LIVINGSTONE MARUFU
The Financial Intelligence Unit (FIU) is plotting a massive crackdown against individuals and companies that are involved in exchange rate manipulation , fearing that the speculative behaviour could result in fresh destabilisation of the exchange rate, Business Times can report.
Apparently, FIU has busted several foreign currency exchange rate manipulators this week across the country. Two weeks ago, the opening rate for the new currency was ZiG13.56 per US$1, but parallel market dealers are now trading at ZiG20: US$1.
It comes after Dr. John Mushayavanhu, the newly appointed governor of the Reserve Bank of Zimbabwe, abandoned the Zimbabwe dollar and instituted the Zimbabwe Gold (ZiG), which is backed by gold and other precious minerals in addition to foreign exchange reserves, in an attempt to combat inflation and stabilize the unstable economy.
Oliver Chiperesa, the director general of the FIU, told Business Times this week that the unit is already on the ground executing the law that declares street foreign currency exchange dealers to be illegal.
“For our part as FIU we have identified traders, especially wholesalers and manufacturers who are either not accepting ZiG or are putting an unjustified premium on the rate, and we are taking stern action on those.
“We have given them a warning to comply by the end of day today (Wednesday) after which we will be freezing their accounts and fining them,” Chiperesa said.
He added: “There are also those that are claiming they are still configuring their systems so are not yet accepting ZiG. We have told them that if it’s taking them that long to configure, they should stop trading until they are in a position to accept both currencies.”
According to him, the intelligence unit keeps an eye on a variety of bank account activities to look for any infractions.
Business Times can report that in certain cases, informants are given money to purchase items to see how the offenders carry out their business.
“If we catch them, we will permanently freeze the illegal forex dealers accounts. We acknowledge that the parallel market is still there but generally it is within the acceptable range of probably 10% of the official rate and that’s normal.
“Whilst we don’t tolerate such issues, it’s still normal in an economy. But when we see some serious distortions we step in to investigate and take steps.
“We are already in the streets before the money changers are too many in the streets, we don’t want to wait for the exchange rate to go bisek.”
In the course of its work, the FIU will collaborate with other law enforcement organizations to capture street-based money changers.
Chiperesa said that while the blitz operation is praiseworthy, the FIU needs to strengthen its processes to ensure that criminals won’t have accounts for a long period.
“Apart from clearing them from the street, we are monitoring bank transactions so that we may identify red flags with some of the transactions occurring. If we see transactions undertaken repeatedly in the same shop or outlet, we will permanently freeze those bank accounts.
Clearing is not enough as they may come back on the same day but the most important thing is for FIU to monitor transactions using technology as we check the activities on people’s bank accounts and red flag the gigantic accounts.
“We democratically allow people to open accounts with as many banks as one can but those with more than three accounts will certainly come under scrutiny.
“When you see someone with four accounts there is something amiss, we will identify those as well.The dealers try to transact on many platforms to avoid being noticed but we are certainly now on them again on too many accounts,” Chiperesa said.
Additionally, the banks and the FIU are collaborating on caps that are implemented to prevent individuals who move large sums of money.
Chiperesa claims that the FIU was in charge of keeping an eye on the financial activities and figuring out who the real cardholders were.
“That’s precisely what we are going to do with the police [to see those behind huge transactions] and we will confiscate those cards and freeze those accounts. We have permanently frozen [and will freeze again] some people’s bank accounts as a way to deal with illegal forex traders,” he said.
“We have been observing various activities on the market during this transition period and we were not taking action but we are ready to do so now. If we see those manipulating the rates deliberately we will definitely intervene.”
Finance, Economic Development, and Investment Promotion Minister Professor Mthuli Ncube pledged last week that the government is determined to remove money changers from the streets during a short presentation of the Monetary Policy Statement in Parliament.
He said police officers are ready to start the blitz.
Assistant Commissioner Paul Nyathi, a spokesman for the police, stated in an interview on Wednesday that law enforcement officers are awaiting the go-ahead to launch the blitz.
“We need your patience on the operation but we are still aiming to undertake it this week,” Nyathi said.
He added: “We are working together with the Reserve Bank of Zimbabwe to end this practice and the law will take its course without fear or favour.”
