Government has forced the Malawi Savings Bank (MSB) to shoulder the loss of K25 million (about $60 000) incurred through enchashment of fake cheques which were printed outside the normal government system, Treasury has confirmed.
Sources at Capital Hill have revealed that the government owned commercial bank has been punished for honouring fake cheques despite “strong” instructions from the Ministry of Finance and the Reserve Bank of Malawi (RBM) on procedures of clearing government cheques.
One of the sources said preliminary findings indicate that government was swindled at least K25 million through encashment of the fake cheques which were cleared at MSB.
Said the source: “As we are talking now, so far, it has been established that government was swindled K25 million through these fake cheques which were printed outside the normal system at Accountant General’s office. Mind you, this was mainly happening when payments were done manually after Ifmis was suspended.”
“However, Treasury has taken a stand that since the procedures were made very clear to all commercial banks when it comes to clearing government cheques, government will not take responsibility of the K25 million. So this is a loss to the bank or it will find ways of handling it,” he said.
Ministry of Finance spokesperson Nations Msowoya confirmed in a questionnaire interview this week that Treasury issued instructions to all commercial banks on the new guidelines of honouring government cheques.
Said Msowoya: “Since we came across the habit of some unscrupulous officers printing cheques outside the system, we issued very clear instructions to all commercial banks and the Reserve Bank that no commercial bank should cash a cheque without receiving our authorised cheque list which is delivered to the Reserve Bank.”
“Any commercial bank that does not adhere to this instructions risks not getting their money from government. This instruction is very clear and the Bankers Association is aware and indeed all commercial banks.”
On the K25 million lost through the encashment of fake cheques, Msowoya said Treasury recently met MSB management to chart the way forward but insisted that government position on the matter remained the same.
On the culprits, he said: “I believe the Malawi Police Service are still investigating the matter. We have not yet received a report from them on this matter.”
MSB business development and marketing manager Brenda Chilima declined to comment on the specific transactions involving the swindled K25 million, only saying the bank follows the standard cheque verification procedure.
“Malawi Savings Bank Limited (MSB) follows a standard cheque verification procedure whenever a customer presents a cheque for encashment at any of its branches/agencies,” said Chilima.
“For some customers these procedures are jointly developed in order to ensure follow ups and reconciliations between the bank and the customers. Through these verification procedures, genuine cheques are processed accordingly while fake cheques are intercepted and forwarded to Fiscal Police for further investigations,” she said..
Sources said some unscrupulous officers started printing cheques outside the normal system immediately government stopped payment processing using the Integrated Financial Management Information System (Ifmis).
However, sources revealed that, for example, a cheque amounting to K6 million (about $15 000) was issued and by the time it was taken to MSB for encashment, it had already been cashed.
“This was inside work. They would know what payments have been made and would use the same information to put on these fake cheques and rush to the bank. These fake cheques look real so it was difficult for the bank to reject them and the signatories knowing that they have issued that cheque, would authorise encashments,” said the source.
“The officers took advantage of the suspension of the Ifmis because the payments were done manually, it was easy for them. So a lot of money was also stolen even after the Cashgate scandal was discovered and investigations are underway at the moment,” added the source.
National Police Headquarters two weeks ago confirmed that law enforcers were investigating the cases and that nobody had been arrested.
Some senior civil servants last week said if government was a private entity, it could have been declared bankrupt because normal operations have almost come to a halt due to lack of financial resources, a situation Treasury described as a result of Cashgate and aid withdrawal by donors.
Malawi Economic Justice Network (Mejn) has supported the government decision to push the responsibility to the bank that honoured the fraudulent cheques, saying commercial banks have a duty to ensure strict procedures of encashment.
“It is a fair decision because both of them have responsibilities; government as well as the banks have a fiduciary responsibility to ensure for stricter enforcement of internal controls to always check fraudulent transactions and attempts and to do everything possible to identify and protect their clients’ resources,” said Mejn executive director Dalitso Kubalasa.
He said there is need to speedily get to the bottom of the looting at Capital Hill and apart from bringing the culprits to book, there is need to recover the funds so that they are put to the intended purpose.
“We need to diligently ensure that the ‘heinous’ looting of public resources should make us angry enough to wake up and reset our way of doing things as a matter of principle and urgency, to truly make this a turning point. No-one should just dream of robbing the taxpayers of any amount and expect to get away with it scot-free. There must truly be consequences! Malawians want actions that will give them back such confidence and trust in their public finance management systems,” said Kubalasa.