Dragnet closes in

..as FIU pounces on schools, pharmacies



The Financial Intelligence Unit (FIU)  has swooped on several schools and pharmacies accused of abusing foreign currency  obtained from the Reserve Bank of Zimbabwe (RBZ) controlled foreign currency auction system.

The schools and pharmacies are accused of channeling it to the black market.

The RBZ governor, John Mangudya confirmed the development yesterday saying the abuse was rampant.

The FIU, which was established in 2004 in terms of section 3 of the Bank Use Promotion and Suppression of Money Laundering Act (Chapter 24:24), exists as a unit in the administrative establishment of the RBZ.

But, it has its own governing statutes giving it a mandate distinct from that of the central bank.

Mangudya said this vicious cycle has continued for a long time and benefits a corrupt few at the detriment of the economy but this has to stop.

“……(The) FIU is currently investigating cases of breaches of the Bank Use Promotion Act and currency manipulations by some business entities. The breaches have become particularly pronounced and prevalent at some schools and pharmacies. The FIU will deploy all tools at its disposal to deal with such malpractices including imposition of fines, freezing of bank accounts and blacklisting from enjoying financial services,” Mangudya said.

The central bank also urges the members of the public to report offending businesses and service providers.

Mangudya said the FIU will unearth various foggy schemes by companies benefiting from the auction system as the central bank moves to deal with the run-away parallel market exchange rate, which has resulted in prices of goods and services skyrocketing in the past few weeks.

The apex bank introduced the foreign exchange auction system in June 2020 and so far over US$1.2bn  has been allotted.

Mobile money operators were blamed for the volatility in exchange rate, resulting in the RBZ regulating their limits.

Mangudya said a crack team from FIU was closing the net on those with rent-seeking behaviour.

In 2020, the  FIU froze bank accounts of top business people and companies who were suspected of black market foreign currency dealings.

The central bank chief said the FIU has enhanced their surveillance role to flush out those who are abusing foreign exchange in the economy, especially those abusing the foreign auction system as breeding ground for arbitrage.

Various investigations by the FIU have revealed that companies and individuals with brief case companies sell foreign currency on the parallel market and then come to the foreign exchange auction where they use local currency to bid for foreign currency.

The official exchange rate is ZWL$108.66: US$1 while the local currency is trading at ZW$230 to the greenback on the parallel market.

Mangudya said the central bank will “ensure that authorised dealers or banks and foreign exchange auction system participants comply with auction rules and regulations to curb abuse of the foreign exchange auction and safeguard the auction from being abused as a breeding ground for arbitrage opportunities.

The monetary authorities have been accused of not effectively dealing with the violators of the foreign exchange auction system but they have vowed to leave no stone unturned in cleaning up the financial services sector of any malfeasance threatening to destabilise the foreign exchange auction system.

National Foods, Georgia Petroleum, Tettola Investments, Africa Steel, Westvillle Investments (T/A) Omni Africa) and Flicknik Enterprises  are among  some companies that were penalised  for abusing the  forex auction system.

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