Here are four cases of money laundering police ignored

Here are four cases of money laundering police ignored

Here are some of the cases which the Financial Intelligence Centre analysed and reported to police in 2018 but police ignored or sat on them:

Case 1:
Corruption, Abuse of Office and Money Laundering
PEP N, was alleged to have amassed wealth that was not in line with his expected income within a short period of time. The PEP was alleged to have amassed wealth through suspected corrupt practices with the aid of two other PEPs, his associates (PEP D) and (PEP C).
PEP N influenced the awarding of contracts to foreign construction companies and in return, these companies constructed 49 residential properties for him valued at ZMW 70 million. They further purchased two luxury vehicles for him valued at ZMW 4 million.
With respect to PEP C and PEP D, it was noted that they had acquired four (4) properties valued at ZMW 61,000,000.
A review of the bank accounts of PEP N and PEP C for the period 1st October 2015 to 30th April 2018 revealed the following credit turnover;

PEP N: ZMW 12,000,000 PEP C: ZMW 35,000,000
The case was disseminated for suspected corruption and money laundering to competent authorities.

Case 2:
Corruption and Money Laundering
Mr. S, a foreign national resident in Zambia received USD 3 million on his personal account from a European company AS. Upon receipt of the funds, Mr. S withdrew ZMW 5 million in cash and then transferred USD 400,000 to his country of origin. He further transferred USD600, 000.00 to a local company CH, where he is a shareholder. Company CH is a Zambian company that was awarded a contract to provide public services. The shareholders are company B based in Zambia, company AS based in Europe and Mr. S, a foreign national resident in Zambia. Company CH was awarded a contract despite being in operation for only three (3) months. This is contrary to Public Procurement Act number 12 of 2008.
Mr. S’s personal accounts further showed substantial inward transfers between 2016 and 2018 from company CH which were followed by transfers totaling USD 3.5 million to various individuals, including public officials. Mr. S further received USD 5 million from company CH.
CH’s bank account revealed that there are two signatories, Mr. S and Mr. M, a partner at an audit firm. It was observed that there were monthly transfers from CH account to the account of the audit firm with the reference stating that the funds were meant for salaries.
The movement of funds among the procuring entity, Company CH and Company AS raised a red flag.
The funds transferred to public officials in strategic institutions by Mr. S had no economic rationale. The funds were used to purchase property by the public officials. Further, huge cash withdrawals were made by Mr. S for suspected third party beneficiaries.
The matter was disseminated to competent authorties for suspected money laundering and corruption.

Case 3: Suspected Terrorist Financing
Two foreign nationals X and Y incorporated company D in Zambia. Company D held bank accounts with bank B. Mr. X requested the bank to amend his name, date of birth and nationality. Upon receipt of this request, the bank performed customer due diligence and adverse information on the new credentials was revealed. The new name was linked to a terrorist group in Country Q within Africa. Mr. X made multiple forex purchases using his company account to fund his travel from Zambia to the African Country where terrorist activities are rampant. The forex purchases by Mr. X were suspected to be funding terrorist activities in Country Q.
The matter was disseminated to competent authorities for further investigation.

Case 4: Bribery & Corruption, Tax Evasion & Money Laundering
Company ZD and its proprietor PQ, a PEP, allegedly received funds from foreign construction companies who were awarded contracts by the public institution. The funds were remitted to company ZD which operates as a financial institution without any economic rationale. The shareholder also received cash deposits in his personal account (Account 2) amounting to ZMW 1.4 million

The funds received amounted to ZMW 6.5 million. PEP PQ subsequently transferred the funds to third parties of a Non-Profit Organisation (NPO). Of the funds deposited, an amount of ZMW 750,000 was transferred to the account of PEP J who purchased property. A further ZMW 5 million was withdrawn in the form of cash by shareholders.

Meanwhile, the Financial Intelligence Centre says 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.

Public Procurement Activities
Public procurement activities were significantly vulnerable to corruption. Government purchasing procedures generally involve:
– Drawing up of specificationsNo.Suspected OffenceEstimated loss1.
Tax EvasionZMW1Billion2.CorruptionZMW 4.9 Billion3.TheftZMW 110 Million4.FraudZMW 54 MillionTotal6.1 Billion

– Tender process
– Awarding stage
– Implementation of the contract
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 specific methods by which the funds were laundered were;
i) Use of shell Corporate Vehicles and Trusts
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.
ii) Use of Gatekeepers
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. In some instances, the perpetrators were holders of public office, and part of their responsibility was to regulate members for AML/CFT purposes.
iii) Use of Domestic Financial Institutions
These included banks, micro-finance institutions, pension funds and insurance companies. A number of cases that were analyzed involved placement of proceeds of crime and transfer to jurisdictions outside Zambia.
iv) Use of Nominees
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. v) Ineffective controls in public institutions
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).
vi) Dispossession of property
The FIC observed dispossession of property through force and intimidation of legal owners and Law Enforcement officers. Perpetrators included Zambians and foreign nationals.

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