Banks slapped with fines for dirty money loopholes
Mbongeni Mguni | Monday October 23, 2023 14:26
Last year’s fines are more than six times what the BoB handed out to banks for non-compliance in 2021, trend analysis by BusinessWeek indicates. According to the central bank’s Banking Supervision Report (BSR) for 2022 released on Wednesday, five of the country’s nine commercial banks were found to have contravened various sections of the Banking Act and the Financial Intelligence Act (FIA) last year.
Violations include one bank falling below the daily liquid asset ratio, another failing to provide correct information on credit facilities granted to directors and another giving unsecured loans to its staff members, which were more than their annual remuneration.
However, the BoB reserved its harshest penalties for banks which violated the FIA, the legislation that deals with Anti-Money Laundering and Counter-Terrorism Financing (AML/CFT).
The highest fine of P250,000 was handed out to one bank for failing to report suspicious transactions to the FIA. Another bank was fined P200,000 for failing to report large cash foreign currency transactions conducted by non-bank customers to the FIA. The two fines appear to be the largest meted out by the BoB, according to data available to BusinessWeek.
The BSR indicates that the central bank stepped up its efforts to enforce AML/CFT protocols in the banking sector and associated regulated sectors. The BoB found areas of concern in on-site examinations it conducted at two banks, one of them a targeted operation and the other a follow-up from a previous examination.
“Some identified shortcomings were failure by the (targeted) bank to obtain relevant certificates of incorporation for some companies; failure to update due-diligence information for some customers and failure to identify some trust entities and beneficial owners of companies during on-boarding,” the BSR reads. Similar on-site assessments at two bureaux de change revealed even more worrying results, according to the BoB report.
“The on-site examination revealed that the two bureaux de change did not comply with most of the provisions of the FIA and regulations. “Exposure to money laundering, terrorism financing and proliferation was rated high, and the level of effectiveness to risk management was rated weak for both bureaux de change,” the BoB said.
At the two bureaux, the BoB found that both bureaux de change did not conduct due diligence or enhanced due diligence on their customers, while one did not screen its customers against international sanctions lists. “One bureau de change did not have a risk-rating process/model to determine the riskiness of each customer before on-boarding. “As a result, customers were not profiled and therefore not risk-rated. “One bureau de change did not monitor customer transactions against their risk profiles and both bureaux de change did not have formal employee training policies on AML/CFT,” reads the BSR.
The BoB is amongst key stakeholders working with the FIA to tighten structures against illicit financial flows in the country, an effort that has been made a national priority to prevent the country from sliding back to the adverse global listings it suffered between 2018 and 2021. The Financial Action Task Force (FATF), the world’s leading multinational anti-money laundering agency, placed Botswana on its grey-list in 2018 citing deficiencies in the country’s money laundering structures.
The decision led to the European Union (EU) placing the country on its blacklist in 2019. To exit the grey-listing, Botswana passed 25 pieces of legislation in 2018 and six more after that. In 2019, Cabinet also approved the National Anti-Monetary Laundering/Combating the Financing of Terrorism and Countering Proliferation strategy.