Banks in Malawi have intensified their searchlight on customers, to the point of seeking clients’ information such as water and electricity bills as well as residential addresses, so why did this rigorous process fail to detect the Capital Hill fraud that has left government bleeding?
Failure by banks to raise the red flag when government employees used them to steal public money prompted former finance minister Friday Jumbe to suspect that the financial institutions form part of the ring that has plundered public coffers.
Jumbe told Nation on Sunday on Tuesday that banks share the blame for the looting that has shocked the nation and donors.
But the Bankers Association of Malawi (BAM) says it is difficult for banks to detect a fraudulent activity at first glance.
Jumbe, now president of the newly formed Labour Party, suspected high levels of complicity in the fraud within banks which he argued should have raised the alarm over suspicious transactions by individuals.
“Where are the banks in all this? They waste our time with the know-your-client procedures, almost demanding to know the number of teeth one has just to open an account. Where were they when people were making huge deposits and withdrawals, cashing huge cheques without getting suspicious?
“Didn’t they see the need to question the millions or billions some small company or individuals were making into their accounts over a period of time? Where is the Financial Intelligence Unit (FIU) and what is it doing? There is no way they can claim not to have detected fraud,” he said.
Jumbe said the plunder has been happening over a long time and believes that “fat cows” who are involved will be fished out.
“To confuse matters, we are throwing these matters to the Anti-Corruption Bureau (ACB) when it is a straightforward case of theft. Let Fiscal Police and the Director of Public Prosecutions (DPP) handle it.
“We want to bring in ACB as if the idea has been corruption. These institutions must be sensitised. It is a crisis. This should serve as lessons to Malawi,” he said.
But BAM president William Chatsala said the situation differs from bank to bank. He said if a customer regularly draws a cheque, a bank would not have background information.
“It is difficult for banks to play a role because the looting might be happening in different ways. Even when a cheque is presented at the counter and issuers are called to verify, the right signatories give a go-ahead, banks would not know anything.
“FIU gets reports from banks on exceptional or unusual transactions. Once the information is given, it is up to FIU to investigate or order an account to be frozen. Banks do not have those powers,” said Chatsala.
Chief executive officer of the Malawi Confederation of Chambers of Commerce and Industry (MCCCI) Chancellor Kaferapanjira said the network might have involved senior people in government who authorised banks to issue payments.
“Without backing the banks, they may have done their job by checking with signatories who allow encashment. I believe the cartel involves senior people. There was little banks could have done,” he said.
He said MCCCI members have since the scandal demanded to stop paying taxes to government directly, a process he said is now at an advanced stage.
“The only thing to stop us from the decision on taxes is for government to engage an independent forensic auditor without the involvement of the Auditor General as he can be easily influenced.
“We also want the Integrated Financial Management Information System (IFMIS), which once back, must also be system audited by independent auditors. We have also asked donors to suspend their budgetary support until service for the money is seen,” he said.
Money laundering expert Jai Banda said banks are supposed to report to FIU any suspicious or unusual transactions for an account in accordance with the Money Laundering, Proceeds of Serious Crime and Terrorist Financing Act,
“Banks can follow accounts through the know-your-customer information which indicates sources of income. There is amount given at which banks can determine to be suspicions and report to FIU for analysis,” said Banda.
FIU acting director Atuweni-tupochile Phiri said two weeks ago that Malawi FIU is not mandated to carry out investigations or prosecutions.
