Sunday, May 9, 2021

Agency assesses money laundering and terrorism financing in Botswana

Minister of Justice, Defense and Security Shaw Kgathi last week revealed that the Financial Intelligence Agency (FIA) is currently undertaking an exercise to assess money laundering, terrorism and terrorism financing activities in Botswana. The national risk assessment ÔÇô as this exercise is called-will be completed in November this year.

The Minister added that the overarching objective of the assessment is to review the money laundering, terrorism and terrorism financing environment in the country, which will inform development of relevant systems to address the problems.

“The outcome of the assessment would be the development and implementation of a national anti-money laundering and financing of terrorism systems, whose implementation plan would lead to overall deterrence and prevention of the abuse of the national financial systems, and to minimise risks of opportunistic terrorism financing,” Kgathi told parliament.

It is expected that the financial industry and other stakeholders will use the results of the assessment and implementation plan to adopt a risk-based approach and compliance to the Financial Intelligence Act and the Counter-Terrorism Act. According to the Minister, the Directorate of Public Prosecutions (DPP) has prosecuted six cases of money laundering between 2008 and 2014, with half the number of accused persons being convicted.

Going back to at least 1987 when the Global Financial Integrity (GFI) began tracking Botswana’s illicit financial flows, an estimated P40 billion has left the country under mysterious circumstances.

When the GFI tracking began in 1987, the amount of illicit financial flows out of the country in that year alone totalled US$316.9 million. The tracking was inconsistent, which explains why there are no available figures covering the next six years. When the tracking resumed in 1994, the figure dropped to $99.2 million and rose to $139.4 million the following year.

No figures are provided for 1996 but in 1997 illicit financial flows were estimated at $130.6 million. Thereafter, they rose steadily for two years ($174.8 million in 1998 and $196.6 million in 1999) before dipping to $181.2 in 2000. The next two years (2001 and 2002) were most peculiar: in the former only $26.1 million illicitly left Botswana but the following year, the figure dramatically shot up to $571.4 million. However, the biggest volume would come in 2004 when $768.1 million illicitly flowed out of the country. Typically, GFI reports do not provide an analysis of the reasons underlying the flows. In the case of Botswana, this leaves hanging the vexing question of why illicit flows tend to go up in an election year. Given what commodity would be on sale (political power and influence) one would expect such flows to be incoming than outgoing but that is not what happens. With the exception of 1994, the levels of illicit flows went up in 1999, 2004 and 2009. If the trend holds, it would have been replicated in 2014.

GFI says that the billions of dollars lost in cumulative capital flight can not only wipe out Africa’s total external debt outstanding of around US$250 billion (at end-December, 2008) but potentially leave US$600 billion for poverty alleviation and economic growth. It is generally believed that much of Africa would literally starve to death without foreign aid. Conversely, GFI says that developing countries lose at least $10 through illegal flight capital for every $1 they receive in external assistance.

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