The ultimate objective of the mandatory financial regulations is to strengthen the national economy and thereby secure the interests and rights of the population at large
BY SHABAIT | EDITORIAL
All substantive commercial transactions must adhere to relevant Bank regulations. This is not only normative but it has also been stipulated in publicly announced, explicit, regulations.
As it will be recalled, the old Nakfa Currency Notes in circulation were redeemed and new Nakfa Currency Notes introduced two years ago; in December 2015.
The overriding purpose of this multi-layered measure was to address, in a comprehensive manner, prevalent economic drawbacks and challenges. And, as it was assiduously explained by competent regulatory government bodies at the time, a raft of new regulations were charted out to ensure the achievement of the desired objectives through rigorous implementation, and periodic monitoring, of these rules.
One of the mandatory Bank regulations that were introduced with the redemption of the old Nacfa Notes was the requirement to carry out all commercial as well as individual financial transactions above a certain amount through bank Cheques and money transfers instead of liquid money.
Efficiency and security were vital considerations behind the new regulations. To this end, all the Banks in the country have been exerting vigorous efforts to sensitize the public to adhere to the new modalities of doing business as well as to upgrade the efficiency of their own operations with the ultimate objective of reducing cash transfers to the lowest minimum possible.
This is, admittedly, still work in progress. Modernization of banking operations is, indeed, predicated on efficient utilization of latest technology in the field, expert manpower and considerable experience. Nonetheless, robust efforts continue to be exerted with a strong sense of purpose.
Commercial transactions carried out in cash are always fraught with security, social, economic and other avoidable pitfalls. Monitoring or verification of these transactions is often impossible due to the absence of appropriate paper trail.
In this sense, these transactions are amenable or convenient for flouting fiscal and monetary regulations such as tax evasion and/or black market currency exchanges. Deleterious ramifications of these illicit practices include spiraling depreciation of the national currency and resultant inflation as well as illegal capital flight. This aggravates, in turn, the living conditions of the public at large.
Efforts exerted in the past months to cultivate as a culture and consolidate the routine use of the new financial modalities have not been wholly successful due to inertia and entrenched illicit practices in some circles. As such, violations that include periodic withdrawal of substantial cash from their bank accounts without injecting any back; opaque commercial operations designed to conceal the source and magnitude of their earnings/revenues; refusal to accept Bank Cheques for transactions that fall under this category and preferring to deal with cash transfer in breach of the mandatory regulations; and illicit activities in parallel market currency exchanges and capital flight have continued.
In the circumstances, the Government is taking appropriate remedial measures on the basis of rigorous inspection and appraisal of these practices.
As part and parcel of these inspections and as a first warning, temporary stoppage of their commercial activities has been imposed on almost 450 entities (mostly in the hospitality sector).
The duration of the stoppage varies from one to eight months depending on the magnitude and gravity of the specific violations of each business entity. The number of enterprises affected by this measure may not be big when seen in the context of the 58,000 licensed businesses that operate in the country. The trend is nonetheless unhealthy and warrants appropriate action.
Needless to emphasize, the remedial measures taken are aimed at the cultivation and consolidation of commercial practices that fully adhere to the prevailing financial regulations. As such, it is incumbent on all citizens, and especially on business enterprises, to conduct their business affairs in accordance with the law.
The more so as the ultimate objective of the mandatory financial regulations is to strengthen the national economy and thereby secure the interests and rights of the population at large.