Salutations
- The Inspector General of Police, Mr. Graphel Musamba;
- The Anti-Corruption Commission (ACC) Director General, Mr. Thom Shamakamba;
- The Drug Enforcement Commission (DEC) Director General, Mr. Nason Banda;
- The Financial Intelligence Centre (FIC) Acting Director General, Ms. Leah Tembo;
- The Banker’s Association of Zambia (BAZ) Chief Executive Officer, Mr. Leonard Mwanza;
- Stanbic Bank Board of Directors and Management;
- Representatives of Financial Institutions from BAZ;
- All Stanbic Staff Present;
- The Media Present;
- Ladies and Gentlemen
Firstly, let me thank Stanbic Bank Zambia Limited for organizing this Fraud Forum aimed at sharing insights on how the bank collaborates with law enforcement agencies. Secondly, I also wish to express my sincere gratitude for the invitation to share some reflections on the role of the Bank of Zambia in ensuring that the financial system remains resilient to financial crimes.
Ladies and Gentlemen, financial crimes include fraud, dishonesty, financial market malfeasance, handling the proceeds of crime, and terrorism financing. Available evidence globally, suggests that financial crimes have pervasive adverse effects on various facets of society. For example, financial crimes can seriously hinder resource mobilization efforts for developing nations such as ours, by reducing the capacity of the government to generate taxes needed to provide essential public goods such as health education and security. Further, the necessity for criminals to conceal the source of their illicit funds has led to financial crimes such as money laundering. Money laundering distorts the official statistics relied upon by public institutions to plan social spending and formulate public policy.
But perhaps the most pernicious facet of financial crimes is one that is most silent. This is the fact that financial crimes can also distort economic policy and decision making leading to inefficient or sub-optimal outcomes. This could be because they contribute to the promotion of bad public policy that delivers poorer economic and social outcomes for our children and grandchildren or the misallocation of resources between businesses and households to those that are less productive and/or are less deserving from a social perspective.
One aspect of financial crimes that is of particular concern to the Bank of Zambia is the rise of Ponzi Schemes in which the organisers of these schemes collect deposits from the public and pay a return on these deposits through the continuous collection of deposits and not from the deployment of these finances in economic activities that provide a return on investment. These schemes are in contravention of the Banking and Financial Series Act (2017) as they involve the provision of a financial service without a license. Worse still the public participating in these schemes are also liable. The Bank of Zambia is continuing to work with other regulators and the law enforcement agencies to tackle this – and an important component is the need to increase public awareness.
Distinguished Ladies and Gentlemen, the fight against financial crimes is diverse in nature and therefore, requires the involvement of all stakeholders. In this regard, the Bank of Zambia welcomes the strong steps the Government has taken in developing a National Policy and Strategy to direct efforts aimed at combating financial crimes. In a similar vein, the development of a collaborative framework among various public institutions which seeks to ensure effective cooperation and collaboration in the fight against financial crimes is also a very important milestone. These measures demonstrate the high-level commitment to creating a hostile environment for perpetrators of financial crimes.
Distinguished Participants, as you may be aware, the Bank of Zambia is a member of the Antimoney Laundering Authority (AMLA) which is the Anti-money Laundering and Countering of Financing of Terrorism and Proliferation AML/CFTP policy setting body in the country. The Bank is also represented on the National Task Force of Senior Officials on AML/CFTP, a body established by Cabinet Office to coordinate and implement AML/CFTP measures.
The Bank of Zambia is also mandated to supervise entities under its supervisory ambit for AML/CFTP in terms of section 62A of the Banking and Financial Services Act. Further, the Bank is designated as an AML/CFTP supervisory authority under section 36 of the Financial Intelligence Centre (FIC) Act with a mandate to monitor and ensure that the institutions under its supervision comply with their AML/CFTP obligations.
Ladies and Gentlemen, allow me to outline some of the more specific actions the Bank of Zambia is undertaking in fighting financial crimes. As indicated earlier, the diverse nature of financial crimes entails that these crimes can occur in various jurisdictions and may require multiple stakeholders to resolve. It is against this background that the Bank has signed a number of Memoranda of Understanding (MOUs) with both local and foreign authorities in order to foster closer collaboration and sharing of information. Domestically, the Bank of Zambia also works closely with other financial sector regulators such as the Securities and Exchange Commission and the Pensions and Insurance Authority based on the existing tripartite MOU. This is because the financial sector is the first in the line of defense and therefore, requires concerted effort by all regulators to prevent the abuse of the sector by criminal elements.
More specifically, the role of the Bank of Zambia is to protect and preserve the integrity of the financial system and ensure the safety and soundness of individual entities it regulates. The Bank of Zambia in its capacity as a licensing authority has put in place a rigorous licensing process which ensures that only ‘fit and proper’ persons are allowed to own and manage financial institutions.
On an ongoing basis, the Bank of Zambia requires all reporting entities to comply with AML/CFT national requirements, laws and regulations. These regulations include specific requirements such as customer due diligence, transaction monitoring and reporting obligations on suspicious transactions and activities. Others are coordination and cooperation as well as record keeping and obtaining beneficial ownership information.
In addition, the Bank enforces compliance to AML/CFTP measures through its
onsite supervision and examinations of regulated entities. Through these on-site examinations, financial service providers that are non-compliant with the AML/CFT requirements are sanctioned and required to put in place remedial measures for the identified breaches. Further, the Bank of Zambia performs targeted/thematic AML/CFTP examinations on specific concerns observed in individual institutions as and when necessary.
The Bank of Zambia also conveys the supervisory expectations to financial service providers through the Banking and Financial Services Corporate Governance Directives 2016 and the Bank of Zambia Anti Money Laundering Directives 2017. Further, the Bank of Zambia also holds workshops, trainings, and meetings with the various stakeholders.
Ladies and Gentlemen, despite the good intentions and efforts of our supervisory activities, financial service providers will still be exposed to some degree of residual risk in their operations. This initiative by Stanbic Bank Zambia Limited to host this forum is indeed testimony of the need to continuously expend efforts towards creating resilience of the financial sector against the risks posed by financial crimes. We are, therefore, delighted that your bank is hosting this forum today.
In conclusion, allow me also to acknowledge the critical role that law enforcement agencies play in addressing financial crimes. Your presence here this morning reinforces our firmly held view that preserving the integrity of the financial sector requires multiple stakeholders to play their respective roles effectively. It is my sincere hope that you will have fruitful deliberations and that we can continue to work together even beyond this forum being held here today.
I THANK YOU FOR YOUR KIND ATTENTION.