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Botswana scores top marks in new 'dirty money' review

MBONGENI MGUNI
Matambo PIC: MORERI SEJAKGOMO
A fresh review by a continental body assessing Botswana’s vulnerability to money laundering has noted improvements in 32 out of 40 areas of concern that caused the country’s blacklisting by global groups.

The Financial Action Task Force (FATF), the leading anti-money laundering agency founded by the world’s richest countries, greylisted Botswana last October citing institutional and structural deficiencies in the country’s anti-money laundering defences.

On the FATF’s recommendations, the European Union (EU) in February blacklisted Botswana and 22 other countries, citing the weak systems and saying it “had to make sure that dirty money from other countries does not find its way to our financial system”.

The effect of the adverse listings has been to take the shine of the country’s well-curated investment climate, as potential investors are required to go through onerous checks to move funds into and out of Botswana.

Other major potential FDI sources outside the EU, such as the United States, also take their cue from the EU’s assessment of money laundering risk.

Local authorities said the adverse listings flew in the face of multi-ministerial efforts to fast-track more than 20 pieces of legislation to plug loopholes in the country’s financial services sector, combat money laundering and stamp out practices such as tax evasion.

The Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), the FATF’s regional body whose adverse 2017 assessment of Botswana snowballed into the negative listings, recently finalised an update showing robust improvement. Botswana is a member of the ESAAMLG and has until 2020 to rectify the deficiencies uncovered by the regional and global bodies.

According to an assessment by a six-member ESAAMLG team, Botswana has improved in the majority of the 40 concerns and recommendations made in 2017.

“On (the other) recommendations,

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progress has been noted, however, it does not justify a re-rating,” the panel noted.

Botswana’s highest jump between 2017 and the latest review was in Recommendation 5, where evaluators had originally noted weaknesses in the local laws around criminalising terrorism financing.

In the 2019 review, the team upgraded Botswana’s mark from “non-compliant” to “compliant” noting statutory amendments made in the intervening years to broaden the penalties around terrorism funding.

The country also scored well in improvements around identifying money laundering risks, assessments by authorities of these risks, greater powers to seize/freeze suspect goods, enhanced information sharing amongst banks and regulators, laws around beneficial ownership of companies, regulations around politically exposed persons amongst others.

Botswana was also upgraded for tightening laws around the requirement to identify the originator of all external funds above P10,000 to the Financial Intelligence Agency (FIA), and the period when a financial institution reports a suspicious transaction to the Agency.

The concerns where the country was not re-rated revolve around monitoring dirty money amongst non-profit organisations such as societies and churches, as well as other technical improvements.

“Botswana has made good progress in addressing most of the technical compliance deficiencies,” team members noted.

“Botswana will remain in enhanced follow-up and will continue to report bi-annually on its progress.”

In May, FIA director, Abraham Sethibe told BusinessWeek that Botswana’s bi-annual reports were being submitted ahead of the May/June 2020 deadline for compliance.

“A determination of whether we are removed from the high-risk countries list will be made after that deadline,” he said.

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