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The 8th Money Laundering and Terrorist Financing Financial Intelligence Centre (FIC) Report has revealed the abuse of incorporated names in public procurement where multiple companies are registered specifically to obtain government contracts.
Under the report, it was established that most of these companies did not meet the criteria for the award of contracts and in most cases the contracts were being fraudulently awarded.
This is according to a report released in Lusaka on Monday
It stated that there was also a rise in the number of individuals and companies purporting to be conducting trade with a view of moving or obscuring suspected illicit funds.
The FIC has continued to observe the incorporation of companies where the identity of beneficial owners is obscured, with the sole purpose of using the companies for suspected illegal activities and externalising of funds.
“A common scheme observed was the use of Zambian nationals registered as shareholders/directors and beneficial owners who were not involved in the running of the companies,” the report said.
It said analysis of financial transactions revealed that the individuals were not signatories to the bank accounts and had no control over the company funds and it was further observed that the said companies had multiple bank accounts and recorded huge cash in United States (US) Dollar deposits, which were later externalised to various foreign jurisdictions mostly in East Asia.
The report said the foreign nationals were found to be linked to various companies as evidenced by financial transactions on the companies’ accounts.
In the report, it was established that despite the huge outflow of funds to East Asia under the guise that they were paying for equipment, seafood, blankets, there were no corresponding imports into Zambia by the same companies.
“It was further established that the companies had remitted funds in excess of US$588 million (Equivalent to K9.93 billion at average exchange rate of US$1: K16.9 in 2022). These companies were created solely to facilitate the movement of funds to a country in East Asia and trade was merely used as a justification for the suspected illicit financial flows.This was mainly done through externalization of funds justified by false invoices,” it said.
Analysis by the FIC revealed that there were no corresponding imports into Zambia as per invoice narrations and in addition, there were suspected illicit inflows of funds with narrations such as payments for consultancy services and loans from companies in foreign jurisdictions.
In 2022, the FIC analysed a total of 64 reports bordering on suspected tax crimes, of which 52 were disseminated to Law Enforcement Agencies and it was established that 42 out of the 52 reports involved foreign nationals who incorporated companies in the names of Zambian nationals.
The report said the Zambian nationals were indicated as directors, shareholders and beneficial owners on the company registry however, the 42 companies were all controlled by different individuals from those submitted as shareholders/directors/and beneficial owners.
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