The latest US State Department report on international narcotics trafficking has has sparked fears that Botswana may be sitting on a major terrorism risks because of insufficient infrastructure to address money laundering and terrorism financing especially following the relocation of DeBeers’ Diamond Trading Company from London to Gaborone In a scathing analysis dated March 2015, the US State Department is critical of the authorities’ efforts to combat international drug trafficking, money laundering and terrorism financing. The report says Botswana authorities believe there is a low risk of terrorist activity in the country, but they are increasingly concerned about the potential for terrorists to focus on Botswana as a soft target and they acknowledge the risk of terrorism financing.
The report warns that “Botswana is a cash-based society, and there is insufficient infrastructure to address money laundering and terrorism financing.” The report says that Botswana supplies a majority of the world’s diamonds and the stringent institutional framework for the mining and processing of diamonds affords limited opportunity for organized diamond smuggling. According to the report, the smuggling that does occur is not believed to be linked to terrorism financing or the laundering of criminal proceeds.
However the report warns that “The relocation of DeBeers’ Diamond Trading Company from London to Gaborone may result in additional wholesale and retail diamond marketers setting up businesses in Botswana; the growth of this industry presents an increased risk of money laundering and illicit financing activity,” states the report. According to the report, Botswana is not a regional financial center, but is increasingly focused on developing a financial services industry. “Although money laundering in Botswana is not primarily related to narcotics, there has been an increase in drug trafficking in recent years, and in the sophistication and level of organization of cross-border crime,” states the report.
In a chilling revelation, the report says “the presence of organized criminal groups is growing, as is the trade in second-hand cars, which present certain risks related to money laundering. In recent years there has been an increase in the amount and frequency of fraud perpetrated against large organizations, e.g., banks or government departments, typically with the collusion of an employee.” The report notes that Botswana is in the process of establishing, and marshaling the resources and training necessary to implement, anti-money laundering and countering financing of terrorism (AML/CFT regime.
“The key components of the institutional framework for AML/CFT are technically in place, and the Central Bank has the authority to monitor compliance with the AML requirements. Botswana has not yet criminalized terrorism financing, nor has it passed legislation to allow forfeiture of the proceeds of financial crimes. “None of the AML-related laws and regulations of Botswana contains requirements related to politically exposed persons (PEPs), foreign or domestic.” The report notes that Government of Botswana enacted AML legislation to establish a financial intelligence unit, the Financial Intelligence Agency (FIA), in 2009, but it is still not operational as of late 2013.
As of the fall of 2013, the FIA had a new director; only four, insufficiently trained technical staff; and a need for analytical software. As such, it was neither receiving nor analyzing suspicious transaction reports (STRs), deferring instead to the Directorate on Corruption and Economic Crime (DCEC). The Non-Bank Financial Institutions Regulatory Authority is responsible for AML oversight of non-financial institutions.
“However, there is no legal provision in Botswana for a covered entity, other than a bank, to actually monitor for complex, unusually large transactions, or unusual patterns of transactions with no apparent lawful purpose. To date, only banks have filed STRs, and fundamental deficiencies exist relating to customer due diligence guidelines. Botswana’s legislation requires the submission of STRs to both the FIA and the DCEC. The Bank of Botswana also receives STRs, which are used only to guide the Bank in carrying out its supervisory function,” notes the report. Unlike in previous years, the report says, the Government of Botswana has declined to release statistics on the number of STRs filed in 2013. “The historically small number of STRs, combined with the failure to publicize STR statistics in 2013 and the lack of AML investigations, prosecutions, and convictions, demonstrates that Botswana’s AML/CFT regime is not functioning effectively,” says the document.
The annual International Narcotics Control Strategy Report (INCSR) (2014) by the Department of State to the US Congress observes that “theDCEC is actively investigating an increasing number of corruption cases, but the Directorate of Public Prosecutions is extremely under-resourced and lacks the training and experience to obtain convictions in those cases. There have been no terrorism or terrorism financing-related prosecutions.”
The Botswana Parliament, the report says, should prioritize the passage of proposed amendments to the Proceeds of Serious Crimes Act, the Firearms and Ammunition Act, and the Criminal Procedure and Evidence Act, along with enactment of the anti-terrorism law. “The FIA should work to recruit and train additional staff and to obtain the software necessary for it to fulfill its core responsibilities. More broadly, the government should ensure it regularly produces and reports the statistics necessary for others to verify any progress in implementing the existing elements of the country’s AML/CFT regime,” says the report.