Botswana has beef with EU over money laundering red flag

24 Feb 2019

BY KHONANI ONTEBETSE & KABELO SEITSHIRO

Botswana has reacted angrily to a decision by the European Union (EU) to include it in a draft list of jurisdictions that pose a high risk of money laundering insisting it should be removed from the list. 

Dismissing the new EU blacklist that claims Botswana poses a high risk of money laundering the Southern African nation accused the bloc of importing outdated information to list it.

Insiders at the government enclave said authorities were irked that despite Botswana having addressed some of the deficiencies in combating money laundering to meet international standards by amending her legislations, the EU still went ahead and included it in the list.

Reports indicate that apart from reputational damage, inclusion on the list complicates financial relations with the EU. The union’s banks will have to carry out additional checks on payments involving entities from listed jurisdictions.

The EU said the criteria used to blacklist Botswana and other countries include weak sanctions against money laundering and terrorism financing, insufficient cooperation with the EU on the matter and lack of transparency about the beneficial owners of companies and trusts.

But the Ministry of Finance dismissed this assertion last week insisting: “The Botswana Government does not agree that there exist any issues related to cooperation with the EU.”

The Sunday Standard has learnt that as part of her efforts to join countries that are already pushing back against the EU plan to include them on a blacklist, Botswana was last week prompted to enforce a new law that requires companies to provide Companies and Intellectual Property Authority (CIPA) with beneficial ownership information.

The Registrar of Companies and Business Names at CIPA Hilda Mocuminyane said government has decided to enforce the Companies (Amendment) Act 2018 because “it is now a requirement for most corporate registries around the world.”

She said a beneficial ownership registry is a key tool for among others reducing instances of money laundering and terrorism financing through identifying the real owners of registered companies.

Botswana further took an aim at EU for adopting the findings of Financial Action Task Force (FATF) which have since been addressed and attended to by amending some of the relevant legislations. 

In response to the Sunday Standard queries, The Ministry of Finance explained that Botswana was assessed under the second round of mutual evaluation in June 2016 by the Eastern and Southern Africa Anti Money Laundering Group.

The assessors, the Ministry said, reviewed Botswana’s Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) legislations and institutional framework against the FATF recommendations and the provisions of other relevant international conventions.

Further, the assessor’s evaluated the effectiveness of the Country’s prevailing AML/CFT framework in order to identify the extent to which the Botswana AML/CFT system is achieving the intended objectives of the FATF standards.

“The findings of the assessors were that Botswana had strategic deficiencies in their anti-money laundering and countering terrorist financing regime. The European Union (EU) has adopted the findings of the FATF,” the Ministry said.

According to the Ministry, following the Mutual Evaluation Report of May 2017, Botswana has since amended a number of laws to address the deficiencies stated in the report.

“The Financial Intelligence Act and other relevant legislations were amended to enhance sanctions against Money Laundering and Financing of Terrorism,” the Ministry said. 

It added that “It should be further noted that the Companies Act has been amended to address issues of Beneficial Ownership and the Company and Intellectual Property Authority (CIPA) is in the process of re-registering companies in order to address the issue of beneficial ownership.”

Commenting on the matter, Head of the Political, Press and Information Section for the Delegation of the European Union of Botswana and SADC, Katrin Hagemann, said the identification of a country as a high-risk third country does not entail sanctions or trade restrictions; nor is it aimed at naming and shaming of countries.

“This is a legal requirement established in order to protect the integrity of the EU financial system from external risks.”

According to Hagemann, “... banks and other entities are required to apply enhanced vigilance in transactions involving high-risk third countries.”

The draft list needs the endorsement of a majority of the 28 EU nations but Britain and other heavyweights of the bloc, including Germany, France, Italy and Spain, are raising concerns, according to a report by Reuters.

Media reports also indicate that the U.S. Treasury recently issued a statement criticizing the methodology used by the European Commission after four U.S. territories were included on the list.

The 28 EU member states now have one month, which can be extended to two, to endorse the list. They could reject it by qualified majority. E.U. justice commissioner Vera Jourova, who proposed the list, told a news conference that she was confident states would not block it, according to international media reports.