to make the remittance of illegal forex more difficult and also easily track down forex fraudsters.

For example, attaching proof of residence (e.g. lease agreement), copy of ID and utility bill must be part of exchange control documentation for easy identification and tracking down of customers. And banks should verify information submitted to them by their clients and only effect payment when all relevant documents are attached and background checks are done. When will Malawi stop being sleepy?

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