BANKERS have bemoaned the impact of Western-imposed sanctions on Zimbabwe, which has led to the loss of more than 100 correspondent banking relationships since the restrictions were imposed at the turn of the century.
Correspondent banks provide services to other banks, usually those in other countries, acting as intermediaries or agents, facilitating wire transfers, conducting business transactions, accepting deposits and gathering documents on behalf of others.
Such banks are most likely to be used by domestic banks to service transactions that either originate or are completed in foreign countries.
The United States imposed an international embargo against Zimbabwe through the Zimbabwe Democracy and Economic Recovery Act (Zidera) in 2001 to punish former strongman Robert Mugabe’s regime over alleged human rights abuses and electoral fraud.
The restrictions have had an impact on financial institutions in the country.
The Zimbabwe Stock Exchange listed financial services group, ZB Holdings Limited was placed under the sanctions regime in 2008.
CBZ Bank, one of the country’s largest banks, was slapped with a US$385 million penalty by the United States Treasury’s Office of Foreign Assets Control for allegedly facilitating thousands of financial transactions on behalf of ZB.
However, both the sanctions on ZB and the penalty on CBZ have since been dropped.
Addressing delegates at the Institute of Bankers of Zimbabwe Summer School in Victoria Falls last week, FBC Bank managing director Webster Rusere said the sanctions have had far-reaching consequences on the financial sector.
“What we need to do is to say how many correspondent banking relationships have been closed since 2001/2002. The number is 102,” Rusere said. “There is no bank that has not been affected by sanctions.”
The impact of sanctions, Rusere said, is not restricted to those who are said to be targeted, but extends to the country as whole.
“When you have a situation where your suppliers cannot access credit … Can you say that it is targeted? No, it is not,” he said.
The mining sector has also been plunged into crisis, as some mining companies are failing to access money from their banks and clients abroad after being seized by fiscal authorities in the United States over their dealings with the Mineral Marketing Corporation of Zimbabwe (MMCZ), which is under sanctions.
The MMCZ is the sole marketing and export agent for all Zimbabwean minerals, including nickel and chromite, but excluding gold and silver.
As a result the central bank early this year directed that the Zimbabwe Revenue Authority (Zimra) would now have the mandate to collect fees and commissions previously paid to the MMCZ.
“The bank has received numerous requests from mining exporters on the need to continuously improve the ease of doing business arising from complications around payment of fees and commissions by the Minerals Marketing Corporation of Zimbabwe,” RBZ governor John Mangudya said in a statement.
“To make statutory deductions easy for exporters of minerals, with immediate effect, all commissions and royalties that are due and deductible at the point of receipt of export proceeds will no longer be deducted by MMCZ.
“All applicable taxes shall be paid to the Zimbabwe Revenue Authority (Zimra) in the normal manner.”
But the remaining correspondent banks have queried the central bank’s directive, saying without legal support, the change places them at odds with regulators.
They want Zimbabwe’s government to play by the book and help them avoid being hit with heavy penalties for violating established cross-border systems.
Legalising the policy would give correspondent banks assurance that the Government of Zimbabwe was behind the policy change.
Until May this year, requisite fees and commissions due to the state were transmitted through the MMCZ.
The sanctions, according to the government, are estimated to have cost the country over US$42 billion between 2000 and 2013, apart from sending thousands of firms into bankruptcy.
But last month, a United Nations special envoy called on the United States of America and the European Union (EU) to consider lifting the sanctions.
But the EU maintained that the global embargo was only targeted at a few elites that have been blamed for high level corruption, electoral fraud and human rights violations.
In an interview with the Independent, recently, EU ambassador to Zimbabwe Timo Olkkonen said the restrictive measures would only be lifted after an assessment of the situation in Zimbabwe by the bloc’s council.
Government has blamed the decimation of Zimbabwe’s currency, hyperinflation, foreign currency shortages and deteriorating living standards on the measures.