EcoCash CEO & Cassava CEO Charged Under Anti Money Laundering Law

Here is a long letter charging EcoCash, its CEO- Natalie Jabangwe and Director (CEO of its holding company, Cassava Smartech) of crimes under Zimbabwe’s anti money laundering laws:

OVERVIEW

We write to advise you of the Financial Intelligence Unit (HU)’s intention to penalize:

(a) Ecocash (Private) Limited (Ecocash);
(b)Natalie Jahangwe, Ecocash Chief Executive Officer; and
(c) Eddie Chibi, Ecocash Director,

in terms of section 5 of the Money Laundering and Proceeds of Crime Act [Chapter 9:24] (the Act), for failure to comply with obligations imposed on financial institutions and their officers, employees, directors and agents.

Ecocash’s failure to carry out its obligations in terms of the Act is directly attributable to the incompetence, ineptitude and unprofessionalism in the execution of duty by its management and directors, more particularly

Natalie Jabangwe, the Chief Executive Officer, and Eddie Chibi, a director who plays a prominent role in the day to day operations of Ecocash. Natalie Jabangwe and Eddie Chibi are, therefore herein charged in their indi. idual capacities. jointly and severally with Ecocash, on all charges.

Failure to comply with any mandatory requirement of a circular, directive or guideline issued in terms of the Act (Item 26 of Table of Civil Infringements, AML/CFT Directive No. 2 of 2014)

On 4 May 2020. the FIU issued and served a directive on Ecocash titled “Suspension and Re-Registration of all Ecocash Agent Accounts with Transaction Limits of above ZWS100.000”.

This was after the FIU had noted the ongoing abuse of Ecocash agent lines for foreign currency parallel market activities, which Ecocash had failed to curb. despite persistent engagement and requests by the FIU. The FIU had noted that transactions of substantial value were being undertaken as between agent-to-agent, with no visible lawful purpose nor underlying business rationale.

Among other things. the directive required Ecocash to —
(a) suspend and freeze the accounts of all Ecocash agents with transaction limits above ZW$100,000 per month; and
(b)commence a re-licensing and KYC enhancement exercise in respect of the suspended agents.

Ecocash defied the directive by failing, refusing or neglecting to suspend and freeze the accounts of the high-threshold agents that fell under the categories referred to by Ecocash as “bulk-payers.”

Ecocash’s brazen defiance of a regulatory directive calls into question the suitability of Natalie Jabangwe and Eddie Chibi to hold prominent positions in a financial institution of the size and status of Ecocash. or, for that matter. any regulated financial institution.

Failure to comply with any obligation relating to customer identification and /or verification (Item 2 of Table of Civil Infringements, AML/CFT Directive No. 2 of 2014

Alternatively,

Failure to maintain books and records as required under section 24 of the Act (Item 2 of Table of Civil Infringements, AML/CFT Directive No. 2 of 20141

Alternatively,

Failure to timely avail to the FIU, upon request, books and records referred to in section 24 of the Act or any information contained therein (Item 14 of Table of Civil Infringements, AML/CFT Directive No. 2 of 20141

0n I May 2020. the FIU issued and served a directive on Ecocash titled “Directive to Freeze Accounts of Ecocash Agents Suspected of Involvement in Money Laundering and Illicit Transactions.”

The directive required Ecocash to freeze the accounts of 96 agents (listed under Annexure 1), each of whom the FIU had noted to have moved millions of Zimbabwe dollars during the 7-day period from 22 — 28 April 2020, whereby the transactions inconsistent with the purpose for which the agents were licenced and also inconsistent with the nature and size of their respective businesses.

The transactions, mostly by agents referred to by Ecocash as -bulk-payers” had no visible lawful purpose or underlying legitimate business rationale. The high-value, hyper activity in the accounts of the listed agents, were all the more suspicious in the context of the national lockdown, when most legitimate businesses were closed and financial activities were expected to be low;

Among other things, the directive required Ecocash to furnish the FIU, on or before 3 May 2020, with KYC information in respect of each customer including:
(a) Business address;
(b)List of the directors;
(c)Name and contact details of the CEO / MD;
(d)List of the shareholders
(e) List of the Ultimate Beneficial owners: and
(f) Nature of business and source of funds of each entity.

Contrary to the requirements of the directive, Ecocash and / or its management and directors, for no lawful reason. failed to comply with the requirement to provide the inibrmation referred to in 2.4 above, until after close of business on 15 May 2020, when Ecocash provided information falling far short of what was requested. In many respects, the information eventually provided was incomplete and contained glaring errors, by design or otherwise. See Annexure “2”

Even after taking two weeks to run around and put together some information. Ecocash still could not provide names of a CEO / MD even of one agent, nor the list of directors, list of shareholders and ultimate beneficial owners as requested by the FIU and as required by law. Although Ecocash in the end provided purported business addresses for some of the agents, in most cases the addresses were incomplete or patently false / fictitious.

Ecocash’s failures in this regard points to the fact that it did not collect and maintain customer identification and identity verification information and other KYC data as required under sections 15 — 18 of the Act, only started running around after being served with the directive.

If Ecocash had collected and maintained the KYC information as required by law. when opening an account, which is not borne by the above facts, then it should explain why it failed to avail such information timely, when requested by the FIU.

Failure to report a suspicious transaction as required in terms of section 30 of the Act: (Item 21 of Table of Civil Infringements, AML/CFT Directive No. 2 of 2014)

During the period from 22 to 28 April 2020. Ecocash agents listed in the first column of Annex: I. bearing agent numbers shown in the third column. conducted transactions in amounts specified the fifth column.

The transactions were suspicious and ought to have been reported to the FIU promptly. and in any case within 72 hour.. as mandated in section 30(1) of the Act.

Failure to report the transactions as required. is not only a criminal offence. in terms of section 30(1) of the Acts but also amounts to an administrative infringement in terms AML/CFT Directive No. 2 of 2014, item 21.

The transactions referred to above, as detailed under Annexure 1 were suspicious for one or more or all of the following reasons —
• Each agent conducted transactions of very high value in relation to their size and nature of business, with cumulative figures ranging between ZWS1.1910,068 to ZWS9.999,973 in a space of seven days.
• All the agents are obscure entities, therefore registering such high turnover in a matter of days ought to have roused Ecocash’s suspicions;
• The high turnover of transactions occurred when the country was under national lockdown, when most legitimate businesses were closed. Ecocash thus ought to have been suspicious of the hyper-active transactional behaviour of the agents during such a period;
• Ecocash did not have adequate KYC data of the entities to support a reasonable belief that the entities could legitimately transact such high volumes and high values in such short period:

Contrary to its legal obligation to report suspicious transactions, Ecocash did not report any of the highly suspicious transactions as summarised in Annexure 1.

Disclosing to a customer or to a third party that a suspicious transaction report has been, is being, or will be submitted to the Unit: (Item 24 of Table of Civil Infringements, AM L/CFT Directive No. 2 of 2014)

Section 31(2) of the Act prohibits a financial institution or any of its director. partner, officer. principal or employee, from disclosing to its customer or to a third party the fact that the financial institution has filed a suspicious transaction report to the FIU.

The provision reads: “(2) No financial institution or designated non-financial business or profession, nor any director. partner, officer. principal or employee thereof shall disclose to any of their customers or a third party that a report or any other information concerning suspected money laundering or financing of terrorism will be, is being or has been submitted to the Unit, or that a money laundering or financing of terrorism investigation is being or has been carried out, except in the circumstances set forth in subsection (3) or when otherwise required by law to do so.

This prohibition is one of the basic rules of financial intelligence which every financial institution and all its employees, let alone senior officers, ought to be aware of. Breach thereof is not only an administrative violation in terms of AML/CFT Directive No. 2 of 2014, it is also a serious criminal offence in terms of section 34 of the Act, which reads in relevant part —

Any person who intentionally or by gross negligence—(a) … or (b) … or (c) discloses to a customer or a third party information in contravention of section 31 (2); shall be guilty of an offence and liable to a fine not exceeding one hundred thousand dollars (US $100 000) or to imprisonment for a period not exceeding three years, or both such fine and such imprisonment.

Contrary to the law, on or about 6 May 2020, Ecocash Director Eddie Chibi, deposed to an affidavit in support of a court application filed by Ecocash against the Reserve Bank of Zimbabwe.

In his affidavit and by way of attachments thereto, Chibi intentionally or recklessly gave details of a number of suspicious transactions that Ecocash alleged it had filed with the FIU. The affidavit and annexures were filed with the courts and also published in online publications and / or social media.

Chibi’s actions, whether deliberate, reckless or in ignorance of his ad Ecocash’s legal obligations, amounted, not only to an administrative violation, but also a criminal offence. He had no lawful reason to publish details of suspicious transactions as he was not under any legal compulsion to do so. Ecocash did not need to name the entities in court papers or cite the facts of the cases submitted to the FIU.

If Ecocash felt it was necessary for the court (and the world) to know the entities and facts concerning the SIRs, at the very least. it should have sought a court order to authorise disclosure and / or publication of such intimation. a request that would almost certainly have been refused. in view of the legal prohibition.

Chihi’s criminal conduct (whether out of ignorance or out of contempt for the law or the regulator) is yet another indictment of his suitability to hold the position of director of a financial institution.

RESPONSE TO THE CHARGES

Ecocash. its Chief Executive Officer, Natalie Jabangwe and its Director Eddie Chibi. are each required to respond to all the 4 charges as set out above, within 7 days of receipt of this letter. stating whether you admit or deny the charges.

If you deny the charges, you are required to detail the grounds of your defense. The FIU may make a determination based on your submissions without having to call you to a hearing.

If you admit any of the charges. you may, if you wish, make submissions that you wish the FIU to take into account in assessing the appropriate penalty.

May you take note that some or all the charges cited herein also amount to criminal offences prosecutable in the courts of law.

O Chiperesa
Acring Director General
Financial Intelligence Unit