Cashgate transactions involving a whopping K2.7 billion (about $6.4m) cashed through the Malawi Police Service [MPS] vote were uncovered as early as 2012, Weekend Nation has established.
When the Financial Intelligence Unit (FIU) noticed the strange bank transactions involving the police, President Bingu wa Mutharika and law enforcement agencies were informed, documents we have seen can reveal.
In a memo to President Mutharika on 17th February 2012, former Reserve Bank (RBM) Governor Perks Ligoya reported of funds being siphoned through dubious transactions in the Ifmis system as exactly reported by auditors at the height of the Joyce Banda-time side of the saga.
Mutharika, in his own handwriting, responded to the memo on 19th February 2012 saying “I have noted the report and will act on it.”
At the centre of the fraud was the police, the very institution the FIU kept sending reports to, expecting action.
“It had been discovered the payments were beyond the figures that the Ministry of Finance has allocated and approved for the institution (police),” reported Ligoya.
By November 24, 2011, FIU had submitted to police 48 reports covering 2008 to June 2011 involving K3 billion, but in a memo to former Chief Secretary Bright Msaka, deputy FIU director Tom Malikebu complained of lack of action by police.
“Obviously, the MPS may have legitimate reasons that contribute to the slow progress. Otherwise, lack of progress in these cases is a matter of serious concern to the FIU as it undermines the fight against money laundering in the country,” wrote Malikebu.
According to Ligoya, it appeared the officers in the Police Finance department and officers from Accountant General were increasing police allocations to accommodate their fraudulent transactions.
“These transactions were immediately deleted from the system. As such, nobody was aware of what was happening,” wrote Ligoya to Mutharika.
According to British auditors Tilly Baker, this is the exact way through which some K6 billion was stolen from Office of the President and Cabinet, the Ministry of Tourism, the Ministry of Water Development and Local Government Ministry between April and September.
Director of Public Prosecutions Bruno Kalemba acknowledged this week that action at that time could have stopped the Cashgate.
“If things [had] moved that time, that’s where Cashgate could’ve been avoided because the modus operandi is exactly the same and nothing changed,” he said.
A high level meeting chaired by Msaka on 22nd November, 2011 also noted the fraud and shortcomings in the Integrated Financial Management Information System (IFMIS) now blamed for Cashgate.
Apart from Msaka, the meeting at OPC was attended by former Deputy Chief Secretary Necton Mhura, then Solicitor General Anthony Kamanga, former Director of Public Procurement Rosemary Kanyuka and then ACB Director Alex Nampota.
Also in attendance were former Secretary to the Treasury Joseph Mwanamvekha, then Accountant General Dorothy Banda, Mrs Kumbatira from RBM and Patrick Matanda, OPC Principal Secretary responsible for finances.
Minutes we have seen show a shocked Msaka saying he was worried “that the government’s Integrated Financial Management System (IFMIS) and the Central Payment System (CPS) allowed such huge payments to be processed unnoticed.”
“Equally, the chairperson [Msaka] was concerned that huge cash withdrawals were made without the concerned banks raising alarm with the Financial Intelligence Unit (FIU) as is required by law,” reads the minutes in part.
The meeting had three objectives:
—To fully understand where the weaknesses of the financial system lay
—To understand any opportunities within the financial system that are currently being exploited or could potentially be exploited
—To establish what needs to be done to avoid a recurrence of fraudulent payments.
According to the minutes, it was observed that the Ifmis did not have the capacity to “track transactions through audit trail”, the very weakness that allowed the K6 billion out of the public purse unchecked.
K2.7 billion police scam
According to Ligoya’s memo to Mutharika, at the centre of the suspected fraud at MPS were senior personnel in the Finance Department and from the Accountant General’s office.
He added that these were arrested but their cases had not been concluded.
Suspected beneficiaries of the K2.7 billion payments, reads Ligoya’s report, included 10 companies whose identities we have withheld.
“The FIU submitted the intelligence reports to Anti Corruption Bureau, Fiscal Police and MRA to carry out investigations on the case, since the FIU has no legal mandate to investigate and prosecute,” Ligoya reported.
Although the suspects were arrested at that time Ligoya was concerned that “the investigation are going at a slow pace which may give the suspects time to change ownership of assets that were acquired using the proceeds of crime.”
Ligoya said he was also worried that the case, which involved senior officers at police headquarters, was being handled by juniors.
“The independence of the investigators is likely to be compromised,” said Ligoya, asking Mutharika to command that “a team of senior government officials should oversee the investigations and prosecution of this case.”
“The Director of Public Prosecution should take a lead role and provide guidance to the investigators in order for this case to be prosecuted successfully,” advised Ligoya.
This did not happen and Kalemba said this week he “deduced that these matters had indeed stalled mainly because of difference in opinion on who should prosecute these cases between the ACB and police.”
Ministry of Finance spokesperson Nations Msowoya said this week that several actions have now been taken to ensure all Ifmis and government cheque system loopholes are closed.
The action plan we have seen also shows that government has among other things, revoked all Ifmis access rights.
Further, there is now an Ifmis manager at deputy director’s level, apart from an Ifmis adviser recruited with support from Germany.
Msowoya also confirmed that government has transferred all old human resource, accounting and IT personnel from the Accountant General’s office.