International transactions are part of any country’s capital account, which is administered by the central bank according to policy goals and priorities. Even in the US where the USD is both legal tender and international reserve currency, the Fed reserves the right to impose controls and other administrative measures on the capital account from time to time. Administrative measures may take the form of restrictions on international transactions.
In Zimbabwe, international transactions are regulated by the Exchange Control Act (Chapter 22:05), which confers powers on the President to impose restrictions and administrative measures related to gold, currency, securities, exchange transactions, payments and debts, and the import, export, transfer and settlement of property, and for purposes connected with the matters aforesaid. These statutory regulations are administered by the RBZ for policy purposes.
Biti’s claims seem to suggest that international transactions processed in Zimbabwe are subject to the provisions of the RBZ Act (Chapter 22:15) only. It seems to disregard the fact that the RBZ Act (Chapter 22:15) is administered together with the Exchange Control Act (Chapter 22:05) and its subsidiary regulations.
The fact that the USD and other currencies were made legal tender through an amendment of the RBZ Act (Chapter 22:15) does not mean that they are no longer subject to exchange controls regulations under the Exchange Control Act and Exchange Control Regulations. They are legal tender as far as domestic transactions are concerned. International transactions that breach statutory regulations are, from a legal perspective, illicit transactions.
Statutory Instrument (S.I.) 145 of 2017 considers such illicit transactions as “illegal expatriation of property”. In terms of the statutory instrument, “illegal expatriation of property” refers to the “illegal transfer/export of foreign exchange and/or assets from Zimbabwe and/or offshore retention of foreign exchange and/or assets due to Zimbabwe, without relevant regulatory authorisations”. Regardless of which term is used—whether ‘externalisation” or illicit “international financial transactions” or “illegal expatriation of property”—unauthorised international transactions in USD or other legal tender are in contravention of national laws.
When the cross-border transactions contravene both national and international laws, they can be considered to be either illicit financial flows or money laundering, depending on their volume and purpose. These wide categories encompass several different types of financial transfers, made for different reasons, including: funds with criminal origin, such as the proceeds of crime (for example tax evasion, money laundering, fraud and corruption), legal requirements (such as transparency or capital controls), to mention just a few.
The argument that it may be difficult to prosecute perpetrators involved in the illegal expatriation of property or externalisation, as it is commonly referred to in Zimbabwe, does not have a solid factual basis. It is legal to prosecute the individuals and corporates who contravened the Exchange Control Act and its subsidiary exchange control regulations.
By Onias Mugowo is an econometrician and researcher. He holds a first class M.Com (Economics) degree from the University of Venda. This article was first published by Zimfact