Dirty money fears as churches rake in P216m
Mbongeni Mguni | Friday September 11, 2020 16:56
The figure of P216 million is based on the annual returns of those organisations that actually filed with the Registrar of Societies, which in 2018 was 57% of the 2,451 registered religious societies.
As authorities fight to shrug off the country’s negative listing for money laundering by organisations such as the European Union, religious societies have emerged as a hotspot for dirty money and financing of terrorism.
The ministry’s researchers assessed the country’s non-profit sector, which includes burial societies, youth groups, charitable organisations and sporting clubs, and found that religious societies carried the highest risks for dirty money and funding of terrorism.
Researchers said the non-profit sector as a whole carried medium risks for threats such as fraud, tax evasion, inadequate vetting of foreign nationals holding senior positions and cash-intensive nature. However, religious societies carry greater risks than the industry in general.
Religious societies, which account for about 25% of all non-profit organisations, carried a high terrorism financing risk and a medium-to high risk for money laundering, according to the assessment. By comparison, the other non-profits were ranked low to medium for both dirty money and terrorism funding, except for charitable organisations which were ranked medium to high for terrorism funding.
“In terms of materiality and the nature of services provided by each category, religious societies are rated at high level of terrorism financing risks,” the Finance Ministry researchers said.
The factors driving the higher risk ranking for religious societies include their cash-intense operations, links to foreign actors such as recruitment of external pastors and inadequate financial controls as seen in the weak submission of annual returns.
“The underlying factors for the nature and level of money laundering and terrorism financing risks of non-profits relate to international links including cross-border procurement transactions, large sums of cash, tithes and offerings from members and presence of foreign prominent influential persons holding key positions,” the report reads.
“In addition, supervision and monitoring of the non-profits identified as posing higher TF is yet to take place.”
The Finance Ministry’s report confirms the Financial Action Task Force (FATF)’s findings two years ago that the non-profit sector was one of the country’s deficiencies in its anti-money laundering and terrorism financing strategy. The FATF, a global anti-money laundering organisation founded by the world’s richest countries, placed Botswana on a list of high risk areas in 2018, leading to the blacklisting by the EU. The high risk listing and the EU’s blacklisting persist to today.
The FATF said it had found ‘strategic deficiencies’ in a review pointing out one of these as involving the monitoring of non-profits.
Meanwhile, the Finance Ministry report indicates that religious societies are enjoying the cream of the crop in the non-profit sector, reporting incomes of P216 million in 2018, which represents about 72% of the entire sector’s earnings. By comparison, sporting clubs, who make up 23% of all non-profits, earned about P23 million in 2018.
The figure of P216 million, however, is apparently short of the mark as it only represents the 57% of religious societies who submitted their annual returns.
“There are on-going efforts to improve compliance levels in general and religious societies in particular considering that records and annual reports are the bedrock to analysis of emerging threats as they contain information on financial flows and programmes,” researchers said.