THE Financial Intelligence Centre Trends Report 2018 says a trend has continued where ‘’companies’’ not registered with the Patents and Companies Registration Agency (PACRA) were awarded public contracts.
The FIC report also indicated that the acquisition of property using laundered funds continued to occur during the year 2018.
On political parties, FIC noted that some private companies that were awarded public contracts were funding some named political parties.
“The funds would move from these private companies to prominent individuals linked to the political parties. The cases analysed amounted to K10 million,” the report states.
“It is recommended that the Registrar of Societies makes it a requirement for all political parties to disclose their sources of funding and submit audited annual financial statements which should also be available for public scrutiny through the appropriate Parliamentary Committee,” FIC states.
On use of domestic financial institutions, the FIC states that these included banks, micro-finance institutions, pension funds and insurance companies.
“A number of cases that were analyzed involved placement of proceeds of crime and transfer to jurisdictions outside Zambia,” it stated. “…Use of Nominees - The FIC noted a continuing trend of the use of associates or nominees or family members to hide beneficial ownership of corporate vehicles and to own property… Ineffective controls in public institutions. In some instances, the FIC observed a trend where ‘’Companies’’ not registered with the Patents and Companies Registration Agency (PACRA) were awarded public contracts. Most of these companies were connected to Politically Exposed Persons (PEPs).”
The FIC observed dispossession of property through force and intimidation of legal owners and Law Enforcement officers. It states that perpetrators included Zambians and foreign nationals.
The FIC recommended review of the public procurement Act to prohibit participation of shell corporate vehicles in public procurement.
“This should include partnerships where the sole purpose is for the shell company to obtain the contract which is executed by some other company. Further, the rules should focus on the persons behind the incorporated entity rather than the entity to avoid repeat offenders defrauding government through use of new corporate vehicles,” the report states.
The trends report also states that professional bodies such as Zambia Institute of Chartered Accountants and Law Association of Zambia should effectively supervise institutions under their scope of influence to ensure criminal elements did not hijack the operations of the supervisory bodies.
On environmental crimes, the FIC reported continued timber sales in regions where endangered Rosewood “Mukula” is indigenous.
The Centre analysed cases in which individuals trading in the prohibited Mukula declared timber as their source of funds. The Centre received Suspicious Transaction Reports (STRs) related to timber valued at K2,156,000.
“Many of the individuals in the illegal trade of Mukula established other businesses through which these proceeds were laundered. The areas most affected were Manyinga and Mufumbwe in North Western Province. The Centre further noted that foreign nationals continued to engage locals to illegally harvest the endangered tree for subsequent transportation out of the country, mostly to Asia,” it reported.
The FIC also noted that the acquisition of property using laundered funds continued to occur last year.
“The Centre observed a discrepancy between the mortgage market and the rising number of housing and office infrastructure. This rise can partly be attributed to an increase in the number of property developers. Currently, there is no regulator that oversees the activities of property developers for AML/CFT [Anti-Money Laundering/Countering the Financing of Terrorism] purposes,” it stated. “Construction provides an easy and undetectable avenue for criminals to launder funds. The placement and layering of the illegal proceeds occur during the construction of property. The integration of the proceeds of crime occurs when either the property is sold or leased for rental income.”
On case studies: Corruption, abuse of office and money laundering, the FIC states that a politically exposed person (it denoted as N) was alleged to have amassed wealth that was not in line with his expected income within a short period of time.
“The PEP was alleged to have amassed wealth through suspected corrupt practices with the aid of two other PEPs, his associates (PEP D) and (PEP C). PEP N influenced the awarding of contracts to foreign construction companies and in return, these companies constructed 49 residential properties for him valued at K70 million. They further purchased two luxury vehicles for him valued at K4 million,” stated the FIC. “With respect to PEP C and PEP D, it was noted that they had acquired four (4) properties valued at K61,000,000. A review of the bank accounts of PEP N and PEP C for the period 1st October 2015 to 30th April 2018 revealed the following credit turnover; PEP N: K12,000,000, PEP C: K35,000,000. The case was disseminated for suspected corruption and money laundering to competent authorities.”