The Zambian Revenue Authority (ZRA) has said it will soon undertake forensic audits of large mining companies to establish whether or not they are involved in illicit financial flows (IFFs).

The move follows investigations conducted by the Financial Intelligence Centre (FIC) that found evidence in five mining companies of a combination of tax evasion, fraud, corruption and money laundering.

Powers of prosecution

The FIC is only authorised to investigate cases of suspected financial crime and has no powers of prosecution.

So the ZRA has been handed some of the cases the FIC investigated and can bring prosecutions if it finds evidence of tax evasion.

TBML techniques

Assistant director of FIC, Clement Kapalu, has estimated that Zambia is losing US$3 billion annually in IFFs, mainly from the minerals sub-sector.

He says tax evasion is enabled by trade-based money laundering (TBML) techniques including transfer pricing, over- and under-invoicing and trade mispricing.

Expression of interest

To address these issues, the ZRA is seeking the services of an audit or investigation firm to undertake a forensic audit on several large mining companies.

According to a request for expressions of interest, the audit will aim to identify “areas of non-compliance with legislation, fraud, tax evasion and avoidance schemes perpetrated by the mining companies to, on the one hand, minimise their tax obligations and maximise their profits on the other.”

Categories: Trade Based Financial crimes News