The cost of getting blacklisted by the EU

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The European Union (EU)’s blacklisting of Botswana for weak anti-money laundering protocols means any transaction emanating from the local financial sector and going international will attract heavier scrutiny from regulators and take longer to complete than normal, Mmegi has learnt.

Global entities responsible for payments and settlements are part of the EU’s anti-money laundering rules and with Wednesday’s blacklisting, are on high alert for transactions emanating from Botswana.

The net effect is an inconvenience both in terms of time and cost to businesses already in the country, while investors who had been eyeing Botswana, are discouraged from proceeding with their plans.Non-Bank Financial Institutions Regulatory Authority (NBFIRA) head of anti-money laundering directorate, Motsisi Mongapi said blacklisting raises the cost of doing business with and within affected countries. “Authorities from outside have heightened inspections and have to check the source of funds, the individuals who have sent them and where to, whenever an entity here transacts internationally,” she told Mmegi.

“There is enhanced due diligence and it delays the international transactions.

“It’s not that a particular regulator is not complying, but simply because the transaction comes from a country that is said to have high risks or deficiencies.”

NBFIRA is amongst a group of statutory institutions monitoring and enforcing anti-money laundering protocols in the country. Others include the Financial Intelligence Agency, Botswana Unified Revenue Service and the Bank of Botswana, while the enforcement agencies include the Directorate on Corruption and Economic Crime as well as the Directorate of Intelligence and Security.The non-bank financial institutions sector, which until 2008 was unregulated, has been fingered as a conduit for money laundering activities, particularly in cases involving asset managers, their clients and clandestine dealings.

By end of 2018, the non-bank financial institutions sector had 775 active entities with assets of P123 billion, cutting across asset management firms, insurance companies, microlenders, pension funds and others.

Mongapi said anti-money laundering inspections amongst the regulated entities had only begun last year after the full establishment of the responsible department. This year, the regulator plans to conduct 12 more inspections.“What has been happening is that we were not doing anti-money laundering focused inspections.

These we only started doing last year when we formed the fully-fledged department and thus far we have done seven, with five of these in high-risk sectors. “We do risk-based inspections.  Within our regulated entities, we look at the complexity of the products, the clients, delivery channels and payment modes.“Within the high risk sectors, like in insurance, we look at the big entities looking at the portfolio and number of high-risk clients they have in terms of the FIA Act.

“These high-risk clients include prominent and influential persons because some of them may not be salaried and we need affidavits attesting to where their funds are coming from.“With salaried individuals, their incomes are known and during an inspection, an investigation would look at any money being brought from outside. “If your client says I’m self-employed and depend on tenders, you have to investigate that. Know your clients so that next time when they bring something that is out of the ordinary, you know.” Mongapi said the blacklisting of Botswana was related to previous legislative weaknesses, but these had been tightened.

“As NBFIRA, we are not the right people to be talking about that, but it would appear the main challenge was the legislation, which was lacking in many respects,” she said.“If you dragged someone to the courts, the case would not prop up.“Now, the laws are tight enough. Even the FIA Act is now tougher with higher penalties and that is perhaps why we are seeing more entities dragged before the courts on these issues.”

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