Botswana was caught off-guard by the European Union blacklisting imposed earlier this year, Minister of Finance Dr. Thapelo Matsheka has said.
Addressing Parliament last week Matsheka said government was concerned that there was no proper consultation before the announcement was made about the imminent blacklisting.
This is despite Botswana rushing over the past year to pass reforms, many of them at lightning speed in anticipation of possible blacklisting by the European Union which unfortunately came to pass in May this year (2020).
The European Union usually spells out to countries what it perceives to be lacking and how it can be addressed before taking drastic measures.
Matsheka said they were also surprised by the failure by the European Commission to appreciate the significant progress made by Botswana in strengthening the Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) legal framework including through implementing the six Financial Action Task Force (FATF) action items which forms the basis for the Commission’s decision.
“Botswana received a correspondence from the Delegation of the European Union dated 6th May 2020 informing us that 13 the European Commission, in exercising its delegated authority, has decided to adopt an updated list reflecting recent developments since 2018 and align it with FATF assessments, and that the updated list includes Botswana,” Matsheka said when delivering a speech on Anti-Money Laundering (AML) and Combating the Financing of Terrorism. Early this year the European Commission published a new list of high-risk third world countries, including Botswana, said to have strategic deficiencies in their AML and CFT systems.
Botswana was among four African countries added by the European Commission to a list of countries that pose financial risks to the European Union due to anti-money laundering and terrorism financing shortfalls.
The three other countries included Ghana, Mauritius and Zimbabwe. The EU said at the time that all countries on the list with the exception of North Korea had pledged to change their rules in order to address the problem.
Banks, and other financial and tax firms are obliged to scrutinize their clients who have dealings with the listed countries.
Companies from the listed countries are also banned from receiving future EU funding.
Consequently, the listing obliges all EU member countries to instruct their financial institutions and other designated non-financial businesses and professions to apply enhanced due diligence when dealing with financial transactions involving Botswana.
The EU published in their Official Journal of June 19, 2020 the decision to blacklist Botswana and the other three countries. The Regulation was to enter into force within 20 days following publication, meaning the blacklisting has now been effected.
“This decision was communicated to Botswana on 23rd June, 2020. 25. In taking these decisions, the EU Commission relied on a report of the ICRG, which as I have noted is a committee of the FATF,” Finance Minister Matsheka told Parliament.
“However, it is important to note that the 14 shortcomings from the EU’s perspective are its own interpretation of the actions indicated by FATF for Botswana to address strategic deficiencies. For example, FATF action item (i) requests Botswana to conduct a money laundering and terrorism financing risk assessment relating to legal persons and legal arrangements and non-profit making organizations (NPOs).”
Matsheka said Botswana has since taken a number of actions in response to the blacklisting decision. “Apart from issuing of a press statement explaining the EU Commission listing, a Note Verbale was sent to the EU, with an official paper stating the position of Botswana Government. The Minister of International Affairs and Cooperation wrote to all her counterparts in the EU appealing to them to reconsider the decision,” he said.
“The Minister of Finance and Economic Development wrote to the Deputy Prime Minister of Croatia and Minister of Finance, in his capacity of President of the European Council. The Ambassadors of EU Member States were briefed on the position of Botswana and requested to communicate to their respective capitals the information provided to them.”
Matsheka said despite these efforts, the matter could not be resolved in favor of Botswana as the authorities indicated their inability to change the decision as the Commission acted on a delegated authority. The EU Commission, the Minister said, also expressed their inability to change their decision. “It should be pointed out that the continued blacklisting or lifting therefrom of Botswana will solely be based on the assessment process of the FATF.”
Matsheka said Botswana remains committed to the global fight against money laundering and terrorist financing, and will work with all Technical Assistance providers, including the EU to ensure compliance with the relevant regulations.