Zimbabwe: RBZ Probes Shady Tycoons and Firms

The Financial Intelligence Unit (FIU) – an arm of the Reserve Bank of Zimbabwe (RBZ) — has opened a fresh investigation into firms and individuals who are using shelf companies to siphon money from the foreign exchange auction and channelling it to the black market.

The apex bank is working with other law enforcement agents — police and the Zimbabwe Anti-Corruption Commission (Zacc) — to corner tycoons causing headaches in the financial services sector.

These law enforcers are tracking well-knit networks of those using letter-box companies to buy the foreign currency at an official rate and selling on the parallel market. They then go back to the auction system to offload the local currency.

The cycle continues and benefits a corrupt few at the detriment of the economy.

Resultantly, the murky scheme fuels high exchange rates at the parallel market and causes a jump in prices of goods and services.

RBZ governor John Mangudya told the Zimbabwe Independent last night that investigators were trailing unscrupulous businesses abusing the foreign exchange in the economy.

The apex bank introduced the foreign exchange auction system in June 2020 and so far almost US$800 million has circulated.

Mobile money operators were last year blamed for the volatility in exchange rate, resulting in a ZW$5 000 (US$60) cap on daily individual transactions or ZW$35 000 (US$420) per week.

Mangudya said a crack team from FIU was closing the net on those with rent-seeking behaviour.

In 2020, the FIU froze banks accounts of top businessmen and companies who were suspected of black market foreign currency dealings.

He said: “The FIU has enhanced their surveillance role to flush out those who are abusing foreign exchange in the economy, especially those abusing the foreign

auction system as breeding ground for arbitrage.

“The general findings have been the use of shelf companies to come to the auction.”

Investigations by the FIU have revealed that companies and individuals with brief case companies, sell foreign currency on the parallel market and then come to the foreign exchange auction where they use local currency to bid for foreign currency.

The official exchange rate is US$1:ZW$83,37 while at the parallel market it is around US$1: ZW$112.

“… That’s why we are emphasizing on adherence to KYC (Know Your Customer) and CDD (Customer Due Diligence) principles at banks who are front-liners in this regard,” Mangudya said.

He added that the central bank will “ensure that authorised dealers or banks and foreign exchange auction system participants comply with auction rules and regulations to curb abuse of the foreign exchange auction and safeguard the auction from being abused as a breeding ground for arbitrage opportunities.

“Accordingly, the bank’s exchange control inspectorate and the FIU have enhanced their monitoring and surveillance on the utilisation of foreign exchange in the market to foster market discipline.”

Mangudya said monetary authorities would leave no stone unturned in cleaning up the financial services sector of any malfeasance threatening to destabilise the foreign exchange auction system.

“We have policy measures designed to ensure that the forex auction system is sustained as dependable foreign exchange market for bona-fide foreign currency requirements,” he said.

Commenting on revelations that Zacc recently made spot checks at some banks to investigate corrupt activities, Mangudya noted that, “The bank is working closely with the law enforcement agencies to bring sanity in the economy”.

The central bank chief exonerated mobile money operators whom he said have improved their operations but remained under the probing eye of the FIU that is “monitoring their efficacy”.

RBZ, in the first half of 2020, conducted a forensic audit to investigate the operations of mobile banking institutions, some of which were found on the wrong side of the law.

The FIU is still probing any reported suspicious transactions that may fuel the parallel market.

Mangudya also said the central bank was focusing on its core business of managing the economy.

“The bank is dealing with the core functions of a central bank that include interest rate, reserve requirements and open market operations as tools to control inflation and money supply.”


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