TRANSPARENCY International Zambia (TIZ) has warned that the Financial Intelligence Centre (FIC) Trends Report risks becoming one of the valueless reports which are intended to give a mimicry of a functioning government.
And TI-Z says government has not handled the illegality surrounding Mukula in an appropriate manner and it is clear that there is a lot of money laundering linked to this trade.
In a statement, Thursday, TIZ president Rueben Lifuka asked FIC to make a decision whether to serve those in power or members of the public.
“We want to warn that the FIC Trends Analysis report risks becoming a non-event and one of the many valueless reports produced by government, which are all intended to give a mimicry of a functioning government. Public trust in such institutions like FIC is important and we have seen how the work of important institutions like the ACC is being undermined because poor public perception. FIC management and the board can make a decision to work for those in power or for the people they serve, and whatever decision they make, they should live with the full consequences now and in the future. TIZ has taken some time to critically review the 6th Money Laundering and Terrorist Financing Trends Report for the year, 2019, released on September 2, 2020. This report was much-anticipated by the general public for several reasons: the Financial Intelligence Centre has in its short period of existence, earned public trust and confidence for the work that it has done,” Lifuka stated.
“The FIC in its 2018 Trends Analysis Report raised a number of pertinent issues, which were a cause for public concern and there was anxiety to find out if the trends of the past have continued and what progress, if any, has been made to attend to some of the predicate offences for money laundering, such as corruption. The third reason why the FIC Report for 2019 was long-awaited was the negative reaction and incessant attacks made on the FIC and its leadership by the PF government and as a public, we wanted to assess whether the FIC has remained resolute in the discharge of its functions or it has been captured by those who vehemently opposed its 2018 report. Our general conclusion is that the 2019 FIC Trends Analysis report is the antithesis of everything that the FIC has stood for in the recent past. This document pales in comparison with recent reports in both substance and quality, it is essentially a public relations document of peripheral value to any serious efforts to combat the high levels of corruption that this country is grappling with. One can only deduce that the political pressure of the recent past has come to bear on the FIC.”
Lifuka noted with concern the reduction in the number and value of intelligence reports analysed.
“The FIC 2019 report received 790 reports comprising 748 Suspicious Transaction Reports (STRs) and 42 Spontaneous Disclosure Reports. Significantly, of Suspicious Transaction Reports received in 2019, the FIC only analysed 101 reports and out of which 44 were disseminated to Law Enforcement Agencies and 57 were closed as there were no reasonable grounds for dissemination. This is a very sad development because essentially, FIC only analysed 14 per cent of the reports received compared to 24 per cent in 2018. It is, therefore, incorrect for anyone to infer that Zambia has performed well because of the drop in suspected losses from STRs now valued at K984 million from the 44 intelligence reports. What is true is that the suspected losses from STRs could probably have been higher if FIC had even analysed even 50 per cent of the 748 STRs it received. We note with concern the reasons for this reduction in the number and value of intelligence reports analysed, namely unpredictable funding, which adversely affected the FIC’s ability to verify STRs and SDRs,” he added.
“We would have wanted to know the reasons for this unpredictable funding – was this deliberately designed to cripple the efforts of FIC following the firestorm that the 2018 report raised? What this means is that it is possible that from the many STRs not verified, some of these could potentially be ripe for further consideration by Law Enforcement Agencies. What is further alarming is the admission by FIC that most of the 44 intelligence reports disseminated to Law Enforcement Agencies, were related more to individuals than corporates, which usually have higher values. The question is: was this a deliberate move on the part of FIC to focus on STRs related to individuals rather than corporates? Could this be that corporates, which were previously captured in this analysis, are the conduits of choice for Politically-Exposed Persons (PEPs), who set up shell corporate vehicles and trusts? We are left to ask, how was the decision arrived at to focus on 101 reports mostly related to individuals and leave out corporates, which could have higher values of suspected losses? This decision to focus on low value transactions certainly raises eyebrows.”
He said that the 2019 report missed an important piece on informing the public on what measures government had taken following the 2018 report.
“The 2019 Report does not provide this breakdown of the drivers of predicate offense and it is difficult, therefore, to appreciate whether this omission of details is as a result of government implementing the 2018 recommendations or not. What has happened in the intervening year for us not to see the use of nominees as a driver of corruption, for instance? Does it mean the use of shell corporate vehicles and trusts has reduced? Are we now effectively enforcing the requirements of the law on disclosure of beneficial ownership? It is our considered view that the 2019 Report misses an important piece on informing the public what measures government has taken following the 2018 Report. This makes it difficult to build any meaningful trends in the matters handled by FIC,” he stated.
He lamented that government had done nothing to address the losses arising from public procurement.
“We are all painfully aware that because of political patronage some of the contracts are awarded to ill-qualified suppliers and contractors, who are basically members of the ruling party. This trend continues unabated and we will see more of this as we head towards the 2021 election. It is a known fact that individuals (including some serving senior members of government) use their positions in public institutions to influence the awarding of contracts to companies in exchange for gratification in the form of cash, real estate and motor vehicles. Similarly, FIC highlights a problem of old – the single-sourcing of projects, which are non-competitive – this is a perennial story, which will not go away soon,” Lifuka stated.
And Lifuka said that government had not handled the illegality surrounding Mukula in an appropriate manner due to the huge amounts of cash still linked to the illicit trade in the export of the logs.
“The 2019 FIC Report notes that some Suspicious Transaction Reports related to environmental crimes, particularly the illegal harvest, transportation and export of the prohibited Rosewood, popularly known as Mukula. FIC notes that funds generated from the sale of the prohibited tree were declared to financial institutions as proceeds from sale of timber. We note that in 2018, the FIC received Suspicious Transaction Reports (STRs) related to timber valued at ZMW2,156,000. Many of the individuals in the illegal trade of Mukula established other businesses through which these proceeds were laundered. Our concern, as TI-Z, is that this issue of Mukula production is not new and government has not handled the illegality surrounding Mukula in an appropriate manner and it is clear that there is a lot of money laundering linked to this trade. We want to remind the Zambian people of two previous reports on Mukula trade, which have not received active attention from government. The 2019 Mukula Cartel Report by the Environmental Investigation Agency (EIA), which alleged that Mukula continues to be trafficked despite the outcry of the Zambian public and that the sale of this natural resource was allegedly benefitting only a few people,” stated Lifuka.
“The 2018 Report on Mukula trade between China and Zambia, by the Centre for International Forestry Research, which highlighted that recent Mukula production in Zambia could have amounted to about 110,000 m3 per annum, with revenue losses of about US $3.2 million and bribes paid to State officials of about US $1.7 million. This CIFOR Report also highlighted that what leaves Zambia as sawnwood seems to arrive in China as logs – ‘It seems clear that Mukula, which is largely exported in logs, often gets declared as sawnwood at departure to comply with the legal framework, as a log-export ban remains in force in Zambia.’ Finally, this report made a serious finding of discrepancies in declarations both in volume and value. For example, in 2016, Zambia declared to have exported about 3,000 m3 Mukula for an approximate value of US $900,000, while China declared imports of about 61,000 m3 for an approximate value of US $87 million. FIC reporting on Mukula trade today, while important, does not change the sad reality that, as a nation, we are aware of unscrupulous activities related to this trade and we have done nothing about it. Most likely, the 2020 Trends Analysis Report will bring out similar concerns and in typical Zambian fashion, this will not move the people to realise the magnitude of the loss of vital natural resources, which only end up benefiting a few.”