Hold Malawi commercial banks accountable for illegal externalisation of forex

Cases of money laundering and illegal externalisation of foreign exchange are common and it seems the monetary authorities do not have a clue how to stop this. Huge sums of money are illegally leaving our banking industry to Asian countries and elsewhere. One is bound to ask: why is this happening on a regular basis and what measures are banks and the Reserve Bank of Malawi  taking to arrest the situation?

Cases of foreign exchange externalisation has been on the rise in the country and recently, RBM disclosed that Malawi lost about $980 million (approximately K719.32 billion) to illegal foreign exchange externalisation and transfer pricing.

According to High Court records in Mzuzu, an Indian and three Pakistan nationals are answering five counts of obtaining foreign exchange under the pretense of paying for imports and three counts of money-laundering. The four externalised illegally a total of US$3 million (about K2.3 billion kwacha) in a space of seven months using Nedbank, New Building Society and FDH Bank.  Another trader of Indian origin based in Blantyre externalised illegally US$2.08 million (about K1.5 billion) between 2010 and 2013. He was also involved in money laundering.

Stories of traders [many of whom are foreign nationals], externalising forex illegally or being involved in money laundering is not new. This has been going on for decades. But the hard questions that everyone should be asking are: why are these vices continuing? What should commercial banks do to stop this? What should be the appropriate action of the Reserve Bank to financial crimes? Can the Reserve Bank come up with new stringent exchange control measures to curb the malpractice?

Illegal externalisation of forex and money laundering are very serious offences in many countries. Recently, a court in Tanzania sentenced a man to 200 years for money laundering, meaning he will die in prison. A bank was shut down in Malawi almost a decade ago because of flouting exchange control regulations, illegal externalisation of forex and money laundering activities.  Since then, there has never been any meaning action by the central bank against commercial banks to stop the malpractice. And this has been a serious problem.

As long as commercial banks are not held accountable for their actions Malawi will continue to lose billion in forex to unscrupulous traders. Already Malawi is losing billions through illicit outflows.  Once commercial banks are held accountable they will start to be careful.  Reserve Bank should take a cue from the Competition and Far Trading Commission  of Malawi which recently fined Castel Malawi K35 million for selling unfit Sobo Orange to consumers.  This was Regulators should be tough against violations otherwise they lose their

It is high time Reserve Bank started holding commercial banks accountable for helping traders externalize forex fraudulently just as they should be tough on the culprits themselves. It is clear commercial banks are complicity in the forex racket. Some illegal externalisation of forex is because of outright corruption. Others is negligence of duty.

One also wonders why many foreign nationals, especially those from Asian countries are involved in illegal externalisation of funds and money laundering activities. And this involves huge sums of money. Imagine the Mzuzu four traders externalized US$3 million within seven months. This is economic sabotage. One can conclude that the money is externalized to finance terrorism. That is why monetary authorities need to get tough with financial crimes.

Banks and traders involved in illegal externalisation of forex and money laundering need to face the law. Some Indian and Pakistan traders are destroying our economy through illegal forex. The Reserve Bank and Financial Intelligence Agency need to work together and start putting these criminals behind bars. Many of these traders do not even bring value to Malawi other than siphon forex.  Just check the businesses they operate. Some of them operate groceries or supermarkets that Malawians can ably do.

Reserve Bank should review the Exchange Control Act to provide for stringent measures to make illegal forex externalisation difficult and also to provide for hefty fine for commercial banks involved in illicit forex transactions. It should not be business as usual.

Until 1994, the Exchange Control function was under the Reserve Bank. But with reforms in the financial sector and liberalization of the economy driven by the IMF, the function was delegated to commercial banks. This has been a disaster!

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#DzukaniAmalawi
Guest
#DzukaniAmalawi

All state institutions have collapsed. Nothing no longer works in Malawi not even those institutions mandated with oversight roles. Malawi is fficially a banana Republic and is haven for criminals.

Zimatiwawa
Guest
Zimatiwawa

Spot on Malani. Forex externalisation and land issues are very important issues we must address as a country. The Financial Intelligence Unit releases reports every year on forex externalisation in Malawi but nothing tangible is done to bring the culprits to book. Foreigners are taking advantage of our poverty and the corrupt people in the system – be it banks, MRA, Immigration dpt etc. Malawi has the potential to develop but these are some of the things that stand in our progress. The system needs complete overhaul. What the Indians and Chinese are doing in Malawi, a Malawian cannot even… Read more »

Panganani
Guest

I have been amazed why the Reserve Bank of Malawi is at the forefront of giving licenses to these Asians to run Money bureaus. Each time I have talked to officials in the Reserve Bank, their responses leave a lot to be desired. In Banks, these guys bribe big time and so do they when it comes to land matters. If the money laundering issues is not stemmed quickly, Malawi will be blacklisted for financing terrorism. In addition, Malawi needs to move faster to deal with land matters -otherwise, we will have no country. Has anybody wondered why lately, there… Read more »

benjones
Guest

MALAWIAN ARE SLEEPING. THEY WILL WAKE UP ON DOOMSDAY.

Johane
Guest
Johane

This is a very misguided article. Banks cannot remit FX without regulatory approval and we always submit. Also as bankers we cannot audit every client’s request to externalise FX. Do you really expect a banker to have the time and resources to check if company ABC is really purchasing steel rivets and that the price of such rivets is correct? It’s not our job. All we can do is ensure that there are valid invoices and such and then ask for RBM approval. Externalisation is an issue but its reckeless and irresponsible to accuse bankers of assisting people break the… Read more »

Hlabezulu Ngonoonda
Guest
Hlabezulu Ngonoonda

You are lying as well as hiding criminal reckless activity. Your banks has the time and resources to check what a company is buying from outside. It is just that your banks are following the footsteps of Hong Kong & Shanghai Banking Corporation which has operated accounts of shady characters by clearing suspicious checks. Like the mentioned bank, no single executives from your banks has faced single charges in court to explain why there are aiding suspicious forex transactions. The cash gate showed your negligence in that respect but you were spared for unknown reasons. It is a known fact… Read more »

ALICE
Guest

Kodi even the Chinese business people,, have you seen them on a que in any bank to deposit their moneys from many shops they are owning? where do they bank their moneys. Does anyone follow or check their bank accounts? People make money in our country and take it out. Most of the nyangwita clothes being sold in Chinese shops are brought by malawian business ladies for cheap cheap money, but after the shops owners sell them at a high price, when do the moneys go to? Please Malawi government, bring back the investors who can do commercial farming in… Read more »

Lilian Kaunda
Guest
Lilian Kaunda

There are people who are being sent by Chinese and Indians in Banks to apply for forex as if they are travelling and when they get the forex they sell it to indians and chinese who take it out to their respective countries through airports because they know they are corrupt fiscal police men at airports and border posts. Banks that are in this scam are NEDBANK and FMB

nyoko
Guest
nyoko

Not Banks but your failures as country to generate forex.Expect that if you allow
investors like Indians and Chines here to do Toy investments.Know alo that we are importing country.
All foreigners one day they will need to go back home with their profit and what they brought.

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