By Lambwe Kachali
Dubious financial transactions in Zambia have continued to skyrocket, now costing the country K6.1 billion from K4.5 billion in 2017, according to the Financial Intelligence Centre (FIC) report.
And FIC has cited law firms as major accomplices in facilitating suspected criminals to mask the source of funds and aid reinvestment or movement to foreign jurisdictions.
According to the FIC report which zeroed in on the 2018 financial transactions, and obtained by Daily Revelation, corruption is on the ever-increasing trajectory under the Patriotic Front (PF) government under the leadership of President Edgar Chagwa Lungu and has cost the country hugely.
“In 2018, the Centre analysed 176 suspicious transaction reports, of which 80 were disseminated to Law Enforcement Agencies on suspicions covering: tax evasion, fraud, corruption and money laundering. The total value of the suspected offences in the disseminated cases was estimated at ZMW 6.1 billion (or about USD 520 million) which includes tax assessments by ZRA amounting to ZMW 62 million,” the report stated in part.
FIC reported that in the year under review, the country lost K4.9 billion to corruption, K1 billion was lost due to tax evasion, K110 million to theft, while K54 million was lost due to fraud: cumulatively amounting to K6.1 Billion.
“The trends observed in 2018 were in many ways similar to those of preceding years. For example, in 2017, the Centre disseminated reports involving suspicious financial transactions valued at ZMW 4.5 billion, increasing to ZMW 6.1 billion in 2018. This was mainly attributed to the increase in the value of transactions related to corruption in the disseminations. The most prevalent forms of corruption noted in 2018 were those involving bribery, self- dealing/conflict of interest. During the year, the Centre disseminated reports on corruption with an estimated value of ZMW 4.9 Billion,” the report emphasised. “
FIC further stated that public procurement or tender awarding processes had become extremely vulnerable to corruption.
“Certain specifications are manipulated to disadvantage other bidders. After the specifications have been drawn, the tender process commences. This involves the bidding and the awarding of contracts. The implementation stage is also susceptible to corruption as most contracts are not performed as per contractual obligation. Procurement corruption has led to the crowding out of legitimate businesses. It has also increased the cost of public projects,” the report continued and cited companies involved in dubious corrupt dealings.
“Shell Corporate Vehicles are registered companies that are non –operational and do not have known physical addresses. From cases analysed in 2018, shell companies were used to obtain contracts from Government institutions and launder proceeds of crime. It was also noted that some shell companies were used to conceal the identity of beneficial owners. Other cases analysed indicated that some contracts were awarded prior to formation of the corporate vehicle. The FIC noted the high usage of gatekeepers such as law firms and accounting/audit firms to facilitate corrupt activities. The specific activities included using accounts of law firms to layer transactions, purchase property and to distribute cash to beneficial owners,” the report stated in part. “In some instances, the perpetrators were holders of public office, and part of their responsibility was to regulate members for AML/CFT purposes. These included banks, micro-finance institutions, pension funds and insurance companies. A number of cases that were analysed involved placement of proceeds of crime and transfer to jurisdictions outside Zambia. The FIC noted a continuing trend of the use of associates or nominees or family members to hide beneficial ownership of corporate vehicles and to own property. In some instances, the FIC observed a trend where ‘’Companies’’ not registered with the Patents and Companies Registration Agency (PACRA) were awarded public contracts. Most of these companies were connected to Politically Exposed Persons (PEPs). The FIC observed dispossession of property through force and intimidation of legal owners and Law Enforcement officers. Perpetrators included Zambians and foreign nationals.”
And FIC cautioned law firms in the country against becoming accomplices in illegal financial transactions.
“It was observed that identified law firms assisted suspected criminals to mask the source of funds and aided its reinvestment or movement to foreign jurisdictions. Most cases involved illegally obtained funds transferred to law firms who then facilitated the acquisition of property such as land and motor vehicles on behalf of the launderers. In 2018, the Centre analysed cases related to nine (9) law firms amounting to ZMW 365 Million,” the report revealed.
FIC added that some Casinos and Real Estate businesses have joined the thieving band through money laundering among other illicit financial transactions.
“The acquisition of property using laundered funds continued to occur during the year 2018. The Centre observed a discrepancy between the mortgage market and the rising number of housing and office infrastructure. This rise can partly be attributed to an increase in the number of Property Developers. Currently, there is no regulator that oversees the activities of property developers for AML/CFT purposes. Construction provides an easy and undetectable avenue for criminals to launder funds. The placement and layering of the illegal proceeds occur during the construction of property. The Integration of the proceeds of crime occurs when either the property is sold or leased for rental income,” stated FIC report. “Reports analysed by the Centre in 2018 indicated that some casinos do not hold bank accounts in Zambia. It was however noted that persons, especially from foreign jurisdictions working for these casinos, had bank accounts in Zambia that received large cash deposits which were followed by large outward transfers, mostly to their home jurisdictions. Further, some casinos were using employees and shareholders as cash couriers. The Centre also noted that some of these casinos are not compliant with the local law requirements prescribed by the Zambia Revenue Authority or the Licensing Committee under the Ministry of Tourism and Arts.”