Old Mutual faces potential money laundering charges in Zimbabwe
30 Mar 2020

The Securities and Exchange Commission of Zimbabwe (SECZ) has launched an investigation into suspected illicit activities surrounding trading in fungible stocks linked to three listed companies — Old Mutual, PPC Limited and Seed Co International.

Government recently suspended the fungibility of the stocks.

Fungibility means that shareholders from the three companies would buy shares from the ZSE and dispose of them on offshore markets where they are dually listed.

Old Mutual is listed on both the London Stock Exchange (LSE) and the Johannesburg Stock Exchange (JSE).

PPC is also listed on the JSE, while Seed Co trades on the Botswana Stock Exchange.

Market watchers believe the Old Mutual Implied Rate (OMIR) — determined by comparing share prices of the same stock on other stock exchanges — was increasingly being used as the country’s de facto exchange rate, which essentially gave the company’s shareholders free rein to influence the value of the local currency.

It is also alleged that fungible stocks provided some of the shareholders a conduit to launder money out of Zimbabwe.

Investigations would reportedly focus on the possible abuse of the 90-day vesting period, which stipulates the time shareholders who bought the shares were supposed to hold on to them before offloading.

Finance and Economic Development Minister Professor Mthuli Ncube recently confirmed to journalists that the investigation would look into possible cases of money laundering.

“There are some illicit transactions which occurred around the stocks that are impacted by the fungibility provision. We wanted to close that hole; that is why we (have) suspended and not banned the provision, while we investigate to make sure that the right fine-tuning is done,” said Prof Ncube.

“The abuses also point to money laundering and that is obviously an issue that we want to deal with.”

Responding to emailed questions from The Sunday Mail, ZSE chief executive officer Mr Justin Bgoni confirmed that the SECZ had asked for an investigation into possible abuse of fungible stocks.

“Fungibility was permitted subject to certain Exchange Control guidelines, and as the ZSE, market integrity is a key value. ZSE is definitely concerned with the allegations and when we received information to that effect we promptly alerted the regulator, SECZ,” said Mr Bgoni.

“ZSE instituted measures to investigate the allegations and is currently carrying out an audit on the matter. ZSE is well-known for compliance and emphasises the same on intermediaries . . .

“The ZSE received allegations that the 90-day vesting period that was effected in June 2019 was not being adhered to. This is what the ZSE is investigating.

“With regards to money laundering, the ZSE relies on intermediaries (stockbrokers, transfer secretaries, custodians and banks) to do the checks as we do not deal directly with the investing clients. Transactions on purchases or disposal of listed securities are facilitated through normal bank accounts.”

By Kuda Bwititi, The Sunday Mail, 29 March 2020

Read more at The Sunday Mail

Photo: K.Gituma/CC BY-SA 3.0

RiskScreen: Eliminating Financial Crime with Smart Technology

Advance your CPD minutes for this content, by signing up and using the CPD Wallet

FREE CPD Wallet