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The 2018 Financial Intelligence Centre Trends Report has revealed an increase in suspicious transactions involving politically exposed persons (PEPs) and others, totalling K6.1 billion.
The report launched in Lusaka on Friday by Attorney General Likando Kalaluka and Financial Intelligence Centre director general Mary Chirwa, further reveals that some law firms have been used to mask money laundering activities by the PEPs.
Corruption topped the list of suspicious transactions for 2018 with K4.9 million involved while tax evasion came second at K1 billion followed by theft (K110 million) and fraud (K54 million).
These figures signify a 30 per cent rise in suspicious transactions since in 2017, the activities totaled K4.5 billion.
“In 2018, the Centre analysed 176 suspicious transaction reports, of which 80 were disseminated to Law Enforcement Agencies on suspicions covering: tax evasion, fraud, corruption and money laundering. The total value of the suspected offences in the disseminated cases was estimated at ZMW 6.1 billion (or about USD 520 million) which includes tax assessments by ZRA amounting to ZMW 62 million. The assessment period was from 1st January 2018 to 30th September 2018,” the Report states.
A total of nine law firms are said to have been involved in suspicious transactions amounting to K365 million in 2018.
The law firms assisted suspected criminals to mask the source of funds and aided its reinvestment or movement to foreign jurisdictions, the report states.
Most of these cases involved illegally obtained funds transferred to law firms who then facilitated the acquisition of property such as land and motor vehicles on behalf of the launderers.
On corruption, abuse of office and money laundering, the report that some individuals amassed huge wealth that was not commensurate with their incomes .
These individuals also had several properties built through suspected corrupt activities and the FIC has so far reported these unnamed individuals to competent authorities for possible prosecution.
In the report, 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) and PEP N influenced the awarding of contracts to foreign construction companies.
In return, these companies constructed 49 residential properties for him valued at K70 million, the report states, and they further purchased two luxury vehicles for him valued at K4 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 report states.
Other key cases highlighted involved suspected terrorist financing where two foreigners identified as X and Y incorporated company D in Zambia.
Company D, according to FIC, held bank accounts with bank B and 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, it states.
“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 report reveals, adding that the matter has been disseminated to competent authorities for further investigation.
The report also reveals that company ZD and its proprietor PQ, a PEP, allegedly received funds from foreign construction companies who were awarded contracts by the public institution.
These 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 K1.4 million.
The funds received amounted to K6.5 million and PEP PQ subsequently transferred the funds to third parties of a Non-Profit Organisation (NPO) and K750, 000 was transferred to the account of PEP J who purchased property.
A further K5 million was withdrawn in the form of cash by shareholders, the report states.
The report further notes an increase in purchase of property allegedly using laundered money.
“The Centre observed a discrepancy between the mortgage market and the rising number of housing and office infrastructure. This rise can partly be attributed to an increase in the number of Property Developers. Currently, there is no regulator that oversees the activities of property developers for AML/CFT purposes. Construction provides an easy and undetectable avenue for criminals to launder funds. The placement and layering of the illegal proceeds occur during the construction of property. The Integration of the proceeds of crime occurs when either the property is sold or leased for rental income,” it stated.
On Casinos, the FIC report also notes that most these gambling businesses were non-compliant with local law requirements and some of them do not hold bank accounts in Zambia.
However, persons, especially from foreign jurisdictions working for these casinos, had bank accounts in Zambia that received large cash deposits which were followed by large outward transfers, mostly to their home jurisdictions.
Further, some casinos were using employees and shareholders as cash couriers, it stated.
The Centre also noted that some of these casinos are not compliant with the local law requirements prescribed by the Zambia Revenue Authority or the Licensing Committee under the Ministry of Tourism and Arts, it stated.
Under public procurement, a manipulation of certain specifications to disadvantage other bidders was noted in the FIC report.
It states that procurement corruption has led to the crowding out of legitimate businesses and increased the cost of public projects and has recommended a review of the Public Procurement Act to prohibit participation of shell corporate vehicles in public procurement.
Under tax evasion, the report reveals that small and medium scale enterprises were cited as the main culprits.
“Most of these entities were either not registered for tax purposes or were not tax compliant while some of the cases analysed were based on the following false accounting; some companies overstated their expenditure and this reduced their profits and hence their tax obligations,” the report states.
Some companies externalized funds to their parent companies, and the same companies would then receive the funds in the form of loans.
“This reduced their tax liability as interest on the loans received tax relief. Use of personal accounts for business: it was observed that individuals were using personal accounts for business purposes. This affected the completeness and accuracy of business records hence compromising their tax compliance,” the report states and recommends that presumptive tax is extended to other sectors, especially small enterprises such as barber shops, salons and micro retail stores.
The report has further revealed that some private companies that were awarded public contracts were funding some named political parties in the country.
“The funds would move from these private companies to prominent individuals linked to the political parties. The cases analysed amounted to ZMW10 million. It is recommended that the Registrar of Societies makes it a requirement for all political parties to disclose their sources of funding and submit audited annual financial statements which should also be available for public scrutiny through the appropriate Parliamentary Committee,” states FIC report.
The post FIC Reveals More Suspicious Deals in 2018 appeared first on Zambia Reports.
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