Attorney General (AG) Thabo Chakaka-Nyirenda has warned both local and international local and international Non-Governmental Organisations (NGOs) against illegal dealings in the foreign currency.
In a letter dated November 1 2024, Chakaka-Nyirenda said his office has discovered that some financial controllers and managers in various organisations who are engaging in self- serving practices when exchanging foreign currency with commercial banks.
The letter has been addressed to the Bankers Association of Malawi and copied to NGO Regulatory Authority, Secretary to the President and Cabinet, Office of the President and Cabinet, minister of finance and Reserve Bank of Malawi.
“The evidence that I have gathered indicates that financial controllers of local and international Non-Governmental Organisations (NGOs) as well as of donor- funded projects are colluding with treasury departments within the commercial banks to allocate foreign currency to their preferred individuals or businesses for private benefit, thereby depriving the Government of critical foreign exchange resources needed for essential imports such as fuel, fertilizer and medical supplies.
” The observed process typically involves the Financial Controller or Manager sends a request to a commercial bank where the organization holds a Foreign Currency Denominated Account (FCDA), indicating the amount to be exchanged, the Financial Controller or Manager selects a commercial bank for the transfer of foreign currency and the Treasury Dealer issues a formal quotation to the NGO, adhering to the regulated exchange rate of USD 1 to MWK 1,751.00.
“The Financial Controller or Manager instructs the Treasury Dealer about the name of the individual or organization to which the foreign currency should be allocated, the international NGOs through their financial controllers exchange foreign currency with local currency with an international broker and both the treasury representative and the financial controller personally benefit from the transactions once the allocation is complete.
“The conduct leads to increased trade of foreign currency on the black market and scarcity of foreign currency on the formal market. Simply put, the conduct amounts to economic sabotage. Since NGOs and donor-funded projects are not authorised foreign currency dealers, they cannot legally demand that commercial banks allocate foreign currency to their preferred individuals.
“The said NGOs should sell their foreign currency either to commercial banks or to the Reserve Bank of Malawi. They are not legally permitted to sell their foreign currency through the backdoor to individuals, organizations or international brokers that are not licensed to deal in foreign currency in Malawi in terms of the decision of the Malawi Supreme Court of Appeal in NBS Bank Plc v Capital Oil Refining Industries, MSCA Civil Appcal Cause Number 48 of 2017 (Umeported).
“Additionally, NGOs are either public trusts or charitable trusts. They must serve the public. The conduct outlined above amounts to illegal dealing in foreign currency contrary to Regulation 10 of the Exchange Control Regulations and money laundering contrary to section 42(c) of the Financial Crimes Act, 2017.
” Moreover, exchanging foreign currency through international brokers contravenes both the Exchange Control Regulations and the Financial Crimes Act, 2017. Consequently, I would like to urge NGOs, managers of donor funded projects and financial institutions to desist from dealing in foreign currency in contravention of the Exchange Control Regulations.
“I have also observed poor enforcement of the Exchange Control Regulations Act on the part of the Reserve Bank of Malawi when it comes to dealing with the malpractice highlighted above. By copy of this letter, I urge the Reserve Bank of Malawi to take appropriate Administrative measures against commercial banks or senior managers of commercial banks involved in this malpractice.
“The NGO Regulatory Authority has also failed to monitor its licensed NGOs when it comes to dealing in foreign currency. By demanding that their foreign currency should be sold to their preferred individuals or businesses, these NGOs are effectively involved in illicit financial activities or are knowingly complicit to money laundering activities.
“You may wish to know that the Attorney General is an overseer of all public and charitable trusts. The Attorney General represents the beneficiaries of charitable and public trusts as a parens patriae, appearing on the part of Government. The Attorney General may take actions to recover property from third parties.
“By reason of my duty as the Sovereign’s representative, protecting all the persons interested in the charity funds, I represent all the objects of the charity, who are thus in effect claimants through me. My duty will, therefore, be to ensure that all NGOs are accountable and that the funds they collect are not used for money laundering activities.
“Accordingly, I would like to warn you that I will take legal action against any NGO and all those involved in the illegal dealing in foreign currency by demanding compensation on behalf of the Government of the Republic of Malawi for the economic damage caused to the country. The concerned NGOs, directors of NGOs and senior management team of the NGOs will also be held responsible for failing to supervise their financial controllers when it comes to selling foreign currency from respective NGOs’ FCDA Accounts,” reads part of the letter
