Why is the Financial Intelligence Centre misleading people?

Why is the Financial Intelligence Centre misleading people?

The Financial Intelligence Centre says in 2017 alone, Zambia lost K4.5 billion (USD 450 million) through financial crimes, and that such money has been laundered. See report here: TRENDS REPORT 2017

“In 2017, the Centre analyzed and disseminated a total of 425 reports to local law enforcement agencies. The majority of cases were disseminated on the grounds of suspected tax evasion and corruption. The amount of estimated losses related to the above violations in 2017 was K4.5 billion,” Financial Intelligence Centre (FIC) director-general Mary Tshuma said during a press briefing.

These are very serious ‘revelations’. USD450 million is a lot of money to lose to criminals in one year. If such money is put to proper utilization, so many poor Zambians would benefit. We can build schools, hospitals, dual carriageways and even airports and be able to remunerate civil servants.

But we think the FIC itself is being insincere. They are giving us raw if not misleading information. The Director General (DG) of the FIC is required by law to submit her findings to the Law Enforcement agencies local (and foreign for terrorism threat) and to competent authorities like ZRA, Bank of Zambia, Minister of Finance and Head of State.

Now, we know that the above named, local institutions are useless and in most cases controlled by the same culprits named in the report. Probably, that is why Mrs. Tshuma has decided to defy the law and report directly to the public. We salute her for the bold move. But since she has decided to report to the public, why is she doing it half-heartedly? Why is she giving us big figures without substance? There are no names of the culprits in her report but just hot air.

It’s very easy to say that K4.5 billion has been stolen, laundered or looted, and the gullible can believe. A deeper look at the statement issued by Mrs. Tshuma reveals holes. We have a feeling that Mrs Tshuma and her colleagues just added up the figures of the reports they received from the banks and thought that was the amount of money lost or laundered. This is dangerous. The Zambian Watchdog actually believes that the money lost is higher than what the FIC has stated, but that the FIC has no capacity to do a thorough job.

Some people may not understand what we are talking about so we will explain. The FIC which Mrs. Tshuma heads is not a law enforcement agency like the police, DEC or ACC. It’s just an information gathering agency of the state on money laundering and terrorist financing. Money laundering is simply an act or attempted act to conceal or disguise the identity of illegally obtained money so that they appear to have originated from legitimate sources. Simply put, it’s cleaning dirty money. For example, you rob someone at night then try to deposit that money in the bank or buy a car, a house or some other property. The important aspect here is that the money you are trying to deposit or use to buy property must have been obtained from a criminal activity.

As stated in its own report, the core function of the FIC is to receive reports of financial transactions from reporting entities (Financial institutions especially banks) and other sources, analyse them, and disseminate financial intelligence to Law Enforcement Agencies (LEAs) and foreign designated authorities. Then the law enforcement agencies take it up from here, investigate more, question the suspects to ascertain whether the suspicion has merit, or the money was legitimate.

FIC cannot summon a person for questioning. FIC does not carry out independent investigations. All their data come from third parties, especially banks.

In fact, in the 2017 report, FIC admits that:

‘Most of the reports received in 2017 were from the banking sector and this accounted for 92% of the STRs received. Money Value Transfer Service providers (MVTS) submitted 5%, insurance companies 1%, microfinance 1% and audit firms accounted for less than 1% of the STRs submitted. No reports were received from law firms, pension funds, casinos, real estate agents and other DNFBPs.’

What happens is this; financial institutions, banks in particular are required to submit suspicious activity reports on transactions or attempted transactions that the financial institution knows, suspects, or has reason to suspect, involve money derived from illegal activities. This simply means that when you go to the bank to deposit, transfer or withdraw a certain amount of money, the bank can report you to the FIC if they suspect that you stole the money or murdered the owner or obtained the money through some other crime such as bribery, corruption.

That is the primary source of information for the Financial Intelligence Centre. They depend on these reports from the banks to come up with their findings. Remember that these are just suspicions from the bank. They are not verified reports of crime. The FIC does not go into the field to gather information because they do not have that power.

The problem here is that the focus is mainly on large amounts of money. But then, depositing, wiring or withdrawing a large amount of money is not a crime in itself. It is not money laundering. As explained above, money laundering is only when the money you have was obtained from a criminal activity.

There are legitimate reasons why a person would be found with stashes of cash. If you sale your car for K100, 000 and the buyer gives you cash, which he withdrew from another bank, how is that your f***** problem? But certainly, such a transaction will be reported as ‘suspicious’ especially if you go in the bank wearing chikabudula. Now remember that the FIC cannot summon you for questioning. They can only ‘analyze’ the report from the bank. That is why, they are required to report to law enforcement agencies who can actually summon the suspect and ascertain whether the money he deposited was earned genuinely. The findings of the FIC at this stage are raw, prejudicial and require further investigations and verification by the police who have powers to do so. But to release such figures to the public at this stage is alarming and misleading. And by the way, as you are reading this, your name could be one of those forwarded to the FIC as long as you deposited money in the bank and the bank found it suspicious even if you earned it legitimately.

This is why we have issues with the 2017 report by the Zambia Intelligence Centre. We feel that they have just added up the figures of the suspicious activity reports from the banks and assumed that that is the total amount of money laundered or lost in 2017. It’s like saying that every person reported to police is guilty. No need to take them to court. We are very sure that if these suspicious reports were to be properly investigated, a lot of them would be cleared as legitimate money.

To make matters worse or further distort the picture, they have only released figures without details of the information they have.

Zambian banks are required to undertake customer due diligence measures which are known as know your client (KYC). This simply means that the bank must take steps to identify their customers and checking to make sure they are who they say they are. In practice this means obtaining a customer’s name, photograph on an official document which confirms their identity, residential address or date of birth. So when the bank files a suspicious activity report to the Financial Intelligence Centre, such reports are accompanied by full details of the ‘suspect.’ So why is the FIC only giving us unverified figures while withholding the details of the suspects when they do have this information? Yet we know that the reports submitted to foreign jurisdictions contain this data.

While still on the topic of due diligence, here is a brief due diligence on Mary Tshuma, the director-general of the Financial Intelligence Centre (FIC). It might not be important, but we just thought you should know, even for future reference. Her maiden name is Mary Chirwa. She was married to a Mr Sikazwe. One day he knocked off early just to find her with another man in their matrimonial bedroom. He locked them and went to fetch petrol, set the bedroom on fire but he he was the one consumed by the fire. Mary and her lover escaped. A few days later Mr Sikazwe died from fire burns leaving her free  to remarry her lover, the younger Zimbabwean   ‘prophet’ Tshuma. Mr Tshuma is one of these fake, foreign prophets going round our communities selling miracles. Mary Chirwa was fired from DEC for leaking information during the Rupiah Banda regime. She was brought back when PF won with a view to be installed as DEC boss, but the current DEC boss resisted. So, Mary was taken to the newly operationalized FIC. Again, we ask ourselves, is Mary fit to hold this position when she is married to a foreigner when police officers are not allowed to marry foreigners? We are just asking. It’s our job.

And by the way, information from banks is not even reliable. Look, banks are not established to fight crime or to detect money laundering. They are businesses whose primary function and focus is to make profit. When a person goes to deposit money, there is no one from the Financial Intelligence Centre (FIC). It’s only bank employees. It’s the bank employee who decides what constitutes suspicious activity, and it is therefore the bank that ultimately decides what should be brought to the attention of the FIC and what should remain a private matter. Why would the bank report a valuable customer who has just deposited a million?

When a potential money launderer is in the bank, at this point the knowledge of the suspicion is restricted to the bank and the bank can, based on its own judgment and other factors such as its own reputation, decide not to tell the FIC.

Besides, it has been proved already that Banks do not always cooperate with such institutions.

For example, in 2012, the Hong Kong and Shanghai Banking Corporation (HSBC) HSBC agreed to pay $1.9 billion and enter into a five-year deferred-prosecution agreement to settle allegations that it failed to catch at least $881 million in drug-trafficking proceeds laundered through its US subsidiary and that its staff stripped data from transactions with Iran, Libya and Sudan to evade US sanctions.

In 2012, the New York financial regulators found that, for ten years, Standard Chartered Bank connived with the Government of Iran and hid from regulators roughly 60,000 secret transactions, involving at least $250 billion, and reaping SCB hundreds of millions of dollars in fees.

Using USA based Wachovia Bank, Teodoro Nguema Obiang Mbagasa, the ruler of Equatorial Guinea was able to move $73 million from Equatorial Guinea into the United States using wire transfer systems operated by Wachovia Bank; and over a four-year period from 2002 to 2006, he was able to move $37 million through wire transfer systems operated by Citibank.

Riggs Bank had secretly opened accounts for the former President of Chile, Augusto Pinochet, created offshore corporations for him, accepted about $8 million in suspect deposits, and secretly couriered millions of dollars in cashier’s checks to him in Chile. Some banks actively helped him hide his funds, while others failed to comply with US regulations requiring banks to know their customers. �

In this happened in America and the EU, how much data has been hidden in Zambia?

We also have another concern. Look at this statement:

‘The core function of the FIC is to receive reports of financial transactions from reporting entities and other sources, analyse them, and disseminate financial intelligence to Law Enforcement Agencies (LEAs) and foreign designated authorities.’ These designated authorities are bigger countries like USA, UK, South Africa etc. What this means is that the Zambia Financial Intelligence Centre does not need clearance from anyone to give their report to foreign powers. But then, does Zambia receive the raw data of money laundering from these countries?

Now, why would Zambia submit its raw data to foreign jurisdictions?

We also looked at the case studies which the FIC released to the public. They picked on three suspicious activity reports as case studies. One of the cases they highlighted involves the controversial purchase of fire tenders at $42 million. The FIC said that Grandview, (they did not name it) held no past record and their bank account was basically a conduit used to receive funds from other sister companies and later either wire the funds outside Zambia or make huge cash withdrawals. Strangely, the FIC said No payment has been noted going to the supplier of the fire tenders and that Grandview received ZMW 200 Million in Zambia.

Whatever the merits and demerits of this case, we are just wondering why the FIC is only telling us about this case when there is nothing new here. The truth is that it is the Zambian Watchdog that highlighted this case in 2014. The FIC said more than K4 billion was lost in 2017. So we expected them to give us more information on the other cases that constituted the K4 billion. Repeating what is already in public domain appears to be an attempt to conceal something. Why is Avic International not reflected on the 2017 report? Everybody knows that Avic International has been the biggest recipient of corruption in Zambia the past 5 years. Are the people at the FIC shielding some names? We find it strange that out of the K4.5 billion they claim was lost, they repeat the same example they gave in 2016, when there are bigger cases.

The other case study they gave involves minister of infrastructure Ronald Chitotela and his companies though of course they did not mention him.

“In the period under review, from August 2015 to April 2016, Company ABC received credits amounting to USD 6 Million and ZMW 70 Million in the foreign and kwacha accounts. We noted that all the payments originated from a Government Ministry. The withdrawals on the account were predominantly in the form of cash and transfers to law firms. Upon review of the law firms’ accounts, it was noted that the funds were mostly drawn in cash and transfers to other law firms,’ the report said.

This is good, but note that the report says this plunder happened from August 2015 to April 2016. So it is not part of the K4.5 billion that the FIC says was lost in 2017. So who are the culprits of the K4.5 billion? If they can release details on the fire tenders and Chitotela, why are they shielding the other names? And on Chitotela, this is the same information the Zambian Watchdog has been publishing. So there nothing new here either.

As explained above, we believe the report by the Financial Intelligence Centre is highly inaccurate and misleading. The information they have posted or based their findings on is raw. To say that K4.5 billion was lost based on suspicious activity reports from banks is actually undermining the banking sector in Zambia. The FIC is simply telling the world that the Zambian banking sector is so porous that that money launderers can easily come and do business here. With such careless reports, we doubt any genuine investor can come to Zambia, but we are sure that money launderers are now on their way, thanks to the FIC.

The Zambia Watchdog believes that the Auditor General’s report is a more accurate and reliable reflection of the financial crimes in Zambia than this hot air. If there should be action, let it be on the auditor ‘general’s findings as they are properly researched and based on primary sources of information.

Just saying. See full report by the Financial Intelligence Centre here: TRENDS REPORT 2017

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