Editorial Comment: FIU must take the game to culprits

Defeating the myriad of people speculating at a high level in the foreign currency black market and doing their level best to cheat the auction system requires not just the Reserve Bank of Zimbabwe’s ability to look into bank accounts, but also high level staff who can look into a complex trail with unmapped sections and see the path the money has taken.

The Financial Intelligence Unit is the main body that does this. It is part of the Reserve Bank, but has a permanent staff of just 27, which considering the magnitude of the tasks before it is very much on the low side, especially as that group will include people not directly tracking down the movement of money through the systems.

So the recruitment of another 19 people, if they are the right people, will help a great deal. Announcing the expansion of his unit over the weekend, FIU director-general Oliver Chiperesa was reasonably happy, or at least not totally dissatisfied, with what the banks are doing to know their customers and, if they find out their customers are rather dubious types, raising the linesman’s flag.

Of course, banks do vary, but the Reserve Bank has been leaning hard on all in the system and take the rules seriously.

This is why Zimbabwe is now off the global “watch it” list, a major boost for foreign trade and investment since respectable foreign banks now know Zimbabwean banks are up to speed on the latest global rules and so they just have to take ordinary precautions over their own customers, rather than try to second guess and investigate the Zimbabwean sending them money to pay a customer or receiving money from a customer.

There are still problems since a serious player breaking the rules in Zimbabwe will have more than one bank account with more than one bank. 

But all that player’s banks should be keeping their eyes open and watching money flow in and out of their accounts, and watching out for anyone trying to use them as a laundry to clean dubious transactions. 

And the Reserve Bank can gaze at all bank accounts, as a group of major businesses recently discovered when their complex transactions raised so much suspicion that all their accounts were frozen, or rather that they went under external control.

Ordinary business transactions are no doubt given approval, with perhaps a bit more explanation required, but no one can really generate an explanation, or at least a legal explanation, for some of the money movements they were initiating.

One obvious sign of laundry is the sudden deposit or sudden withdrawal of large sums of cash, a useful tool to break a chain in the databases and that would need a bank manager to look carefully to see if the customer is someone likely to handle large loads of cash and dig a little deeper. 

The near cashless economy does have the advantage of leaving electronic paper trails everywhere.

But Mr Chiperesa is now more worried about those outside the banking system who handle large sums of money, and only come to the notice of their bank manager at the beginning and end of the process, when money leaves an account and when money comes in. 

What happens in between is a dark secret. Of course, many of the professionals who need to be watched try to be squeaky clean, but a decent fraction are ready to bend and break rules, not so much to cheat their clients, in fact often to help them, but are quite happy to change currencies as they massage the money coming in and out of their safe.

There are others. The spate of robberies hitting safes containing large sums of foreign currency suggest that there are fair number of outwardly respectable business people, who want to operate outside the systems and would generally prefer that neither their bank manager nor Zimra know too much about their business dealings. 

We have medical professionals, estate agents and even lawyers, besides the usual suspects like car dealers and some in the retail trade, whose financial manoeuvrings breach the rules about banking cash and the rules about foreign currency, even if there is no fraud, no stealing and no tax evasion. 

When investigating a lot depends, of course, on scale. It is a bit like trying to tame the black market in foreign currency. Hitting the small-time street dealers is worse than useless since this absorbs a lot of resources better devoted elsewhere and in any case does zero since every dealer off the streets is quickly replaced.

But going after the big timers does make sense, the people who accumulate the cash bought by the street dealers or more commonly the people who buy the cash from the people who buy the cash from the street dealers. 

One reason for the very large margins between buy and sell rates on the streets is the fact that most of money rises up a pyramid of several stories, and each layer takes a cut.

The recruits to the FIU will need to be the top of their professions, since they will be hunting down people at the top of theirs. This makes recruitment more difficult and special efforts will be needed to find top-class people who want the security of working for the Reserve Bank rather than working for themselves. 

In some ways Mr Chiperesa must envy the old colonial fraud squad in the last few years of the liberation war when the manpower net for drafted men was so embracing. 

One special deal for older chartered accountants, over 35s, was to seek a transfer to the police reserve where they were assigned to the squad, and so a lot of very important people were netted. The reservist accountants were very diligent since lack of efficiency meant a transfer back to the bush.

At least, unlike the Auditor-General who has to obey civil service pay scales and complains at regular intervals how this turns her office into a training ground, the FIU can be more flexible. 

Both units could also look at older people who are still fit and active, but shipped out of their former employment by retirement rules made before modern medicine was around. 

After all, if a judge can work until 75 some accountants with a decent doctor can still be used in their early 70s to track down the bad guys.

The FIU now has teeth. Parliament made permanent in the last Finance Acts the temporary legislation introduced last year to allow high-level civil penalties to be imposed by designated Reserve Bank officers.

The lack of complaints tends to suggest that these designated officers have the details in front of them when the malefactor is summoned and those details obviously come from the FIU.

Civil penalties only need a probability of wrongdoing, not proof beyond reasonable doubt as is required in a criminal trial, and the opportunity for lawyers to delay proceedings until everyone has died of old age are limited. As with so much in the Second Republic, the mess is not new, but rather inherited, with attitudes and corruption entrenched in the sloppy days of the old dispensation. 

But it is being cleaned up and will be cleaned up faster as outfits like the FIU are better staffed with the right sort of skilled, intelligent and experienced people.