THE Reserve Bank of Zimbabwe (RBZ) says it will request the Financial Intelligence Unit (FIU) to close bank accounts of business entities that are pricing using exchange rates not linked to the ruling auction rate.
The central bank said it was aware of errant businesses in the habit of using exchange rates far removed from the ruling exchange rate despite obtaining US dollars from the auction system.
RBZ Governor Dr John Mangudya, addressing a Zimbabwe Chamber of Commerce(ZNCC) conference last week, also said the bank FIU will take action against businesses that are practising transfer pricing.
This comes amid fears that the delinquency by some businesses will lead to a raft of price increases that could send inflation, which appear to have stabilised, on a rampage once again.
Annual inflation dropped to 401 percent in November from 473 percent the prior month, the Zimbabwe Statistics Agency (Zimstat) said, while monthly inflation is now trending below 5 percent.
The central bank says the economy appears to be on a strong footing for recovery and growth, adding this assertion was backed by solid export performance numbers and forex inflow figures.
Dr Mangudya said in terms of the law, market players should price their products in line with the ruling exchange rate, but businesses are not complying and profiteering through exchange gains.
Since the introduction of the auction on June 23, 2020, approved businesses have been buying foreign currency on the RBZ auction at the ruling weekly rate, now perched circa US$1/$81,7.
But upon receiving the money, several unscrupulous business entities charge prices using rates that reflect margins between $15 and $30 over the prevailing official market exchange rate.
Others, the Governor said, seek quotations in foreign countries for approved imports and manufacture invoices that reflect grossly inflated prices in order to get more US dollars from the auction.
Dr Mangudya said the monetary authorities were watching and had all along been using moral suasion for compliance, but may soon request the FIU to close bank accounts of culprits.
“We were trying to use moral suasion all along, and as we traverse the journey towards 2021, we now want compliance. Others are using $85, others $95, and others $130. It is non-compliance.
“The instruments are there, we have plenty of statutory instruments but compliance is our weakest point in Zimbabwe. (Businesses) are (taking) arbitrage opportunities.
“We were using moral suasion, but we have our FIU, Criminal Investigations Depart, and the Police.
“These things are, however, so difficult to police, we need self introspection and self discipline,” he said.
The Financial Intelligence Unit (FIU) was established in 2004 in terms of section 3 of the Bank Use Promotion and Suppression of Money Laundering Act. The Unit exists as a unit in the administrative establishment of the Reserve Bank of Zimbabwe (RBZ), but has its own governing statutes, giving it a mandate distinct from that of the country’s central bank.
Its mandate is ensuring anti money laundering (AML) and combating the financing of terrorism (CFT) compliance but works in close cooperation with supervisory or regulatory bodies of the various types of designated reporting institutions to ensure that the regulated entities comply with their AML/CFT obligations.
The unit, which falls under RBZ, also works with relevant stakeholders, in ensuring the investigation, prosecution, conviction of criminal offenders, and confiscation of recovered assets or funds.
“Businesses want to sell at $91, $95, but every day they come to the auction (for USD at $81,3) and when you go and buy in their shops they charge $95, $110, they think only of making money.
“The $14 or $15 is exchange gains; this is arbitrage, we see it happening but we cannot police everyone, we need self-policing, this is lack of compliance, the FIU will come and close your accounts,” he said.
Dr Mangudya said the best way to rein in the errant businesses involved in the mentioned arbitrage activities using funds obtained from the auction market was to freeze their accounts.
“If (FIU) hit your pocket, you cannot transact and the next thing to do is to phone the RBZ and when they come and you ask ‘Why were you doing (this)?’, all they say is, aah Governor I’m sorry.
Dr Mangudya said he was aware a number of businesses now have associate companies in South Africa that issue invoices and come to Zimbabwe to get US dollars, which is transfer pricing.
“We are watching you. They come to the auction for US$10 000 yet the goods are for $4 000, the other $6 000 is transfer pricing; that is why we need to do production here,” he said. — ebusinessweekly