Wednesday, May 25, 2022

Money laundering: The EU says Botswana no longer poses a risk

The European Union (EU) has officially delisted Botswana from countries with deficiencies (“High Risks”) to Anti-Money Laundering and Counter Terrorism Financing. The removal from the list took effect this past week.

The removal follows a three-year trial and error exercise to comply with the Financial Action Task Force (FATF) recommendations. Following amendments of some pieces of law earlier this year, Botswana submitted her request for re-rating to the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG).

The removal also follows a significant progress that Botswana made in the last quarter of 2021 in addressing the legal shortcomings which were identified by the ESAAMLG mutual evaluation. This was also achieved through amendments of existing legislations and enactment of new laws. Compliance with Financial Action Task Force (FATF) standards requires alignment of the legal regime with the 40 recommendations of the FATF.

The “High-risk” status did not make it illegal to invest in the countries like Botswana, but it required European banks to probe clients with ties to these markets more intensively — potentially making it too costly to continue business.

Following the removal by EU, Botswana is also expected defend her submissions in the report at the Eastern and Southern Africa Anti-Money Laundering Group Plenary meeting in September 2022.

The report addresses some recommendations of the Mutual Evaluation Report published in 2018 by the ESAAMLG. The country’s main threats emanated from the high incidence of poaching, motor vehicle theft, tax evasion, fraud and corruption.

The ESAAMLG is the regional body implementing the Financial Action Task Force (FATF) Recommendations, and the FATF is an intergovernmental organization to combat money laundering. The FATF mutual evaluations are peer reviews where members from different countries assess another country, according to the FATF website.

In a bid to comply with international standards, Botswana was forced to amend and develop some pieces of legislations to comply with the FATF recommendations, which were approved by Parliament at its Special Meeting in January 2022.

The wide expanse of the country and inadequate monitoring of the long and porous borders created vulnerabilities to all sorts of crimes including trans-national organised crime and the resultant vulnerability to money laundering risks

While money laundering activities were evident in many sectors of the economy, it was more common in the financial services sector due to the amount of large transactions involved.

For the non-banking sector, securities and insurance have been rated medium and medium-high respectively, signalling a growing element of criminality in the billion pula sectors. The government has previously expressed concerns on how the grey-listing was making it hard to attract foreign direct investment (FDI). In response, Parliament has since made amendments on sixteen laws including the Financial Intelligence Act, Companies (Amendment) Act, Trust Property Control Act, Societies Act, amongst others. In addition to the consequential amendments arising from the amendment of the Financial Intelligence Act, a new Virtual Asset Act was also promulgated in order to strengthen the country’s AML/CFT regime.

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