FIU crackdown nets 300 firms

LIVINGSTONE MARUFU

The Financial Intelligence Unit (FIU) has fined over 300 firms in the past 18 months for fuelling illegal parallel market activities in an audacious move to stabilise the local currency and contain inflation.

Zimbabwe has been grappling with inflation and a volatile exchange rate since de-dollarisation owing to excess local currency that businesses dispose of in search of the greenback to store value.

FIU director general Oliver Chiperesa told Business Times that some firms tend to “siphon” their proceeds into the parallel market thereby causing domestic inflationary pressures.

“We have fined over 300 companies in the past 18 months over their participation in the illegal trading of foreign currency on the parallel market thereby influencing the exchange rate. Since 2021 we have taken this administrative action against these companies to instill discipline,” Chiperesa said.

FIU has suspended several companies including Transervet, Powerspeed trading as Electrosales, Halstead Brothers, and Enbee noting unusual activities on the business entities.

It also carried out investigations on the possible money laundering relating to the fund and accounts that were frozen.

The companies were allowed deposits or other flows into the account.

He said when the accounts are frozen banks are told to report to the Unit any deposit or other inflow into the account as well as attempted withdrawal or transfer from the account.

“FIU has drastic action before we afford a person an opportunity to temper with accounts.

As FIU we check the anomalies in the banking sector, that is where we monitor how the money was moved, what where you buying, whether is it a normal operating company, and does it have the services you require, if we see that there is no linkage and there is no normal business relationship with the two companies we pick it.

“After that, we dig deep and analyse the findings as well as engage the parties, resultantly many have confessed to taking part in the parallel market,” Chiperesa said.

“If we are tough with every business that we find guilty, the economy will ground to a halt. That’s why we try to strike a balance. The main reason why we try to deal with the issues at FIU level is that our criminal laws are a bit weak on that side as most issues we have referred to the police were not effectively dealt with.”

He said the country’s laws need an upgrade to deal with these issues, as there are no strict measures to deal with the perpetrators.

It is said courts view these issues as administrative issues.

“Sometimes it is a symptom of forex shortages in the country but in a normal economy where things are balanced and people are using mono-currency that will not happen. It is Zimbabwe’s unique situation.

“We see fine as a solution. If we just refer to the police that may be the end of the case as the police process takes time to deal with the processes,” Chiperesa said.

FIU now has the power to freeze for 90 days from the previous 14 days to give the police the time to investigate.

The penalties stretch to over ZWL$1m per violation but sometimes the violations could be bigger and attract bigger penalties, Chiperesa said.

FIU says the freezing of accounts is working very well to instill discipline in the market, especially those companies that are outliers in terms of charging exchange rates that they cannot justify.

Under FIU rules, the Unit will start by discussing with companies that it has identified as violating Statutory Instrument 127 of 2021. If the company chooses to ignore FIU calls then it will move to freeze the accounts.