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The threat of organised crime and knowing who the beneficial owner is

In the shadows: Beneficial ownership has become a key issue in the global fight against dirty money and corruption PIC: LAVECO.COM
While Botswana responds to the listing by the European Commission of the country as being a high money laundering and terrorism financing risk, there are numerous examples emanating from Europe on why effective AML/CFT&P controls are necessary.

A recent incident reported by Europol highlights the danger posed by organised crime and the industries and professions at risk.

In December 2020, Europol announced that the Spanish National Police, with its support, had dismantled a large organised crime network in Spain which was involved in corruption and money laundering in that country. 

The crime group employed two significant capabilities, which enabled it to survive and prosper. The first element involved infiltration of various public institutions. This provided the group with protection from police and judicial authorities and enabled the acquisition of real estate in Spain by clients of the criminal organisation. The use of corruption strengthened the money laundering activities undertaken by the group, proving again the symbiotic relationship between the two crime types. The other capability used by the group was the use of professional services. Amongst those arrested were entrepreneurs, their advisors and business partners and several lawyers who acted as fronts for the crime group.

The alleged money laundering activities undertaken by the group included investing in projects involved in the development of luxury real estate, purchase of restaurants, industrial warehouses, plots of land and boats. The crime group used a network of offshore companies established in different countries to mask the real owners.

In Botswana, many night clubs, restaurants, travel agents, tourist venues and accommodation providers are owned and/or operated by companies or trusts. Which means that they would be defined as a specified party or an accountable institution in Botswana and subject to the requirements of the Financial Intelligence Act and Regulations (AML/CFT&P law). The AML/CFT&P law of Botswana requires specified parties and accountable institutions to undertake a risk assessment of the financial crimes that impact upon them and design and

implement measures to mitigate those risks. Based on the risk assessment, specified parties and accountable institutions must then implement an AML/CFT&P policy incorporating customer due diligence measures, enhanced customer due diligence, monitoring of transactions, training of staff and the keeping of records. The AML/CFT&P law applies to all entities that are a specified party or an accountable institution without exception and regardless of the type of businesses engaged in.

Any specified party or accountable institution engaged in international business or who deals with an international company or foreign person, needs to be very careful in understanding who they are dealing with. By law, they are required to know who the beneficial owner is.

A beneficial owner, in simple terms when dealing with an international company, means the person who ultimately controls or benefits from its operations. This AML/CFT&P measure is not only an effective means of preventing financial crime but also makes sound business sense. Frequently, international or local people are used as nominees to protect the real owner. People who do not want to be identified have something to hide other than protecting their privacy.  In addition, if they are seeking to engage in legitimate business and comply with the laws of Botswana why should they hide?

Any specified party or accountable institution that spends the time and money to thoroughly identify who they are dealing with, not only complies with the AML/CFT&P law but protects itself from dealing with a potential credit risk or scammer.

*Article written by Merero Partners, a boutique advisory firm based in Botswana offering Corporate Finance, Management Consulting and Risk Advisory Services. Contact us via email for more information on our AML/CFT training and consultancy services in Botswana


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