Thursday, April 25, 2024

Keeping bad money at bay

The fresh-faced and affable young man at the helm of the Financial Intelligence Agency (FIA) long dedicated his life to law enforcement. On graduation from the

University of Botswana with a social science degree in economics and sociology, Jackson Madzima joined the police service. Years later, he looks back with gratitude at the institution that he credits for moulding his professional character and discipline.

“One hopes that the whole of the civil service could borrow discipline from the disciplined forces,” he quips.

The seeds of his interest in financial intelligence may have been planted when he was seconded to the international police organisation Interpol, where he spent four years at the Harare bureau helping to establish the desk that would deal with financial intelligence. On quitting the police service, he joined the South African-based think tank, Institute for Strategic Studies (ISS) under its Organised Crime and Money Laundering Programme. He spent over two years researching organised crime in southern Africa.

“That helped me a lot in terms of putting into perspective issues we are dealing with now in terms of organised crime and money laundering,” he says.

When he returned home, it was to join the Directorate on Corruption and Economic Crime (DCEC) as a Senior Assistant Director responsible for Training and Development. His return coincided with the establishment of FIA, which he was asked to spearhead on secondment from DCEC before being appointed the new organisation’s director a year into the assignment.

Having closely studied the workings of organised crime syndicates, Madzima talks of the need to protect the integrity of the financial sector to ensure that it is not used to transfer funds that could either be used to fund terrorist activities or to wash proceeds of crime.

The need to watch international financial systems became evident after the September 11 attacks on the United States. This type of terrorism was added to a list of vices such as human and drug trafficking, as well as money laundering that used financial systems of various countries to move its proceeds. Out of international concern to stem the tide, countries came together to establish Financial Action Task Force (FATF)to be an organisation that watches criminal trends and the use of financial systems to move about criminal proceeds and establish standards to stop the practice.

Among the FATF’s 40 recommendations on what countries had to do to ensure that their financial systems remain clean was establishment of an institution where financial information can be analysed, and to assist law enforcement agencies with financial intelligence. The system seeks to paralyse operations of organised criminal syndicates by taking away their profits, thereby making the trade unattractive.

“As Botswana, we are exposed to the same vices of organised crime, corruption and many other criminal ways to generate money,” Madzima says. “At this unit we receive, request, analyse and disseminate suspicious transacting reports. If a bank suspects that money [that has come into its system] could be criminal money, and they don’t have to be experts, they tell us. We then analyse the movement of the money and come to a position. If it is likely that it is criminal money we give the product of our investigation to the appropriate law enforcement agency such as the DCEC, or the police or BURS (Botswana Unified Revenue Service) if it is tax evasion. If it is a national security issue we are capable of helping DIS. We are entitled to warn organisations that are bound to suffer prejudice.”

Now, why would Botswana be a top target for organised crime?

Madzima points to the country’s economic success, which has attracted different shades of people ÔÇô good and bad.

“As much as Botswana has been lucrative for legitimate business, it is also lucrative for criminal business,” he says. “We have to be proactive because already there has been demonstration that we have problems of criminal syndicates. If you look at a number of robbery cases you find that foreigners are involved.”

He talks of the need for Botswana to have the capability to detect potential harms to the economy such as capital flight and tax evasion. There is also the need to establish the credentials of shady characters who pitch up claiming to be investors. He says this is even more crucial at this stage in the country’s economic development when it is positioning itself to be an international business hub, thereby also protecting investments of genuine investors.

Madzima acknowledges that Botswana’s economic success is a double edged sword.

“Legitimate business goes where legitimate business has succeeded, and criminals go where business has succeeded,” he states. “Criminal entities know the business opportunities that Botswana currently presents and they are positioning themselves to gain as much legitimate business as possible or to wash their proceeds in Botswana.”

Madzima brushes off the suggestion that FIA could drive away potential investors who may not be comfortable with its scrutiny. He argues that only people with something to hide would shy away from scrutiny.

“If you made your money in a legitimate way, why would you be uncomfortable when asked where you made your money?” he asks. “This institution is not only in Botswana. The same questions we are asking in Botswana are the same questions that would be asked anywhere you go to do business. Besides, we don’t go about asking everybody questions. We only ask those whose transactions would have triggered red flags.”

He states that where some of the top investors come from, there are institutions like FIA. He mentions top economic zones like India, Belgium, Switzerland, New York (USA), and London (UK) as places with some of the world’s best financial intelligence units.

“I think in most cases, before anyone would do business in Botswana they would want to know if we are at work and how good we are,” he says. “If they can’t find comfort [in our capability] they can’t come here. Potential investors will always ask questions, and if we can’t give them answers they will get answers somewhere.”

He draws a parallel between Botswana, which is just setting up this capability, and countries such as Namibia and Mauritius, whose financial intelligence institutions are known to be well-established. He states that an argument could be made that this may be one of the contributing factors to Namibia and Mauritius being able to attract more Foreign Direct Investment (FDI) than Botswana.

He wants FIA to be seen as a guarantor of the reputation of Botswana’s financial system.
“When reputations crumble they do so over a short time. Our reputation has been built painstakingly over four decades, and if we are not careful, it can go down the drain in one night. This is the livelihood of a whole country,” he says.

We are meeting against the backdrop of revelations that the international banking group HSBC allowed Mexican drug cartels to launder billions of dollars through its United States operations. Madzima points to this case as a living example of what can easily happen even here if we were to let down our guards, or we were to be caught snoozing.

“This is what we want to prevent in Botswana,” he says. “Real criminals have more money than even Botswana. There are criminal organisations that are worth billions of dollars who desire to take their money to a place where their money won’t be touched; that place shouldn’t be Botswana.”

You’ve probably heard it said many times that organised crime thrives in failed states. Madzima agrees, and further suggests that not only do criminal syndicates participate in bringing down states so that their business thrives; they can also go to great lengths to stop countries that have failed from recovering.

Now, Botswana is not a failed state. So we are safe, right? Apparently we’re not.
“When the criminal syndicates have made their money, it can’t be useful in a failed state. They have to go to a good state where they can enjoy the money, or even participate in business that can help legitimize their money. Botswana provides possibility for people to do business and wash their money, so we should be vigilant,” he warns.

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