Monday, May 17, 2021

UK sanctions Botswana over poor money-laundering safeguards

The United Kingdom (UK) has, in a joint action with the European Union (EU), imposed fresh sanctions on Botswana over money anti-laundering and counter financing of terrorism compliance deficiencies.

Documents seen by Sunday Standard show that following her decision to quit the EU, the UK passed the Money Laundering & Terrorist Financing (Amendment) High-Risk Countries Regulations No.392 of 2021 listing Botswana, along with 20 other countries as high-risk third countries with strategic deficiencies in the Anti-Money Laundering/Counter Financing of Terrorism (AML/CFT) regimes. 

Commenting on the latest development, local attorney, Thuto Senwedi – a compliance manager at Bookbinder Business Law Firm said being on the UK AML/CFT list (as well as the EU) of blacklisted jurisdictions has several implications for Botswana.

He said, UK and EU obliged entities, such as financial institutions and certain professionals, are required as a matter of law to conduct enhanced customer due diligence, on transactions involving Botswana clients and those involving Botswana intermediaries.

This enhanced due diligence, he noted, entails enhanced examination of the background and purpose of the transactions connected to Botswana, and increasing the degree and nature of the monitoring of business relationships where the parties involved are linked to Botswana, to determine whether the transaction or business relationship is suspicious. 

“Secondly, the blacklisting has attendant implications for the ease of doing business and the urgent and unavoidable need to diversify from being a mineral-led economy- potentially constraining the Botswana Investment and Trade Centre’s (and other sister state owned entities) efforts of attracting foreign businesses into Botswana, cross-border transactions, and financial transactions flows.

These effects also have the potential of overspilling into the tourism sector which ordinarily has UK and EU citizens as perhaps the main tourists who visit Botswana,” said Senwedi.

He said it was to be noted that being blacklisted by the UK and the EU does not prohibit specified parties in terms of the Financial Intelligence Act, No. 11 of 2019 from making international transactions.

“However, specified parties are bound to experience some modicum of delays in respect to transactions involving UK and EU member states, as Botswana transactions are classified as inherently high risk in respect of commission of financial offences,” he said.

He added that it was noteworthy that the applicability of Botswana’s blacklist is with respect to the UK and EU member states only. With respect to the rest of the world, in terms of the Financial Action Task Force (FATF), Botswana is listed as one of the jurisdictions under increased monitoring (“grey listed”). 

“This means that Botswana has committed to resolve swiftly the identified strategic deficiencies within agreed timeframes and is subject to increased monitoring.

As Botswana makes efforts to get out of the FATF grey list, which will in turn results in removal from the UK and EU blacklist, Botswana looks ahead to the next Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), which is an affiliate member of the FATF follow-up report and technical compliance re-rating session to be held on or about May 2021,” Senwedi said.

In the meantime, he said, Botswana remains under ESAAMLG ‘increased monitoring list’ and will continue to actively inform ESAAMLG of the progress made to address the outstanding technical compliance efficiencies in its AML/CFT framework. Pending Botswana addressing her strategic deficiencies, the UK and EU blacklist will remain extant, thereby hindering the efficiency of business transactions with respect to the UK.

The Ministry of Finance and Development Planning spokesperson Fenny Letshwiti had promised to respond to Sunday Standard queries but had not done so at the time of going to press. 

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