Saturday, September 23, 2023

Hurried Bills were to comply after dismal ratings

The last sitting of parliament was marked by flurry of Bills, with some moved as matter of urgency, irking some members of parliament as to why the Bills were being rushed without intense debate. As it turns out, it was all done in good faith as Botswana is not compliant with the Financial Action Task Force (FATF) recommendations on Anti Money Laundering and terrorism financing.

The FAFT, an inter-governmental entity, was established in 1989 to combat money laundering through setting of standards, also known as FAFT recommendations, and promotion of effective implementation of legal, regulatory and operational measures for combating money laundering, terrorism financing and other threats to the international financial system.

First issued in 1990, the FATF Recommendations were revised in 1996, 2001, 2003 and most recently in 2012 to ensure that they remain up-to-date and relevant. FAFT monitors progress in the implementation of the FATF Recommendations through peer reviews of member countries. The mutual evaluation assessment tool is the FATF assessment methodology.

Bank of Botswana’s 2017 banking supervision report reveals that technical assessment rating showed that the diamond rich country – out of the 40 FAFT recommendations – was not compliant with 23 recommendations, while partially compliant with 14, largely compliant with two and compliant with none. Moreover, the ratings indicated that the country had major and moderate shortcomings.

According to the central bank, following the country’s adverse ratings, significant work was carried out at a country level to ensure that a satisfactory level of compliance with the core FATF Recommendations, namely, recommendations on money laundering offence, terrorist financing offence, targeted financial sanctions related to terrorism and terrorist financing, customer due diligence, record keeping and reporting of suspicious transactions, is attained by June 2018.

Indeed, by mid-2017 the commercial banks and other financial institutions embarked on Know Your Customer (KYC) exercises which required them to update their details, as well declare the source of the funds being deposited. For its part, Bank of Botswana intensified on its on-site examinations to ensure the banks were compliant and also to improve the level of effectiveness.

Behind the scenes, the central bank which falls under the gambit of the finance ministry, was working around the clock to lobby its principals to move legislations that will see the country meeting the June 2018 deadline of being compliant with the recommendations. The third meeting of parliament which ran from June to July had to debate and pass a raft of bills.

Kenneth Matambo, the finance minister, moved as a matter of urgency a bill that amended the Banking Act to meet the FAFT’s recommendations on anti-money laundering and terrorism. The Bill also addressed the duplicity of reporting suspicions transactions, taking away that responsibility from the central bank and leaving it with the Financial Intelligence Agency (FIA). Before the Bill was passed, Botswana was not compliant partially compliant with anti-money laundering recommendations.

Since the country was only partially compliant with confiscation of illegal proceeds arising from money laundering, a bill was tabled and passed to close the gap. The minister of Defence, Justice and Security, Shaw Kgathi, brought forward the Proceeds and Instruments of Crime Bill to be amended to include that the country adheres to the recommendations and also enhance the director of Public Prosecutions and other law enforcement agencies to ensure that criminals do not benefit from proceeds of crime whether convicted or not.

The non-compliance with terrorist financing and financing of proliferation which stretched over a decade came to an end when Kgathi brought in the Counter Terrorism amendment Bill to strengthen the existing one which was found to be deficient by the Southern African Money Laundering Group.

Other Bills passed during the last parliament sitting to meet the June deadline to be compliant with FAFT recommendations included the amendments to the existing Extradition Act, the Anti-Human Trafficking Act, and Mutual assistance in Criminal matters Act. This was after the country was flagged as partial compliant on national cooperation and coordination of anti-money laundering efforts.

The Financial Intelligence Agency received a boost as amendments to its Act gave the agency sweeping powers to deal comprehensively with money laundering and financing of terrorism, by allowing it to report suspicious financial transactions to accountable institutions, while also giving heavy fines to institutions that do not report suspicious financial transactions.

With about ten bills passed which were centred on anti-money laundering and terrorist financing, Botswana will likely get favourable ratings during the next review of its compliance with the FAFT recommendations.


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