OVER 200 local businesses were slapped with severe sanctions by the Financial Intelligence Unit (FIU) for manipulating the foreign currency exchange rate through illicit black market currency trading and abusing the official foreign exchange auction.
The FIU, which is the Reserve Bank of Zimbabwe (RBZ)’s investigations arm, referred over 140 cases of alleged financial crimes relating to currency manipulation to law enforcement agencies for further investigations over the same period.
To date, 82 cases of alleged breaches of financial regulations have been referred to the Criminal Investigations Department (Commercial Crimes Division), while six cases were handed over to the Central Intelligence Organisation Counter Terrorism Unit.
The Zimbabwe Anti-Corruption Commission (ZACC) is also investigating 11 other cases, while the Zimbabwe Revenue Authority is conducting further investigations into 41 cases referred to the taxman by the FIU.
A single case is with the RBZ’s Exchange Control Division.
The Sunday Mail understands that some of the businesses that were flagged by the FIU were the alleged top financiers behind black market foreign currency trading.
Other businesses were accessing forex through the RBZ Foreign Currency Auction before pegging prices of their goods and services using the black market exchange rates.
The imposition of harsh financial sanctions by the FIU coupled with the ongoing criminal investigations by law enforcement agencies constitute a cocktail of response measures being implemented by authorities to stop manipulation of the local currency, which has fuelled inflation and currency volatility.
The far-reaching response measures to arrest the blatant sabotage of the Zimbabwe Dollar have also witnessed the FIU freezing bank accounts belonging to dozens of businesses.
The central bank has also put banks with weak Know Your Customer systems on notice, with the threat of severe financial sanctions looming large.
KYC systems are standards designed to protect financial institutions against fraud, corruption, money laundering and terrorist financing.
In an interview with The Sunday Mail, FIU director general Mr Oliver Chiperesa said the ongoing blitz was targeting illicit currency manipulation through local banking systems.
“There are those companies that we have fined ourselves as the FIU using administrative sanctions, they were around 150 last year.
“To date, there are now 206 companies fined by the FIU through administrative sanctions,” said Mr Chiperesa.
“Then there are cases that we refer to law enforcement agencies, that is the ZRP, ZACC and ZIMRA and so on. We have so far referred 141 cases.”
He, however, said the prosecution of cases referred to law enforcement agencies was below par.
Mr Chiperesa said as a result of the FIU’s investigations, dozens of companies have been blacklisted from accessing the RBZ forex auction.
“Every week we have companies that are being disqualified from the auction for various forms of abuse.
“Repeat offenders will be barred from accessing the auction altogether. As regulators, we have noted that some banks are submitting applications on behalf of their clients without doing enough due diligence.
“The Central Bank has now come up with stiff penalties against banks who have lax Know Your Customer platforms (KYC) and who are found to have facilitated fraudulent applications to come through to the auction.”
Mr Chiperesa said the FIU will not spare businesses that are pegging prices of their goods and services using the parallel market exchange rate while accessing foreign currency through the RBZ auction.
“The FIU has frozen accounts of dozens of companies that engage in this type of malpractice which amounts to exchange rate manipulation,” he said.
Mr Chiperesa said the blitzkrieg against currency manipulators was beginning to bear fruit with the exchange rate movements slowing down over the last two months.
“We do not share the sentiment that the Zimbabwe dollar has been losing
value at an alarming rate,” he said.
“The rate of depreciation on the parallel market has slowed down over the last year and has been stable over the last two months or so on the back of a combination of prudent measures by the fiscal and monetary authorities which have restricted money supply.
“But the following are the key factors that tend to push the parallel market rate up: Whenever there is a huge injection of Zim dollars into the market, either by Government making payment to goods and service providers, which in most cases is unavoidable or by private sector players seeking to offload huge ZWL balances in exchange for US dollars. The second and very important factor that tends to push the rate up is the current trend whereby economic players, whether corporate or individual, whenever they get Zimbabwe dollars, they want to immediately convert them to US dollars as a store of value thus creating a high and artificial demand for US dollars. The third factor pushing demand are goods and service providers who demand payment in cash, even those that do not need to import anything.
“This forces the ordinary consumer to also go and buy the US dollar on the parallel market, again creating artificial demand.”
Mr Chiperesa said monetary and fiscal authorities are implementing measures that promote greater demand and use of the domestic currency.
Last month, the FIU ordered the freezing of bank accounts for four companies citing suspicious activities related to money laundering activities.
The companies – Geribrian trading as Transervet, Powerspeed trading as Electrosales, Halsted and Enbee – were barred from withdrawing money from their accounts until the conclusion of the FIU’s investigations.
The Central Bank is on a drive to rein in market indiscipline, which has seen businesses taking advantage of lax regulations to profiteer while in the process manipulating the exchange rates to their benefit.
A Chinese restaurant in Harare, Shangri-La, was also slapped with a US$30 000 fine for pegging prices way ahead of the official exchange rates last month.
Source — Sunday Mail