Malawi central bank Governor with prosecuting agencies bosses

 

LILONGWE-(MaraviPpst)-The country’s central bank Reserve Bank of Malawi (RBM) on Monday along side prosecuting government agencies team up in a Memorandum of Understanding (MoU) to crash down illegal  massive plunder of foreign exchange due to illegal foreign currency externalisation and transfer pricing.

This according to the central bank the vice has  greatly undermined Malawi’s economic development efforts.

Prosecuting agencies which have team up with RBM including Malawi Police Services (MPS), Director of Public Prosecutions (DPP), Director General, Anti-Corruption Bureau (ACB) Malawi Revenue Authority (MRA), Financial Intelligence Authority (FIA) and National Intelligence Services (NIS).

In a joint news conference in the capital Lilongwe RBM Governor Dr. Dalitso Kabambe said time was up for illegal forex vending arguing the nation was loosing billions of kwachas due to the vice.

Dr Kabambe disclosed that there will be no sacred cow in the exercise saying agencies in the MoU will intelligently do their work to end the vice.

 

The Governor therefore urged unregistered forex bureau or individual dealers to a bid by the law warning that will be flashed out starting Monday, February 11, 2019.

Malawi central bank governor with prosecuting agencies bosses

Below is the full statement of the joint press conference;

PRESS STATEMENT BY THE GOVERNOR DALITSO KABAMBE, PhD

 

AT THE PRESS CONFERENCE ON INTELLIGENCE SHARING, INVESTIGATION AND PROSECUTION OF FINANCIAL CRIMES 11 FEBRUARY, 2019 AT RESERVE BANK OF MALAWI, CLUB HOUSE. Lilongwe

Mr. Rodney Jose, Inspector General, Malawi Police Services and your officials here present;

Mrs. Mary Kachale, Director of Public Prosecutions and your officials here present;

Mr Reyneck Matemba, Director General, Anti-Corruption Bureau (ACB) and your officials here present;

Mr. Tom Malata, Commissioner General, Malawi Revenue Authority and your officials here present;

Mrs. Atuweni Agbermodji, Director General, Financial Intelligence Authority (FIA) and your officials here present;

Mr Elvis Thodi, Director General, National Intelligence Services and your officials here present;

 

Dr. Grant Kabango, Deputy Governor of the Reserve Bank of Malawi;

Mr Masauko Medi, Chief Immigration Officer;

Members of the Press;

Distinguished Ladies and Gentlemen.

 

 

To begin with, let me start by quoting Philosopher Dennis Waitley who once said:

 

There are two primary choices in life – to accept conditions as they exist or accept the responsibility to change them.”

 

For the 54 years since independence, Malawi has experienced massive plunder of foreign exchange due to illegal foreign currency externalisation and transfer pricing, which have greatly undermined our economic development efforts. Law enforcement agents have therefore been faced with two choices: to accept conditions as they are or accept the responsibility to change them.

Today, eight institutions, namely: The Malawi Police Service; the Office of the Director of Public Prosecutions (DPP); the Anti-Corruption Bureau (ACB); the Financial Intelligence Authority (FIA); the Malawi Revenue Authority (MRA); the Immigration Department; the National Intelligence Service (NIS); and the Reserve Bank of Malawi – have all agreed to join hands to completely eliminate and end this heinous act and criminality of illegal foreign currency externalisation and transfer pricing.  To this end, we have executed a Memorandum of Understanding (MOU) where each stakeholder has SPECIFIC roles and responsibilities to act upon in order to eradicate this criminality in Malawi.

 

Under this MOU, our eight institutions shall collaborate in intelligence sharing, investigations and prosecution of all financial crimes. No case shall be left out. As such, all perpetrators are being duly warned to stop these malpractices lest the long arm of the law will catch up with them and crash them.

 

 

BACKGROUND

The importance of foreign exchange reserves in any economy cannot be over emphasised. Foreign exchange reserves play a critical role in satisfying a nation’s strategic imports demand. Malawi just like any other African economy needs to build enough foreign exchange reserves to meet its strategic imports which include medicines, fertilizers and petroleum products.  It was in this spirit that companies such as Export Development Fund were conceived – to improve our export earnings.  Regrettably, there are those who seek to undermine such efforts. Malawi’s foreign exchange reserves get depleted by the day through criminal acts of illegal foreign currency externalisation, transfer pricing and/or money laundering.

 

ILLEGAL EXTERNALIZATION OF FOREIGN CURRENCY

There are processes and procedures which one must follow in order to hold or expatriate foreign currency out of Malawi. Illegal foreign currency externalisation therefore entails the transfer or attempted transfer of foreign currency out of Malawi without following proper procedures. The improper procedures include instances where companies export goods and services with no corresponding receipts of proceeds for sale into Malawi; under declaration of goods being exported; exporting using fake invoices, opening offshore accounts on the pretext of facilitating international transactions and even the physical transfer of large amounts of cash out of the country; incorporating shell companies in Malawi to facilitate movement of foreign currency out of Malawi; an attempt to take or taking out of Malawi foreign exchange currency without authorisation which is common across the borders of Malawi. All these criminal acts deprive our country of the much needed foreign exchange.

 

Currently, there are several cases of illegal externalization of foreign currency that are being investigated and prosecuted. A total amount in excess of an equivalent MK30.0 billion is being investigated and the suspects are being prosecuted.  Several companies are involved and these include the Cotton Ginners Limited Case of Abdul Rehman and Others, which is already in the public domain and is in court involving USD20.0 million, about MK15.0 billion. In addition, we are also prosecuting several Malawians of Asian origin for illegal foreign currency externalization cases of an equivalent of around MK20.0 billion.  In the recent past, we have also instituted proceedings on illegal foreign currency externalisation involving 11 Chinese companies where USD 5.5 million is alleged to have been externalised. It must also be pointed out that several individuals who obtained foreign currency from banks and foreign exchange bureaus masquerading as travellers are also in court answering to charges of obtaining foreign currency for one reason and using it for another. This only signifies the magnitude of the problem that has befallen our nation.

 

Be that as it may, quite a number of cases of illegal foreign currency externalization have been successfully prosecuted and an equivalent of about MK905.7 million now has been confiscated by the courts in the past few months and forfeited to the Malawi Government through the RBM. The most recent concluded case to be added to the list is that of the Republic vs M. Sodagar where an amount equivalent of MK317 million has been forfeited to the Malawi Government in one case  alone last week.

 

 

 

TRANSFER PRICING

Transfer pricing refers to the setting of the price for goods and services sold between controlled or related legal entities within an enterprise. This would happen for instance where a subsidiary company sells goods to a parent company outside the country – the cost of those goods paid by the parent to the subsidiary is the transfer price. Transfer pricing multi-nationally has tax advantages, but we, regulatory authorities, frown upon using transfer pricing for tax avoidance. In some cases, the transfer of goods and services from one country to another within an interrelated company transaction can allow a company to avoid tariffs on goods and services exchanged internationally.

Transfer prices are supposed to be done at arms lengths. It is therefore disheartening to report that some companies in Malawi are involved in transfer pricing for tax avoidance. Investigations and transfer pricing audits regularly carried out by the Malawi Revenue Authority have revealed that an amount equivalent to USD394.60 million translating to approximately MK239.27 billon is suspected to have been illegally eternalized through transfer pricing by several multinational companies operating in Malawi. This is a large percentage of what Malawi has as its foreign exchange reserves. As law enforcement agencies, we will ensure that everyone involved in this malpractice is brought to book as this is a great disfavor to our nation.

 

PARALLEL FOREIGN EXCHANGE MARKET

In the cities of Lilongwe, Blantyre, Zomba and Mzuzu and other areas of the country, there exist unlicensed persons who illegally openly sell foreign exchange to the general public. This market is also called ‘forex black market’. This practice is unlawful and transactions pertaining to such practices are illegal, bold and unenforceable.

 

CONCLUSION

 

In conclusion, all our eight institutions mentioned above, as law enforcement agencies, we are saying a big no to illegal foreign currency externalization, transfer pricing and money laundering. We believe the Memorandum of Understanding which has been executed today will go a long way in curbing these malpractices. We will also ensure that every dollar made from our exports is retained in this country. We will ensure that every remittance is in respect of payment for bonafide importation of goods and services or any other bonafide offshore payment.  But more importantly, we will ensure that the law applies to EVERYONE equally. We shall utilize all legal means necessary to achieve this, including the Reserve Bank of Malawi Tip Offs Anonymous. However, for us to succeed, we need the cooperation of every Malawian.  We should all hold hands together and report companies or individuals involved in illegal foreign currency externalization, transfer pricing and money laundering for the good of our nation.

 

Those who are carrying out these illegal transactions, KNOW that you WILL be traced, located, followed wherever you are, arrested, prosecuted, convicted, and thrown into prison. All their assets will be confiscated and forfeited to the Government. There will be no authority that will protect you. Tracing of the illegal assets will be extended to other countries, through our counterparts, hence, nobody will hide any such illegal funds. So be warned accordingly.

 

 

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