Most people were surprised by the Zimbabwe central bank moves to instruct EcoCash to freeze the accounts of all agents that process transactions above ZW$100,000 (about USD2,000 or USD4,000 when you use the generous official exchange rate) per month.
$100k is a crime
The problem with this directive is that it is just a blanket punishment. Effectively, the Reserve Bank of Zimbabwe is saying that if you are not a listed company, a bank, an international organisation or the government, then you are not allowed to transact above this arbitrary figure of $100k.
Even if there is just one legitimate business in this class, common sense tells you that it is not right nor fair to cut the service for that one business just to ‘catch’ the rest. It’s even worse. The central bank could have applied more targeted sanctions without punishing businesses for having high transactions. They had information on which accounts to target.
The RBZ didn’t follow up on suspicious transactions
A letter that was attached to the papers submitted to the High Court seeking reversal of the RBZ directive reveals that the central bank has not been acting on flagged accounts. The letter written to the Financial Intelligence Unit by EcoCash CEO, Natalie Jabangwe on the 24th of April 2020 says:
We note that, as shown in Table 2 below, since implementation of the new limits we submitted 17 STRs* and only five have been responded to with requests for additional information, the rest (12) we have not heard anything from you with some getting to a month old since submission. Prior to implementation of the new limits, since beginning of the year we submitted 68 STRs and got 22 responses with 1 case being referred to the police. In 2019 we submitted 100 and got 50 responses. Whilst we are fully aware of our obligation to detect and report and we will continue to do so, the low response rate can be disheartening and cause for concern to us especially when you then keep accusing us of not detecting and reporting cases of abuse of the platform.
*STR: Suspicious Transaction Report
Here’s an example of one of the reports ignored by the Financial Intelligence Unit:
All the example transactions that Jabangwe cites in her letter appear suspicious indeed. It’s surprising that the majority of them did not get as much as a follow up from the authorities. Of the 85 transactions flagged by EcoCash from January 1 up to the time of sending the letter, 32% had some sort of follow up and only one was reported to the police.
Is it that there are some untouchable individuals and businesses that can only be ‘accidentally’ caught up in a blanket drag net but not individually investigated without political or other consequence? I wonder what we will uncover if we thoroughly trace the final beneficiaries of some of these companies.
Even the police was surprised
In the same letter, the EcoCash boss wrote:
On 15th September last year, we were invited for a meeting at Criminal Investigations Department Headquarters (CID HQ) to discuss ways of ensuring that channel partners who were abusing the EcoCash platform were brought to book. We advised them the process that we follow in terms of reporting STRs to your office and we gave them statistics of STRs that we had submitted to your offices. They were impressed with the number of STRs we had submitted but expressed shock at the small number of Compliance Orders that they had received from your office.
The other major challenge they mentioned was the requirement of serving Compliance Orders as notices to offenders before any criminal proceedings could be done. The notice periods were 7 and 14 days depending with the offence. These requirements were affecting the effectiveness of the AML/CFT measures. We thus call on the relevant institutions to play their respective roles to ensure that there is combined effective collaboration in implementing the AML/CFT measures.
It’s curious that holders of very suspicious accounts were given up to 14 days notice to comply yet the RBZ issues an ‘with immediate effect’ directive that affects any business that has high transaction volumes.
When inconsistencies like these surface we are left to conclude that the RBZ lacks much moral authority to direct the freezing of accounts more so in a blanket manner as they have done.
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12 comments
Considering Mthuli Ncube had a sophisticated algorithm for distributing funds, I wonder why he didn’t come up with an algorithm to identify forex dealers instead of just using a blanket cap of ZW$100K. I fear this cap will force merchants to reject mobile money as they will not be able to change it into USD on the black market. They will demand cash which they can change to USD.
Mthuli is not RBZ and neither is he FIU. Lets get our facts right!
Dude, where are you getting this? Where were these assertions made? You may want to read to understand, not to reply.
Is Mthuli Ncube not the principal to the reserve bank governor?
Now everyone is opening a netone line so they can have monies deposited. Rbz & Mthuli have made life hell in this country. They shud have been replaced a year ago.
I’m my opinion, if EcoCash noted a agent had suspicious and improbable transactions for an honest actor, they also could have acted and shutdown the line themselves. As long as the agent is in violation of their terms and conditions of operation.
RBZ may have not responded to their reports, but as EcoCash indicated even they found one of the agents cited to be very suspicious, but choose to let them operate on a flimsy excuse that RBZ never responded.
If you loiter in a shop/bank you will be asked to leave, even if you haven’t stolen anything. Because right of admission can be reserved. Shops/Banks act quickly because it’s their stock/money that’s at risk of being stolen. EcoCash stands to benefit from illicit cash flows, so it doesn’t suspend agents, it just files reports and counts is profits.
Had not thought of it that way.
The difference between exercising the right of admission and EcoCash freezing accounts unilaterally is that if EcoCash does that they may find themselves in a litigation situation (constitutional even) for tempering with property rights. As much as we want bad actors brought to book, do we really want to place that power in the hands of private business?
Imi Vanhu Musadaro is wrong. Ecocash would open itself up to expensive legal action against it, if it unilaterally closed down the accounts on the basis of mere suspicions when an avenue to prove if said suspicious activity was against the law of Zimbabwe by simply forwarding the information to the RBZ and getting it to investigate and render a decision on whether or not the account must be shutdown. The RBZ is after all the entity that created the rules pertaining to suspicious activity and it’s their job to act on any information that is forwarded to them. This kill them all and let God sort out the guilty from the innocent type of blanket account closures by RBZ is malicious in that it adversely affects Ecocash business when fault lies with the RBZ for failing to investigate when information was forwarded to it.
Interesting times
There is a wrong perception that If banks or EcoCash close your account, you can sue them. That’s not true. These accounts are opened with conditions, and where it’s clear that AML rules have been breached, banks and MNOs can close those accounts. All that is required is to give the account holder due notice. 14 days has been used in the industry as due notice. There is what is called compulsory closure and all bankers know this term. In the old good days, if you had 3 bounced cheques, your account would be closed… simple!! The conditions are still, there, even stronger in the age of digital money.
When I read that STR, my immediate response was, why did ECOCASH not close the account if they noticed that the purpose for which the account was opened is not the one being used. I also see an element of irresponsibility on the part of EcoCash wanting the RBZ to come and clean up its books. STR or no STRs, banking institutions and MNOs have the responsibility not to onboard nefarious business.
The proper thing to do was for Ecocash to freez the Agent lines for these companies and request for information on how these companies were getting their funds.
Does KYC apply to banks only?
To the extend that they had already carried their investigations and found out that the transactions were not in line with the core business, EcoCash just needed to give notice to the agents that the agent lines were not operating in terms of their conditions, and the agent lines will be closed in the next 14 days. The purpose of the notice is to allow an agent to make alternative arrangements or to engage EcoCash and regularize their accounts or to seek recourse somehow. I am just not happy with EcoCash folding their hands and expecting the RBZ to come and clean up their house..