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?
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!