In many countries, externalising forex illegally is a very serious crime which carries lengthy jail term. It is only in Malawi where the government and monetary authorities have treated the issue with levity. Late Bingu Wa Mutharika took the issue seriously to the extent that a bank was closed down because of this malpractice. Business criminals mostly Asians, Chinese and Pakistanis have been illegally externalising huge sums of forex to China and other Asian countries.
However, the Reserve Bank of Malawi (RBM) is now taking the issue seriously. RBM governor Dalitso Kabambe has lobbied the judiciary to speed up the prosecution of 22 cases in which a staggering K400 billion worth of forex has been illegally externalised. This is a huge forex loss which could have been used in the development of the country. It is tantamount to destroying the economy.
The judiciary is a critical player in bringing to book suspects. The fact that the governor has lobbied the judiciary to fast track the cases tells you that our justice system has problems and that the wheels of justice are frustratingly slow. Unfortunately, our justice system does not prioritise cases such that high profile cases like cashgate and illegal externalisation of forex are not given priority. This partly explains why cases take too long to conclude.
Taking legal action against perpetrators should just be one of the measures to curb illegal externalisation of forex. RBM need to come up with stringent measures to make illegal externalisation of forex more difficult. I have argued that RBM should also hold banks accountable for helping these business crooks to illegally externalise funds. Some bank officers take bribes from these business criminals to wire funds illegally while negligence of duty is also part of the vice. Hefty penalties should be imposed on banks that are involved in such malpractices.
Cases of illegal externalisation of forex are also on the rise because business criminals, some of whom masquerade as foreign investors, have noted loopholes in the manner import payment transactions are made. That is why these crooks easily cheat by purporting that they have imported goods when in actual fact no such importation was ever made. Some of them present fake documents with MRA stamps.
While Letter of Credit (LC) is a preferred way to pay for imports, banks should insist that payment of imports is only done when goods have arrived in the country. It is important to verify with relevant institutions that goods have arrived in the country, and all relevant documents such as bill of lading, invoices, customs documents etc are also verified with relevant institutions.
While this sounds cumbersome, it is necessary to keep away criminals. It is high time exchange control was tightened up in the interest of the nation. If investors are not happy with some measures that RBM can take, they should be free to leave our country. We should not be victims of illegal forex transactions just because we want to please investors or the business community.
RBM and commercial banks should equally be wary of payment of management fees or loans to parent companies. Foreign companies use these instruments as a ploy for illicit externalisation of funds. A way should be found to stop or limit such transactions. As a regulator of the financial sector in Malawi, RBM should continue to be on top of things and act swiftly to issues of illegal forex transactions. This includes illicit financial outflows.