Thursday, December 8, 2022

Vehicle stock increases amid money laundering clams

Rising fuel costs. Double digit inflation rate growth. High interest rates.  But none of that has slowed the purchase of vehicles- a sector recently revealed to be a breeding ground for money laundering.

The number of licensed vehicles in Botswana rose by 5.9 percent in 2021 from 579,789 vehicles in 2020 to 613,845, according to latest data from Statistics Botswana. Privately owned vehicles made up 98.2 percent of the total while government fleet constituted only 1.8 percent.

Vehicles registered for the first time in 2021 were 43,696, up by 4.7 percent from the prior year. As has been the case, most of the vehicles on first registration were used vehicles at 80.8 percent. Brand new vehicles made up 19.1 percent while the rebuilds constituted only 0.1 percent.

In 2020, the number of vehicles in Botswana declined for the first time in nine years as COVID-19 pandemic shuttered business activities. Botswana’s vehicle market has experienced remarkable growth since 2008, thanks to the affordability of used cars or grey imports as they are known.

From 2013, there were 367,155 registered vehicles and this more than doubled to 601,190 in 2019. National vehicle stock grew by an average annual rate of 6.3 percent between 2012 and 2021. The increase in vehicle stock over the years has brought with it some major challenges, causing congestion in cities and rising environmental concerns.

The high number of vehicles in the road has resulted in growing number of road accidents. A total of 17,277 road accidents occurred in 2021, jumping by 14.6 percent from the accidents recorded in 2020. The number of accidents per 1,000 vehicles went up by 8.2 percent in 2021, while accidents per 10,000 population increased by 16 percent last year. The vehicle stock growth is also said to be negatively impacting the durability or life span of national roads, particularly in the more populated areas such as the eastern part of Botswana.

Even more challenging and worrying, the used car market has been identified as a conduit for money laundering. In 2019, Botswana Unified Revenue Services (BURS) cracked down on used cars dealers, accusing them tax evasion as it impounded some imported cars which had suspicious invoices that might undercut the taxman.

This week, other law enforcement agencies; the Financial Intelligence Agency (FIA), Directorate on Corruption and Economic Crime (DCEC), Directorate of Intelligence and Security (DIS) and the Competition and Consumer Authority – through collaborative efforts – gave a glimpse of the criminal workings of the used car market – which for most time deals strictly with hard cash, avoiding detection from regulators.

FIA estimates that over P65 million went through bankhanded dealings in the used car market in the period stretching 2017 to 2021. Money laundering through used cars has been preferred by criminals as it does not have sufficient regulation. Once the criminals lay their hands on ill-gotten funds, they purchase cars to hide the origins of their money, then later dispose of those cars, essential cleaning the money. All this happens because car dealers demand cash to avoid taxes, making the paper trail hard to follow – an incentive for criminals. Further compounding the matter, there is no specific regulation requiring car dealers to report every purchase of cars, leading to transactions going through and avoiding detection.

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