US embassy cable - 03HARARE2093

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, Parliamentary Affairs 
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