The British forensic auditors have faulted the Reserve Bank of Malawi (RBM) and commercial banks in the country, saying some of their actions aided the looting of public funds at Capital Hill in a syndicate christened cashgate.
In their report, the auditors, hired in the aftermath of a discovery of billions of taxpayers and donor funds being stolen, seem to suggest that RBM neglected laid-down procedures, and commercial banks did not see red flags.
The report, prepared by the British forensic audit team of Baker Tilly and handed over to Parliament on Mondaywhich The Nation has sourced, indicates that RBM and government had a memorandum of understanding (MoU) empowering the central bank to check bank balances before clearing any government cheque.
But RBM did not do this, according to the forensic audit report
Government maintains 554 bank accounts, MG1 being the main one where the Malawi Revenue Authority as well as donor funds pass through.
But RBM had only allowed the auditors access to transactions pertaining to 11 accounts, including development, recurrent, statutory, deposit and advance accounts.
Although RBM did not respond to our queries by close of business on Monday, the central bank is on record as having admitted to an agreement with government which mandated it to honour government cheques no matter the circumstances.
Absolving the bank of any complicity, RBM governor Charles Chuka earlier told Parliament that the banks were mandated to honour government cheques as per agreement between Treasury, RBM and the Accountant General.
However, the audit team also queried the central bank’s complicity because they allowed high-value cheques of similar amounts and on consecutive cheques to be withdrawn on the same day.
The report also states that commercial banks in the country were complicit in the theft as they allowed cash withdrawals over the limit in short periods of time.
To show that commercial banks should have noted fraud, the auditors noted that prior to receipt of government payment, the company accounts often showed limited trading on a small scale and the government payment was glaring in the account previously dormant or with little activity.
When the Public Accounts Committee (PAC) of Parliament summoned the Bankers Association of Malawi (BAM) to explain the role they played in the scam, the banks blamed government for not putting in place tighter controls.
BAM president William Chatsala told Parliament: “The internal controls are the responsibility of the customer because even when a cheque is confirmed but the signature is correct, there is no legal requirement that the bank must not pay out.”