Transparency International Zambia (TI-Z) welcomes the 2022 Trends Analysis report which was released two weeks ago by the Financial Intelligence Centre (FIC). Over the course of the last two weeks, we have subjected this report to a comprehensive and critical analysis in order to not only understand the key issues it raises, but also in a bid to ascertain and recommend the most feasible next courses of action with respect to the issues raised.
From an overall point of view, we are extremely concerned that the number of cases analyzed by the FIC has been reducing over time and thus limiting the increase in the number of cases disseminated to Law Enforcement Agencies (LEAs). Our analysis of the 2022 report shows that the Centre received 5,745 reports but analyzed only 155 cases, representing a paltry 2.7% of reports received. This is compared to 211 reports analyzed in 2021 out of the 2,577 reports received, representing 8.2% of the cases. The immediate interpretation of this trend is that the 2022 report has less depth than the report immediately preceding it, which was also the case with last year’s report. Based on this worrying trend, we have very serious concern and reservations about the capacity of the FIC in executing its mandate in an efficient and effective manner. We therefore call on the new FIC Board not to leave any stones unturned in addressing the underlying financial and technical challenges responsible for this worrying state of affairs.
Delving further into the details of the report, our analysis shows that the number of Suspicious Transaction Reports (STRs) have more than doubled to 5,745 in 2022 compared to 2,577 in 2021. Since the majority of the increase in STRs came from banks, accounting for 97% of the STRs received in 2022, and Money or Value Transfer Services (MVTS), TI-Z attributes the increase in STRs to progressive provisions in the recently enacted Financial Intelligence Centre (Amendment) Act No. 16 of 2020. These provisions include the enhancements in customer due diligence and the introduction of administrative sanctions. The new law has given the FIC powers to apply financial penalties and to restrict economic activities of reporting entities for non-compliance. For the very first time in over 3 years, the FIC received 15 STRs from Casinos, which previously provided no reports in 2021 and 2020. This is commendable and we wish to urge the FIC to continue on this trajectory in subsequent reports, in order to allow for trends to be observed on the financial transactions related to Casinos in particular.
Despite the increase in STRs, TI-Z is concerned about the declining number of cases analyzed over time. As stated earlier, in 2022, the FIC analyzed a meagre 2.7% of the STRs received as compared to 8.2% in 2021 and 16.1% in 2020. This state of affairs indicates that the Centre is facing a number of financial and/or technical constraints that are limiting its operations or inhibiting its effectiveness to fully deliver on its mandate. It is evident from the number of cases disseminated to LEAs, which only breached the 100 cases mark in 2022, that the FIC has the potential to disseminate more cases. TI-Z therefore calls upon the newly appointed FIC Board not to rest on their laurels but to immediately effect concrete measures that will safeguard the relevance of the FIC by remedying this situation. It is our considered belief that the major contribution of the FIC to the fight against corruption and financial crimes lies in its effective analysis of financial transaction reports and disseminating these reports to LEAs for further investigations and possible prosecution.
Further, our analysis of the 2022 report indicates that the report has changed with respect to presentation and content. For example, the 2022 report presents a breakdown of Currency Transaction Reports (CTRs) by Province, in sharp contrast to the 2021 Report that presents CTRs by both Currency and Province. In the 2020 and 2019 Reports, the FIC presents a summary of the CTRs by Currency only, with no provincial breakdown given. These changes and inconsistencies in presentation and content make it extremely difficult for stakeholders to compare reports across time since information contained in one report may be completely missing in another report. TI-Z therefore urges the FIC to ensure that the trends reports are comparable over time in terms of content, as the ability to make specific comparisons over time is the very essence of a trends report. In addition, the format of the 2022 Report also makes it difficult to locate key statistics such as STRs and CTRs, since there is no clear separation between overall statistics and case studies.
From the case studies presented in the 2022 report, TI-Z has noted the continued use of corporate vehicles in facilitating fraud, theft, corruption, money laundering and illicit financial flows (IFFs), especially through the public procurement system. In championing beneficial ownership transparency as a key solution to this challenge, TI-Z is currently working on an interactive beneficial ownership register that will interface company registration information with public procurement information. Further, in line with our recent study on IFFs, the case studies also reveal that the use of cash and the purchase of vehicles are significant risk factors for IFFs in Zambia. The FIC received 1,965 STRs on cash related transactions representing 34% of the total STRs reported. These STRs and CTRs include suspicious use of cash in the purchase of second-hand high-value vehicles. There is need, therefore, to limit the use of cash in order to improve the identification and tracking of illicit financial transactions.
In conclusion, TI-Z calls on the FIC to provide an overall report on the status of cases disseminated to the LEAs following the 2021 trends report. It is not sufficient to receive, analyze and disseminate cases to LEAs. There is need for follow-up action on the extent of investigations or prosecution on all the cases disseminated. Such a report will enhance the mandate of the FIC as a source of credible cases, since it will demonstrate that some of the cases result in prosecutions.
Overall, we applaud the FIC for its continued efforts to provide key information related to financial transactions in Zambia, which is a key input into the anti-corruption agenda. However, the need to address some of the gaps that have been highlighted from our analysis of the 2022 report cannot be underestimated, and it is our fervent hope that the new Board will immediately get to work and put measures in place that will remedy the situation and allow the FIC to effectively deliver on its important mandate.
Maurice. K. Nyambe (Mr.)
EXECUTIVE DIRECTOR
