Cassava Smartech announced that they have delayed the release of their audited financial statements for fiscal year-end February 2020. They made this announcement to shareholders citing that the delay is being caused by the “regulatory review” of one of the company’s key holdings EcoCash.
The previously mentioned regulatory review is a currency manipulation investigation being conducted by the Reserve Bank of Zimbabwe.
To revisit or, catch up on the events that have taken place surrounding EcoCash, what follows are the reasons why Cassava’s financial report has been delayed:
RBZ directs EcoCash to freeze agent accounts holding more than ZWL$100 000.00
This was a head scratching directive from the RBZ and their affiliate FIU. EcoCash and their parent company were not consulted about this, this move went on to make financial transactions not only difficult for EcoCash, businesses that rely on their services but also for individuals who no longer had access to agents. EcoCash serves the majority of Zimbabweans and this directive showed that the impact to the transacting public wasn’t weighed when the decision was made.
The pretext to all of this was that EcoCash was facilitating irregular activities (currency manipulation), which were causing the sharp decline of the local currency.
EcoCash CEO charged under anti-money laundering law
EcoCash were expected to comply and freeze agent accounts. They didn’t and went to the high court to seek a reversal of the directive. This wasn’t taken well by the authorities, and they moved to charge EcoCash, Cassava, and their leadership (EcoCash CEO Natalie Jabangwe and Director Eddie Chibi) under section 5 of the Money Laundering and Proceeds Crime Act.
The charges laid out against EcoCash were as follows:
- Failure to comply with any mandatory requirement of a circular, directive or guideline issued in terms of the Act (Item 26 of Table of Civil Infringements, AML/CFT Directive No. 2 of 2014)
- Failure to comply with any obligation relating to customer identification and /or verification (Item 2 of Table of Civil Infringements, AML/CFT Directive No. 2 of 2014
- Failure to maintain books and records as required under section 24 of the Act (Item 2 of Table of Civil Infringements, AML/CFT Directive No. 2 of 20141
- Failure to timely avail to the FIU, upon request, books and records referred to in section 24 of the Act or any information contained therein (Item 14 of Table of Civil Infringements, AML/CFT Directive No. 2 of 20141
- Failure to report a suspicious transaction as required in terms of section 30 of the Act: (Item 21 of Table of Civil Infringements, AML/CFT Directive No. 2 of 2014)
- Disclosing to a customer or to a third party that a suspicious transaction report has been, is being, or will be submitted to the Unit: (Item 24 of Table of Civil Infringements, AM L/CFT Directive No. 2 of 2014)
There is an article that we published at the time, that broke down all the charges and link to that can be found here
The mobile money ban
More of a side note to all of this, but nonetheless important. I’m sure we all remember that Friday night when Nick Magwana tweeted the statement that banned all forms of mobile money. Thankfully that sort of far-reaching measure (due mostly to public outcry) didn’t come in the form it was first announced.
The RBZ published a more toned down version of that initial statement. Not banning mobile money but forcing everyone who trades on it to liquidate through the banking system.
Again demonstrating that they weren’t thinking of what the millions of Zimbabweans would do if EcoCash was no longer operational. It was more important to have their way than it was to assess the nation’s dependency on EcoCash, and maybe finding another way.
Econet and Cassava offices searched by the police to get evidence of money laundering
Making EcoCash the scapegoat for the declining local currency has been a full time job for the financial authorities. A few weeks ago there was a search and seizure warrant that was tweeted by Jonathan Moyo which alerted everyone to what was happening. This court issued warrant gave law enforcement grounds to sift through customer information. Beyond the breach on Econet and Cassava, this is doubly worrying because the warrant put information of the majority of the public in the hands of law enforcement.
The following may not be closely related to the above, but it would be remiss of me not to mention the RBZ directive that declared ZIMSWITCH the National Switch for all transactions. This essentially puts EcoCash on the same playing field as all the other mobile money operators. At the moment it seems like the Authorities may have found a way to neutralise Econet and EcoCash. It’s also worth mentioning that the date for directive to take effect is fast approaching (15 August 2020).
In the statement published by Cassava Smartech they concluded by saying that any publication or updates will be made on, or before the 30th of September 2020.