Fiscal Police in conjunction with Reserve Bank of Malawi (RBM) has arrested several prominent businesspersons of Asian origin in the country’s major cities in connection to illegal foreign currency transactions.
Between Monday and Wednesday this week, the two State agencies rounded up six Asian business tycoons before they were released on bail awaiting court appearance after being recorded statements.
The suspects own different property in the cities and were apprehended for quoting their clients in foreign currencies contrary to the country’s Exchange Control Regulations.
National Police spokesperson James Kadadzera on Wednesday could neither confirm nor deny the joint operation when asked to divulge more information. Instead, he asked for a questionnaire, which he had not responded to at press time.
But RBM spokesperson Mbane Ngwira on Thursday confirmed that there were on-going investigations relating to suspected violations of the Exchange Control Regulations, specifically on quoting in foreign currencies.
“However, according to procedure, statements can only be obtained after an arrest; hence, after obtaining the statement the suspects are given police bail,” said Ngwira.
He said once an assessment of the information they have gathered is done, a decision would be made whether to continue prosecuting the suspects (whose identities have deliberately been concealed) or drop the charges.
According to Weekend Nation research, some of the suspects are also fighting government in courts over cases relating to money-laundering (illegal transferring of money out of the country) and tax evasion.
In February this year, RBM governor Dalitso Kabambe said the Malawi economy had lost about K500 billion through unauthorised externalisation of foreign exchange coupled with transfer pricing cases by some multinationals between 2017 and 2018.
The Exchange Control (Use of Foreign Currency in Local Transactions) Regulations 2006 criminalise quoting prices for payment or demanding payment in any foreign currency, except with the permission of the responsible minister.
The Act does not spare tenants as it also holds them liable for accepting quotation or making payment in foreign currency for goods or services sold or provided in the country.
In terms of fines, the Exchange Control Regulation stipulates that any person who contravenes it is guilty of an offence and shall be liable to a fine of K100 000 and to imprisonment for two years, if it is an individual.
The piece of legislation further states that in the case of a corporate entity, it shall be liable to “such a fine as determined by the court that would deter the further commission of offences…”
Ngwira said the RBM Act Section 47 designates only the local unit, kwacha, as the legal tender for the country and as such any use of other currencies for transactions undermines the credibility of the kwacha.
He said: “The use of other currencies further renders monetary policy ineffective since through the other currencies you are importing monetary policy from those countries where the currencies originate.”
According to a 2017 Global Financial Integrity (GFI), Malawi is being robbed of over K1.7 trillion annually due to illicit financial outflows while trade cash flowing into the country is pegged at about K1 trillion.
Economics Association of Malawi (Ecama) president Chikumbutso Kalilombe highlighted that since the Malawi kwacha is legal tender for the country, the enforcement by RBM and Fiscal Police is aimed at protecting the legal status of the currency.
“Letting uncontrolled use of foreign quoting can negate local currency to just a mere accounting mechanism,” he observed.