The central bank, Reserve Bank of Zimbabwe (RBZ), through the Financial Intelligent Unit (FIU) has banned 12 entities from participating on the Foreign Exchange Auction while 62 are under the FIU watch list due to malpractices.
Since the inception of the Foreign Exchange Auction on the 23rd of June 2020, there has been a significant increase in both the number of bids and the value thereof from just under 100 bids valued at US$11 million at the first auction to the current levels of over 500 bids valued at around US$40 million at both the Main and SME auctions.
On the other hand, the FIU was established in 2004 in terms of section 3 of the Bank Use Promotion and Suppression of Money Laundering Act [Chapter 24:24]. It exists as a Unit in the administrative establishment of the RBZ, but has its own governing statutes, giving it a mandate distinct from that of the central bank.
In a statement, RBZ governor John Mangudya said the Bank’s Exchange Control Division and the Financial Intelligence Unit (FIU) are continuously monitoring users of foreign exchange in the economy in order to deal with the malpractices.
“This exercise has resulted in 12 entities being banned from participating in the foreign exchange auction whilst 62 entities are under the FIU watch list. The banned entities’ respective bankers have been warned against breach of the foreign exchange auction rules,” he said.
One of foreign exchange auction rules requires banks to ensure that applicants have enough local currency in their accounts to finance their bids. However, it has come to the attention of the Bank that some banks are not paying particular attention to this requirement and have instead been extending overdraft facilities to finance their customers’ bids.
“Where absolutely necessary, bank lending should be limited to a maximum of 50% of a bid. Under these exceptional circumstances, bidders would be required to have in their accounts a minimum balance equivalent to 50% to cover their bids.
Banks are further reminded to conduct full Know Your Customer (KYC) checks on their clients, and should not be complicit or connive in malpractices with their customers,” reads the statement.
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