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Probe cites IFSCs as money laundering, tax evasion hotspots

International Financial Services Centres (IFSCs) have emerged as the country’s top sources of money laundering and tax evasion. This is according to the latest report by Non-Bank Financial Institutions Regulatory Authority (NBFIRA).

The report attributed the high vulnerability in the IFSC segment to lack of cross border supervision and monitoring, as most of them are foreign-owned.

Locally some of the IFSC-accredited firms include giant corporations such as Letshego Holdings, Choppies, Motovac, Flotek, a range of asset firms, financial services units and others.

None of these firms are specifically cited in NBFIRA’s report, released last week.

Earlier this year when presenting the 2018-2019 budget speech, Finance Minister Kenneth Matambo announced the review of the IFSC framework as part of complying with international standards and the need to remove any perception that Botswana is a tax haven.

According to Aupracon Tax Specialists managing director, Jonathan Hole this would likely result in either the complete abolishment of the IFSC regime with its tax concessions or may result in the Minister increasing the tax rate from 15% to 22%. Currently, IFSC companies are taxed at 15% when most companies are at 22%.

“The EU and OECD have been on a campaign against tax cuts arguing

that they rob citizens of moneys that could be used to provide basic amenities.

They strongly aver that tax cuts such as for the IFSC preclude governments empowering the masses whilst they favour those whom they call the few elite,” he said.

At the end of 2017, the EU came out hitting hard on Botswana naming it a tax heaven, mainly due to IFSC arrangement and the country almost got blacklisted and luckily made presentations that they would address the contentious issues such as IFSC and exchange of tax information agreements.

NBFIRA’s report notes that obtaining by false pretenses, motor vehicle theft, tax evasion, corruption and poaching are amongst offences that present a high level of money laundering risks.

Other findings show that the retirement funds, micro lenders, bureaux de change and money remitters also present higher risks because of their cash intensive nature.

“All these predicate offences pose high risks in terms of proceeds that arise from the commission of such activities,” the report noted.




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