Strict measures can help prevent illegal money

Tue, 29 Nov 2016 13:17:18 +0000

By Buumba Chimbulu

Combatting money laundering requires developing very good intelligence and highly coordinated efforts.

MONEY laundering is a massive global problem and a single scheme typically involving transferring money through several countries in order to obscure its origins.

There are three stages involved in money laundering; placement, layering and integration.

Placement is the movement of cash from its source. On this occasion, the source can easily be disguised or misrepresented while layering is to make it more difficult to detect and uncover a laundering activity.

This is meant to make the trailing of illegal proceeds difficult for the law enforcement agencies.

The integration stage involves the movement of previously laundered money into the economy mainly through the banking system and thus such monies appear to be normal business earnings.

Thus, money laundering is the process of taking the earnings from criminal activities such as drug trafficking and tax evasion and making them appear legal.

This immorality has serious economic and social consequences such as diminishing government tax revenue while weakening its control over the economy.

Money laundering, financing of terrorism and other financial crimes are global problems that undermine the economic prosperity of a nation, threaten national security, and compromise the stability, transparency and efficiency of the economic systems.

These also encourage crime because they enable criminals to effectively use and deploy their illegal funds. Every year, huge amounts of funds are generated from illegal activities.

In Zambia, the Financial Intelligence Centre (FIC) is part of the national effort to combat and safeguard the stability and integrity of the nation against this vice and other serious offences.

FIC is a sole and designated national agency responsible for receiving, requesting, analysing and disseminating to competent authority’s disclosure of financial information regarding potential money laundering offences.

According to FIC director Mary Chirwa, Zambia is currently losing about US$3 billion in financial flows annually as a result of tax fraud, money laundering and conspiracy.

“Recent reports show that Zambia is losing about US$ 3 billion in financial flows annually,” she said.

Ms Chirwa also said about 1, 507 financial crime cases such as tax fraud, conspiracy and money laundering had been handled by the FIC in Zambia since its inception in 2014.

She observed that the accountancy profession was the most vulnerable when dealing with financial crimes due to its nature.

“FIC, since inception in September 2014, has handled about 1, 507 cases some of which still need more information but 347 have been disseminated to law enforcement agencies pending investigation and prosecution,” she said.

Also, economist Oliver Saasa called on the Government in collaboration with commercial banks to establish a system that would easily monitor how much money comes in and goes out of Zambia to avoid money laundering.

Prof. Saasa said the absence of exchange rate controls did not give a licence for money laundering.

According to him, commercial banks would be able to monitor money movements and put up corrective measures if proper regulations were in place.

“Lack of exchange rate controls does not mean allowing money laundering. There are people who will actually go and pirate and bring money because there are no controls. Lack of control, however, does not mean allowing wrong doers to come to Zambia and do wrong things,” he said.

Professor Saasa observed that there were certain businessmen who shipped money they made through bureau de change, hence causing capital flight.

He suggested that Government must ensure and insist that companies with a turnover of US$2 million have ATM machines in their shops to allow money reach the banks and reduce capital flight.

Launching a fight against money laundering is a battle concurrently being paid against organised crime.

It would, therefore, be unwise for governments across the globe to underestimate the dangers of this vice.

The Zambia Revenue Authority (ZRA) is an institution mandated to collect taxes in the country and one of its core mandate is to fight money laundering.

Other than tax collection, ZRA is also responsible for combating smuggling, prosecuting tax evaders and it is a partner in the fight against money laundering and financing of terrorism

On the regional level, Zambia is among Common Market and Eastern Southern Africa (COMESA) member States which would be added in the next phase of the law enforcement agencies programme aimed at curbing money laundering in the region.

According to the COMESA head governance, peace and security Elizabeth Mutunga, there are currently 10 member States on the programme and that Zambia and other countries have been lined up awaiting addition in the near future.

“To ensure that as we develop a future phase of fighting money laundering, we should include some new countries and Zambia is one of them,” she said.

Ms Mutunga observed that money laundering was a complex crime that continued to change as criminals were ever designing new and innovative methods of hiding and laundering their illegal money.

Globally, the figures behind money laundering are astonishing. In terms of turnover, it is the third largest industry in the world, behind only foreign exchange and petroleum.

Exact figures are unavailable, but a figure in the region of at least $500 billion per annum is widely accepted.

This would be a disaster for the States that desperately require foreign direct investment because international businesses would be deterred from any economic involvement.

Economies themselves can also be disturbed by changes in the demand for cash, causing interest and exchange rates to be more volatile.

Inflation is another danger to economic stability, caused by a sharp rise in cash in the system.

Money laundering leads inevitably to the corruption of officials and employees of the financial and political system, adding to the empowerment of organised crime, and seriously undermining the rule of law.

Over the years, sophisticated criminal organisations have leveraged the accessibility, speed and relative anonymity of the internet and web-based financial programs to better perform and hide their money laundering activities.

Instead of having to run the risk of physically transporting currency gained from illegal operations out of a country, criminals often times conceal the currency by transforming it into a digital format.

This way, dirty money is unable to be distinguished from legal currency.

Advanced computer technology and communication technology is now routinely used to increase the effectiveness and protection of drug-related acts of money laundering.

Currently, there has been significant progress in standardisation of systems of electronic payments.

Some of the features of electronic payment systems, such as the possibility of transferring cash from person to person, on the condition of anonymity of the payer offering the services to the client are on the rise.

Banks and non-Bank institutions may be subject to different rules regarding their transactions with the electronic payment systems.

This distinction already occurs in several countries where non-Bank institution card issuers of electronic payment systems is currently subject to a set of rules different from that for banks.

If a company risk relating to money laundering or terrorist financing is high, it must take reasonable steps to keep its clients’ basic information up to date.

How often it updates this information would depend on its risk assessment.

Strict rules prescribe measures to prevent money laundering and terrorist financing, both locally and abroad.

A company’s first and most important step is to establish sound anti-money laundering policies and procedures across the board. For starters, this means placing an emphasis on “knowing your customer.”

Imperative to the success of an anti-money laundering effort is the full support of senior management and all employees.

In fact, compliance to anti-money laundering policies and procedures should be part of a company’s code of ethics or basic employment standards or expectations.

In addition, non-compliance with anti-money laundering strategies could be sufficient cause for employee dismissal.

A very clear anti-money laundering training program and a commitment to ongoing training are two additional necessities.

All employees who have customer contact (directly or indirectly) or who have occasion to see or handle customer transactions and activity, should be required to take the training, including all new hires.

Furthermore, a policy should be in place that states what form of annual training would be given and who would take it.

Very importantly, the company needs to be concerned about protecting against fraud, money laundering and reputation risk, as well as ensuring compliance with laws and regulations.

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