By Bennie Mundando
THE use of cash in commerce provides an avenue that can be exploited by criminals to launder illicitly obtained funds, the Financial Intelligence Centre (FIC) has said.
In its 2019 trends report, the Centre says it received and analyzed Currency Transaction Reports (CTRs) most of which involved agriculture, construction and general trading.
The Centre says these transactions were performed by both corporates and individuals and that some of the large cash deposits analyzed were made by individuals depositing business proceeds into personal accounts and evading tax in the process.
The Centre also noted a continuous trend in the use of large cash in the construction sector with most of the transactions related to cement purchases.
It says most of the reports reviewed from the Agricultural sector related to maize and soya beans mainly from Lusaka and Copperbelt provinces and that the use of cash in these sectors provides an avenue that can be exploited by criminals to launder illicitly obtained funds.
“As regards to STRs, it was observed that 37 percent of the STRs received by the Centre related to cash transactions. The transactions were classified as either large or unusual cash deposits, large or unusual cash withdrawals and many third parties making deposits in the accounts.
“This pattern further indicates the risks associated with the use of cash in commerce including, lack of audit trail and disguising of third party beneficiaries of the transactions.
“Review of statistics on the STRs submitted to the Centre in the period under review shows that 37 percent of the STRs submitted related to the use of cash. This compares to 28 percent recorded in 2018, representing a 9 percent increase,” reads the report in part.
It has recommended that Government should consider differentiated tax rates for electronic and cash transactions to encourage use of electronic platforms.
It says that good practice in countries such as India and Columbia and in the European Union include mandatory use of electronic payments for transactions with the government/state, partial rebate of VAT when electronic payment systems are used, and para-fiscal contribution that taxes cash transactions for sums above a set threshold.
“The financial service providers should consider incentivizing customers who use electronic platforms for payments,” reads the report.