PARLIAMENT PASSES RESTRICTIVE FINANCIAL LEGISLATION

C O N F I D E N T I A L SECTION 01 OF 02 HARARE 002093

SIPDIS

NSC FOR SENIOR AFRICA DIRECTOR J. FRAZER
LONDON FOR C. GURNEY
PARIS FOR C. NEARY
NAIROBI FOR T. PFLAUMER

E.O. 12958: DECL: 10/21/2013
TAGS: PGOV ECON PTER ZI
SUBJECT: PARLIAMENT PASSES RESTRICTIVE FINANCIAL LEGISLATION

REF: STATE 205634

Classified By: POLITICAL OFFICER KIMBERLY JEMISON FOR REASONS 1.5 B/D

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SUMMARY
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1. (SBU) Parliament recently imposed strict restrictions on
people and institutions, access to cash. The statutory
instrument is the Government,s answer to the biting cash
shortage but only stifles the ability of the country to
conduct day-to-day transactions by criminalizing holding the
equivalent of $880 (for institutions) and $350 (for
individuals) in cash. END SUMMARY

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PARLIAMENT PASSES RESTRICTIVE MONEY LAWS
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2. (U) Parliament recently passed Statutory Instrument 171
and its amendments SI 187 and 198 Presidential Powers
(Temporary Measures)(Promotion of Banking Transactions)
Regulations, 2003, controversial legislation that directs the
operations of financial institutions. The SIs codify GOZ
declarations in August 2003 that restricted the amount of
cash people and business could hold and regulated approved
financial transactions by traders, financial institutions,
parastatals, and money lenders.


3. (U) Under the new legislation, traders, parastatals, and
moneylenders cannot hold cash in surplus to their daily
requirements or in excess of 5 million Zimbabwe dollars ($884
at the current parallel exchange rate). Groups found in
contravention of this law are given an opportunity to deposit
said funds into an account at a financial institution or
otherwise remedy the situation. If the institution fails to
comply within seven days, it will be fined up to a maximum of
2.5 million Zimbabwe dollars ($420).


4. (U) The legislation also restricts traders, parastatals,
or people other than individuals from withdrawing cash in
excess of 4 million Zimbabwe dollars within any 24-hour
period. The penalties for contravening this are paying a fine
not to exceed Z$600,000. Similarly, no individual is
permitted to withdraw more than 2 million Zimbabwe dollars
within a 24-hour period. The penalty for individuals is a
fine of either the excess cash in contravention of this law
or 1 million Zimbabwe dollars, whichever is greater.

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POWERFUL MONITORING UNIT ESTABLISHED
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5. (U) The regulator of this legislation is the Banking
Transactions Promotion Unit, a part of the Reserve Bank. The
Governor of the Reserve Bank nominates a cadre of inspectors
who are afforded sweeping powers to search, question, and
seize materials from financial institutions, traders, or
parastatals without a search warrant or requirement to
display probable cause.

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LEGISLATION PASSED THROUGH THE BACK DOOR
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6. (U) This new legislation is a product of the Presidential
Powers (Temporary) Act, takes immediate effect, and can
continue for six months before government is supposed to
replace it with a proper Act. Under this Act, the President
can make legislation without consulting with Parliament. It
can be invoked when Parliament is not in session or if the
President deems that a situation has arisen that needs to be
dealt with urgently. As with all Statutory Instruments, the
Parliamentary Legal Committee, which reviews legislation for
constitutionality, can challenge it and then Parliament would
be able to review it and deal with its constitutional and
public policy implications.

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ANTI-MONEY LAUNDERING PORTION DROPPED
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7. (C) An earlier iteration of this legislation included an
anti-money laundering section. We have no indication as yet
of whether this anti-money laundering section will reappear
as a separate SI or Bill. The draft legislation addressed
some of the concerns identified by the UN Security Council in
reference to UNSCR 1373, such as requiring financial
institutions and other intermediaries to identify their
clients and to report suspicious financial transactions to
the relevant authorities and allowing the seizure and
detention of suspicious imports or exports of currency if the
authorities suspect the currency was derived from the
commission of a serious offense or is to be used in
commission of a serious offense, but did not specifically use
the term terrorism in the text. (See Reftel)

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COMMENT
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7. (C) This new fast-tracked legislation (it passed in 3
weeks time) is another example of the GOZ treating the
symptoms and not root causes. Restricting people,s access
to cash not only limits the rights and enjoyment of property
but it does nothing to alter the economic conditions that
caused the shortage of cash. As with many other laws here,
we expect this one will be ignored widely and enforced
selectively against institutions or individuals deemed to be
aligned with the opposition or in competition with businesses
associated with ruling party principals. END COMMENT.
SULLIVAN