By Mbatjiua Ngavirue
Governor of the Bank of Namibia, Tom Alweendo, concedes that large-scale financial fraud such as the Offshore Development Company (ODC) and Avid scandals could still occur in Namibia today.
The authorities have so far failed to recover most of the N$100 million that disappeared at the ODC and the N$30 million belonging to the Social Security Commission through Avid Investments – this despite Parliament passing Namibia’s new Financial Intelligence Act, aimed at combating money-laundering on June 7, 2007.
“We are happy that the Bill has now been passed into law and we now have the right tools with which to combat money-laundering,” he said.
In response to a question, Alweendo said he did not consider either the ODC or the Avid cases as typical money-laundering. In both cases, duly authorized company directors approved the money transfers, and he conceded that such incidents could still occur today.
He, however, also agreed that money could not just disappear without trace, and that it always leaves a trace.
Alweendo again warned that money-laundering is bad for business, development and the general rule of law in the country. He said the authorities needed to combat money-laundering, because if left unchecked it would lead to the accumulation of economic power in the hands of criminals.
“This development has the potential of eroding our political and social systems based on elected representation as we know them today.
“The social consequences of allowing money-launderers to operate unchecked could spell disaster for stability and the rule of law,” he cautioned.
Alweendo made these remarks at a breakfast meeting jointly organized by the Friederich Ebert Stiftung and the Namibia Economic Society on Financial Crime in Namibia. Without doubt, he added, money-laundering had a negative impact on any economy.
The money-launderer would generally target an environment that most easily allowed the recycling of the illegally-obtained money, even when this required accepting lower returns.
Money then moved from countries with good economic policies and higher rates of return to countries with poor policies and lower rates of return, seeming to defy the laws of economics.
“As a consequence of these counter-intuitive capital movements, policy-makers may pursue inappropriate policies, because of wrong signals that may emerge from financial markets,” he explained.
Large capital inflows and outflows could significantly influence variables, such as exchange rates and interest rates. It could further affect the prices of particular assets in which money-launderers invest money, such as fixed property.
In free-floating exchange rate economies, the inflow of large amounts of money could lead to an exchange rate appreciation, an expansion of the monetary base, or both.
In response, economic policy-makers might wrongly respond by adjusting fiscal or monetary policies, thereby eroding the effectiveness of both monetary and fiscal policies.
Chief Executive of the Namibia Financial Institutions Supervisory Authority (Namfisa), Rainer Ritter, also agreed that money always leaves a paper trail.
He indicated that there were cases pending in connection with both the ODC and Avid financial scams, but gave no further details.
Ritter argued that the long-term solution to financial crime was a return to ethics and morality.
He recommended that society could influence business towards more responsible behaviour by legal sanctions, social sanctions and with praise where due.
There needed to be willingness by law enforcement agencies to address financial crime, while he also called for encouraging whistle-blowing and transparency.