Chithyola Banda at the press conference in Lilongwe today
* An Action Plan that has been effected towards the recovery, development and protection of the economy
* Aimed at cushioning the most vulnerable Malawians from the economic shock the devaluation has caused
* Dealing in foreign exchange without authorization or licence from RBM is illegal under the Exchange Control Act, 1984
By Duncan Mlanjira
Minister of Finance & Economic Affairs, Simplex Chithyola Banda says government is putting up water-tight legal and regulatory frameworks that protect the country’s economy — that include intensifying the crackdown on all illegal foreign exchange trade in all markets across the country and in boarder areas.
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He said this in Lilongwe today, November 13 at a press conference in Lilongwe that was called to update Malawians the Action Plan that has been effected towards the recovery, development and protection of the economy in the aftermath of the devaluation of the Kwacha — aimed at cushioning the most vulnerable Malawians from the economic shock the devaluation has caused.
“We want water tight legislations that would deter those that would like to play around with our economy,” he emphasized. “With immediate effect, the Fiscal Police, with support from the Financial Intelligence Agency (FIA) and National Intelligence Service — including Malawi Defence Force (MDF) — will intensify crackdown on all illegal foreign exchange trade in all markets across the country and in boarder areas.
“The public is, therefore, warned to resist and report all suspicious incidents of buying or selling of foreign exchange from unregistered vendors. Any individual or entity caught engaging in this business without proper registration and authorization will be arrested, prosecuted, and have their foreign exchange impounded according to law.
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“Government wishes to remind the general public that dealing in foreign exchange without authorization or licence from the Reserve Bank of Malawi is illegal under the Exchange Control Act, 1984.
“All Authorised and licensed Foreign Exchange Dealers are reminded to always display evidence of authorization or license at a conspicuous place within their business premises.”
He further said the Finance Ministry will publish and gazette regulations to promote legal foreign exchange trade, including the requirement that all importers of goods and services into Malawi must show evidence of foreign currency purchase from any authorised foreign exchange dealer to the Malawi Revenue Authority (MRA).
“Provision of an authentic and verifiable receipt will be demanded by the authorities when declaring goods to MRA for duty purposes at points of entry. This will be effective once published in the Gazette and will be applicable to importation of goods whose value exceeds US$2,000 or equivalent value in any currency.
“This will require the importer to declare the source of the foreign exchange used in the importation of those goods. Required evidence shall include receipt from an authorized foreign exchange dealer which either processed the payment of the imported goods or sold the foreign exchange to the importer in the case where the importer travelled with the foreign exchange, authentic documentation in case the importation is through pre-financing arrangement or sent to Malawi by relatives, family, and friends suspected to have obtained the foreign exchange from illegal sources — which is an offence under the Exchange Control Act, 1984 and appropriate penalties shall be prescribed in the Regulations.”
And with immediate effect, Chithyola Banda said RBM has restricted all authorised foreign exchange dealers to sell foreign exchange in cash over the counter in any foreign currency to the equivalent of US$2,000 per traveller.
“Any amount beyond this limit must be placed on an electronic bank card in line with the existing Regulations,” he said while also announcing that with immediate effect, the RBM “will commence foreign exchange compliance inspections of all financial institutions in the country, including commercial banks and authorized dealers”.
“This is aimed at protecting the public from fraud and corporate exploitation, and any institutions found to be in violation of the law will be prosecuted.”
He also said through FIA and National Intelligence Services, the government will investigate into reports from the business community that commercial bank staff (treasury dealers) “were trading foreign exchange at a personal premium,” and warned that “anyone found guilty of this malpractice will be prosecuted under applicable penal laws including the Corrupt Practices Act, the Penal Code and the Financial Crimes Act”.
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Further, the Minister says through relevant institutions, “will consider conducting lifestyle audits on some commercial bank officials who are being perceived to have unlawfully benefited from the illegal forex trading in Malawi”.
All businesses operating in Malawi — with a turnover of K5.0 million and above — must have a verifiable, active, and operational bank account and properly registered for tax and that the Ministry of Finance through MRA will intensify awareness and registration of activities for tax purposes.
“Malawi is open to legitimate and compliant businesses only. Government shall facilitate legitimate trade and shall decisively deal with illicit trade through stronger border enforcement.
“Government shall also pursue all those exporters who are holding onto export proceeds outside the country beyond the prescribed period of 180 days.”
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He also advised international NGOs who transact in foreign exchange to deal with foreign currency dealers licensed or registered by RBM only and similarly, FIA has been directed to track and monitor all banking transactions with a view to curb a malpractice commonly known as Hawala.
“Under this system, local currency is paid into an account in Malawi in exchange for foreign currency outside Malawi. Hawala is usually associated with money laundering which is a criminal offence under the Financial Crimes Act,” he warned.
In order to protect the citizenry against the current skyrocketing prices of goods and services, Chithyola Banda reiterated what the Ministry of Trade & Industry announced last week, that in conjunction with the Competition & Fair Trading Commission, investigations have been intensified of “any perceived unjustified price increases within Malawi and appropriate penalties will be applied to offenders”.
Following the announcement of the devaluation last Wednesday, November 8, the Ministry of Trade said it noted with concern that some manufacturers, traders and suppliers have taken advantage of the situation by unreasonably raising prices of their goods and services.
“Some traders have even temporarily closed their businesses in order to adjust prices for old stocks that were already in shelves and warehouses before devaluation,” said a statement from Secretary for Trade & Industry, Christina Zakeyu.
She thus warned the traders and general public that “hoarding of goods and services in order to take advantage of price increases is tantamount to unconscionable conduct against consumers”.
She further warned that selling goods and prices at excessive and unreasonable prices is a gross violation of the Competition and Fair Trading Act (CFTA) and that the Ministry of Trade and the CFTC will not hesitate to take necessary action to deal with traders found engaging in such malpractices.
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Thus the Ministry of Trade and the CFTC will be intensifying market surveillances on prices of goods and services across the country to establish and gather evidence of possible violation of the CFTA.
The Ministry is also encouraging the general public to be proactive in reporting with immediate effect any such violations by contacting the Ministry’s Mayeso Msokera on 0999 150 718; CFTC’s Innocent Helema on 0880 725 075 or through toll free line 2489.
“This is to prevent unscrupulous traders from raising prices of commodities that are not, or are slightly affected by the currency re-alignment.”
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