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Electronic Fund Transfers fuel money laundering in Zimbabwe

by Vusumuzi Dube
27 Dec 2020 at 07:13hrs | Views
CROSS-BORDER money traders are collecting huge sums in foreign currency in Zimbabwe and smuggling it into South Africa through the use of Electronic Funds Transfer (EFT).

The illegal traders turned to the sophisticated EFT system during the implementation of the Covid-19-induced lockdown which saw most countries close their borders.

Authorities have said the country could be losing millions in potential foreign currency to these illegal traders.

The EFT system has, according to the Reserve Bank of Zimbabwe (RBZ) officials, become a haven for criminal elements wanting to smuggle foreign currency out of the country, where they give traders as much as US$100 000 which they can retrieve from their South African banks.

Some use legal means to send back the money to Zimbabwe, with investigations by Sunday News revealing that in most cases the individuals avoid the use of registered banks as some of the money will have been made through illegal activities like gold trading and hence will be avoiding attracting the scope of authorities.

EFTs are defined as transactions that use computers, phones or magnetic strips to authorise a financial institution to credit or debit a customer's account.

This means people can no longer physically smuggle money outside the country hence traders manipulate the EFT system.

The EFT system can be used to move around currencies across borders at the click of a button with financial experts saying it can be prone to abuse and fuel illicit financial flows with people moving most of the money unmonitored.

In an interview, RBZ governor, Dr John Mangudya said while they could not quantify the money they were losing through this system, it was a huge amount revealing that their main worry was that these funds could actually go a long way in boosting the country's economy.

According to central bank figures, Zimbabwe requires US$100 million a month for industry and critical imports such as fuel.

Dr Mangudya said the country had in February passed into law the Money Laundering and Proceeds of Crime Act in a bid to curtail such activities but noted that the traders were always changing their operations to avoid arrest.

"We are really concerned with this level of non-compliance, what concerns us even more is that we cannot even quantify how much we are losing in these transactions because they operate illegally but we also are aware that it is happening.

Our Financial Intelligence Unit is working round the clock to bring these individuals to book but these people are continuously upgrading their operations like the use of the EFTs to keep ahead of law enforcement agents, but eventually we will bring them all to book," said Dr Mangudya.

According to the Money Laundering and Proceeds of Crime Act that was gazetted by Government in February, any person who enters or leaves Zimbabwe in possession of currency equal to or exceeding US$15 000 must disclose this to a customs official.

"Any person who intentionally or by gross negligence fails to make any disclosure or makes a disclosure that is false in any material particular, or fails to make a full material disclosure, commits an offence and is liable to a fine not exceeding US$100 000 or to imprisonment for a period not exceeding 12 months or both such fine and such imprisonment," read part of the Act.

Dr Mangudya said there was a need for the public to realise that the country had come up with laws that made it much easier for them to trade in Zimbabwe and that the use of the EFT money laundering system was unnecessary.

"Look, I honestly do not see the motivation in this illegal activity unless in a scenario where these funds could have been raised through illegal means but we have created mechanisms where people can freely trade in Zimbabwe and they can also transfer funds through normal channels and shun these illegal means," said the RBZ governor.

Commenting on the matter, National police spokesperson Assistant Commissioner Paul Nyathi said their Commercial Crimes Department was closing in on these individuals so as to bring them to book.

"As a country we do not condone any money laundering activities, we have clear laws relating to that. These individuals must be warned that no matter how sophisticated they think they are, the long arm of the law will eventually catch up with them.

"Over the years we have noted a lot of people taking part in these illegal activities mainly involving foreign currency, which is worrying us as a nation hence our proactive approach to bring these perpetrators to book," said Asst Comm Nyathi.

Sunday News managed to interview one of the traders in Bulawayo dealing in EFTs, who revealed that their target market was big businesses who would want to make orders in South Africa but could not cross the border or fly with the money.

"In most cases we deal with people who won't be able to explain their monies to the Government hence to avoid being arrested or questioned they then approach us. Our service is such that as soon as I receive the money our agents in South Africa transfer the amounts into bank account numbers which our clients would have provided.

"Personally, I operate with figures from US$10 000 going upwards. We do not operate with small figures because our target are big businesses. We charge 20 percent for every transaction," said the trader who identified himself as Nkosilathi.

The trader noted that despite the illegality of their transactions, they would rather continue playing cat and mouse with authorities as theirs was a profitable business hence it would be hard to stop.

This story was produced by Vusumuzi Dube. It was written as part of Wealth of Nations, a media skills development programme run by the Thomson Reuters Foundation. More information at . The content is the sole responsibility of the author and the publisher.

Source - sundaynews