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Transparency International Zambia (TI-Z) welcomes the release of the 2021 trends
analysis report by the Financial Intelligence Centre (FIC). The 2021 report, which was
released on Thursday 23rd June 2022, is the 7th trends report to be released since 2014,
and covers a critical year in Zambia’s democratic history. The year 2021 is notable due
to the holding of the presidential and general elections amidst a politically volatile
environment and an elevated impact of the COVID-19 pandemic. The report also comes
after a change of regime, from one which muzzled the operational independence of the
FIC – a concern we raised in our response to the release of the FIC annual report in July
last year – to one that seemingly has the political will to combat corruption.
Our detailed analysis of the 2021 trends report shows that it makes a good attempt at
being comprehensive, and provides sufficient information on the basis of which
government and other stakeholders can put measures in place designed to address the
concerns highlighted in the report. To that extent, the 2021 trends report has the
potential to contribute significantly to the fight against corruption and the
promotion of good governance, if law enforcement agencies take a proactive
approach in following up the cases featured in the report.
TI-Z would like to address some more specific aspects of the 2021 report and to share
recommendations we are making to government in relation to the issues raised in the
report.
1.0. Suspicious transaction reports
We have noted that in 2021, the FIC analyzed a total of 211 Suspicious Transactions
Reports (STRs) out of which 44 intelligence reports were disseminated to law
enforcement agencies. The value of the disseminated intelligence reports was K3.56
billion compared to K3.14 billion in 2020 and K984 million in 2019, entailing that there has
been an astonishing 262% increase in these transactions over a two-year period. A more
detailed analysis revealed that the majority of STR received were about large or unusual
cash deposits and withdrawals, as well as large or unsual inward remittances from
companies or individuals that were awarded government contracts. It is clear from the
analysis that while the number of STRs received by the FIC has been increasing over the
years, the number of cases analyzed has reduced from 425 in 2017 to 211 in 2021,
entailing a reduction of around 50% over four years.
The 2021 trends report is therefore based on less than 8.2% of the STRs reported,
which suggests that the actual losses due to corruption and other financial crimes
are likely far greater than the reported values. TI-Z is gravely concerned by this as we
believe that it does not provide the full picture of what is transpiring in relation to financial
crimes. This makes it difficult to design measures intended to address these crimes as
the full scope of the same is clearly not known
2.0. Freezing of Bank Accounts
During the year 2021, the FIC froze a total of 55 bank accounts held with eight commercial
banks to allow for further verification and analysis on suspicion of theft, corrupt activities,
tax evasion and money laundering. The amounts frozen were US$ 30.3 million, K292.8
million and EUR1,685.31.
While TI-Z commends the seeming proactiveness of the FIC in this regard, we are of the
considered view that the report should have gone further to give an update of the status
of the verification and analysis of the suspected corrupt activities associated with those
accounts. Is the verification still going on? Do the accounts remain frozen? When will the
nation be updated about the results of this verification? These are some of the questions
that arise as a result of the limited information the report has given on the frozen bank
accounts, and it is our hope that the FIC will provide the answers so that citizens can be
informed.
3.0. Case studies
The 2021 trends report includes six case studies providing the intricate details of the
network of corruption, money laundering, theft, fraud and abuse of office, among other
suspected offences. Some examples of these are as follows:
The suspected corruption and money laundering case involving a Prominent
Influential Person (PIP), who, as head of a government institution, influenced the
awarding of contracts to a Zambian incorporated company in which he was a major
shareholder;
The suspected case of abuse of office, corruption, fraud and money laundering,
involving a lawyer managing the affairs of a company, who facilitated the transfer
of K280 million to a fixed deposit account to accrue interest with a commercial
bank, which interest was never received by the company; and
The suspected case of money laundering involving a law firm owned by a PIP
receiving K100 million in cash deposits from senior officials of a political party
and several other PIPs associated with that political party, a few months prior to
the 2021 elections.
The case studies highlighted in the report do not only show the extent to which impunity
was allowed to take root as far as financial crimes go, but also raises the very serious
concern of a seemingly increasing tendency of our learned colleagues from the legal
profession to facilitate and be involved in corruption, fraud, money laundering and other
financial crimes. On that score, TI-Z commends the Law Association of Zambia for
the statement they have issued in which they have committed to co-operate with
the FIC and other stakeholders to ensure that the matters highlighted in the trends
report touching on the legal profession are thoroughly investigated, and
appropriate sanctions meted out, where wrongdoing is proved.
4.0. Lack of follow up reporting on previous issues
TI-Z is concerned that successive trends reports have done very little to report on issues
that have been highlighted in previous reports, and this trend has continued with the 2021
report. For instance, the 2019 trends report highlighted suspicious transactions related to
environmental crimes, particularly the illegal harvest, transportation and export of the
prohibited rosewood popularly known as mukula. No update was given over this issue in
the 2020 annual report released in July 2021 or the typology report released in September 2021.
The danger with not giving follow-up updates on key issues reported in previous
reports is that not only will those issues likely drop out of the focus of law enforcement
agencies, but it also makes it impossible to understand the trends that are happening with
regard to specific types of crimes being committed over a given period.
5.0. Recommendations
TI-Z commends the FIC for the good effort in releasing a detailed trends report. The report
has revealed key trends in financial crimes, including the use of cash and purchases of
real estate during the year 2021. As stated, the report has the potential to contribute
significantly to the fight against corruption and the promotion of good governance, if law
enforcement agencies take a proactive approach in following up the cases featured in the
report.
In light of the foregoing, TI-Z makes the following recommendations:
- Government should consider introducing a limit or threshold for cash
transactions, as recommended by the FIC. Currently, there is a threshold of
USD$10,000 on reporting cash transactions to the FIC, but cash transactions of any
amount are not illegal. Considering the limited compliance from the non-financial
sector as well as low rates of analysis of suspicious transactions by the FIC,
introducing a cash threshold, beyond which all cash transactions would be deemed
illegal, will greatly reduce the use of cash and make it easier to identify illegal
activities. TI-Z therefore supports the recommendation made by the FIC for a
threshold to be introduced.
For more details, get in touch with the TI-Z Communications Officer, Ms. Zanji Valerie Sinkala on zsinkala@tizambia.org.zm 5 - The FIC should urgently address the low compliance within the non-financial
sector by implementing sanctions. The 2021 trends report reveals that no reports
of suspicious transactions were received from the non-financial sector which
includes Designated Non-Financial Businesses and Professions (DNFBPs),
insurance companies, Forex Bureaus, Capital markets, etc. This situation has
resulted in a failure to capture many suspicious transactions as well as corrupt
activities, which suggests that the situation is a lot worse than reported. - Government should address the financial and resource challenges faced by
the FIC in effectively analyzing suspicious transactions. The 2021 FIC reports
indicates that the FIC analyzed less than 8.2% of the total STRs. It is our estimation
that the actual losses due to corruption and other financial crimes may well be
greater than 10 times the reported values in the FIC report, a situation which is
unacceptable. - Government should appoint a substantive Director General for the FIC
without further delay. We believe that the FIC is too important an institution in the
fight against corruption for it to be left without a substantive head for a prolonged
time, and we urge President Hakainde Hichilema to urgently correct this situation.
We are confident that the implementation of these recommendations will help to improve
the operational efficacy of the FIC and consequently contribute to the fight against
corruption. We are further elated that President Hichilema has given his word that the
trends report will be forwarded to law enforcement agencies in its original form for them
to take action on the issues it has raised. We therefore implore law enforcement agencies
to demonstrate proactiveness in instituting investigations into all the issues highlighted in
the 2021 trends report, and we look forward to those involved in any impropriety in this
regard being made to fully account for their actions.
Maurice K. Nyambe (Mr.)
EXECUTIVE DIRECTOR
