A diplomatic tiff is brewing between Botswana and the United States of America following a decision by the Botswana government to cover up the extent of money laundering in the country.
The American government is unhappy that the Botswana government has refused to release statistics on the number of suspicious bank transactions reports (STRs) filed by local banks in 2013.
The US Department of State disclosed in its 2014 report that “unlike in previous years, the Government of Botswana has declined to release statistics on the number of STRs filed in 2013.”
The US State Department stopped short of publicly bashing Botswana for refusing to disclose the extent of money laundering in the country saying, “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 Anti Money Laundering and Combating of Financing Terrorism (AML/CFT) regime.
Sunday Standard investigations have revealed that the Directorate of Intelligence and Security Services (DISS) which runs a multi-million Pula cash Special Fund controlled by the Director General Isaac Kgosi has been responsible for a number of suspicious bank transactions.
The American government says Botswana has yet to implement an internationally accepted anti-money laundering and terrorist finance (AML/CTF) regime. “In 2011, the Eastern and Southern Africa Anti-Money Laundering Group placed Botswana under enhanced monitoring.”
It also emerged in the US Department of State report that even under Anti Money Laundering and the Combating of Financing Terrorism regime which is being implemented; senior government officials can still get away with money laundering because none of the laws contains requirements related to politically exposed persons (PEPs).
In financial regulation, “politically exposed person” (PEP) is a term describing someone who has been entrusted with a prominent public function, or an individual who is closely related to such a person. PEP generally presents a higher risk for potential involvement in bribery and corruption by virtue of their position and the influence that they may hold.
Independent reports have revealed that Botswana’s politically exposed persons have illegally transferred billions out of the country and stashed it in secret offshore accounts that are as big as the country’s foreign reserves and bigger than the national budget ÔÇô two international financial watchdogs have revealed.
The Tax Justice Network research found that the elites of Botswana have accumulated so much secret offshore wealth it could pay off the country’s external debts many times over. The report lists Botswana’s capital flight crisis as worse than that of Zimbabwe and fourth on the list of Southern Africa’s hardest hit countries after South Africa, Angola and Zambia with US$ 2.7 billion smuggled out of the country to offshore accounts between 1977 and 2010.
According to the report by the US Department of State, “Botswana is in the process of establishing, and marshaling the resources and training necessary to implement, an 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 further states that “the 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.
Unlike in previous years, 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. The DCEC 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 has been no terrorism or terrorism financing-related prosecutions.
The report recommends that Botswana Parliament 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.