Tax Evasion and Financial Crime Haunts Namibia, Experts Warn
Namibia’s efforts to combat financial crimes have been severely hindered by a lack of coordination and inaction from key financial and law enforcement agencies, experts have warned.
Lack of Coordination and Inaction Hamper Fight Against Dirty Money
The police admit to lacking a centralized portal to track finalized cases, those under investigation, or individuals being prosecuted. The Financial Intelligence Centre (FIC), responsible for detecting financial crimes, flagged 254 potential financial crimes between January 2019 and February 2020, but authorities could not provide updates on what was done with these reports.
Insufficient Action Taken on Suspicious Transactions
The FIC received:
- 1,106 suspicious transaction reports from banks and other financial institutions during the same period
- 236 suspicious activity reports from banks and other financial institutions during the same period
However, officials remained silent about the progress made in addressing these red flags or how they utilized actionable intelligence products.
Authorities Turn a Blind Eye to Dirty Money Flow
Authorities have been accused of turning a blind eye to the flow and transfer of dirty money in and out of Namibia. For instance:
- More than N$300 million disappeared from the now-defunct SME Bank
- An unfolding fishing scandal involving close to N$175 million transferred from a national fishing company to politicians and their friends
Manual System Hinders Tracking of FIC Intelligence
National police spokesperson Kauna Shikwambi revealed that they do not compile data on the use of FIC intelligence due to a manual system, making it impossible for them to track:
- How much intelligence was acted upon
- How many cases went to court
- How many individuals and companies were prosecuted or fined
Tax Agency Fails to Spot Tax Dodging
Namibia’s tax agency has also been accused of failing to spot private companies dodging taxes and robbing the government of millions. Inland Revenue Commissioner Justus Mafongwe acknowledged that they receive actionable intelligence from the FIC but do not use all of it due to resource constraints, selecting cases for audit based on:
- Risk
- Potential revenue yield
- Cost-benefit analysis
Call for Tighter Laws and Coordination
Two financial experts have called for tighter laws and coordination between financial and law enforcement institutions.
Lack of Mandate Hinders Anti-Corruption Efforts
Anti-Corruption Commission (ACC) Director-General Paulus Noa said they lack the mandate to investigate direct money laundering and tax evasion, pointing to the police, while tax evasion is forwarded to the Receiver of Revenue under the Ministry of Finance.
Experts Warn of Serious Consequences
Experts warn that the lack of progress on FIC red-flagged cases is “worrisome” and advises the country to establish a unit specifically focused on tax evasion and money-laundering matters. A risk management lecturer at the University of Namibia, Samuel Nuugulu, notes that illicit flows drain foreign reserves, cause high inflation, and reduce tax collections, affecting those at the bottom more than those at the top.
“Strong institutions will eventually compel individuals and companies to engage legally, deal honestly, as well as report and pay their taxes and dues in accordance with our existing laws,” Nuugulu said.