ZIMBABWE’S removal from the Financial Action Task Force (FATF) grey list is a milestone worth celebrating. What does this mean for the Zimbabwean Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) landscape going forward?
This is the second and final part of an article that looks at the removal of Zimbabwe from the FATF grey list and the significance going forward.
The first article touched on what the Financial Action Task Force (FATF) and the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) is and then noted shortfalls from the mutual evaluation of Zimbabwe.
The article also talked about the actions taken to address the noted shortfalls and the significance of these improvements.
This week we will look at the way forward for Zimbabwe.
The way forward for Zimbabwe?
The ESAAMLG 7th enhanced follow-up report on Zimbabwe indicated that the country would remain in enhanced follow-up and will continue to inform the ESAAMLG of the progress made in improving and implementing its AML/CFT measures.
What this effectively means is that Zimbabwe is still under the radar and evidence of continued improvement on the remaining areas of concern will be of paramount importance.
- New perspectives: Money laundering red flags in insurance sector
- New perspectives: Combating money laundering in real estate
- New perspectives: How Zimbabwe can effectively fight money laundering
- New perspectives: Combating money laundering and terrorist financing
This will also ensure that the country will not be reinstated on to the grey list on successive mutual evaluation exercises.
There are areas like recommendation 15 on new technologies which are still of great concern.
From the follow-up report it can be noted that Zimbabwe submitted that it has prohibited Virtual Assets (VA) and Virtual Assets Service Providers (Vasps), there is no legislative framework to support such a proposition.
Therefore, the operations of Vasps are not specifically prohibited.
There are no requirements for Vasps to be licenced or registered.
No action has been taken to identify natural or legal persons that carry out Vasp activities without the requisite licence or registration and apply appropriate sanctions to them.
Further, there are no legal or regulatory requirements for Vasps to be supervised and supervisory authorities do not have powers to supervise or ensure compliance with AML/CFT requirements.
This means that the relevant authorities still need to work on putting adequate controls with regard to the risks that are presented by new technologies.
Botswana through an extra ordinary gazette on February 25 2022, enacted into law the Virtual Assets Bill whose objective is to:
Regulate new and developing virtual assets businesses;
Manage, mitigate and prevent money laundering and financing of terrorism and proliferation risks associated with virtual assets; and
Provide new emerging business practices and technologies.
Zimbabwe must be guided and take cues from such developments to also regulate new technologies.
The relevant authorities must ensure that all areas of concern highlighted in the mutual reports must be attended to and ensure consistency in their regulation efforts going forward.
Zimbabwe is still lagging behind with regards to recommendation 24/25 which require countries to prevent the misuse of legal persons for money laundering or terrorist financing and to ensure that there is adequate, accurate and up-to-date information on the beneficial ownership and control of legal persons.
The recent FATF amendments to these recommendations require countries to explicitly require a multi-pronged approach, i.e, to use a combination of different mechanisms, for collection of beneficial ownership information to ensure it is available to competent authorities in a timely manner.
Countries should require companies to obtain and hold adequate, accurate and up-to-date information on their own beneficial ownership and make such information available to competent authorities in a timely manner.
Countries should also require beneficial ownership information to be held by a public authority or body functioning as a beneficial ownership registry or may use an alternative mechanism if such a mechanism also provides efficient access to adequate, accurate and up-to-date beneficial ownership information by competent authorities.
This will go a long way in ensuring transparency in aspects relating to beneficial ownership.
The country must also take a holistic approach in analysing the issues that affect the AML/CFT landscape.
There is a thin line that separates regulation of AML/CFT issues and the political side as well.
As such the relevant AML/CFT authorities must take a leading role in engaging government and other political stakeholders on the need to prioritise issues like sanctions, corruption, respect for human rights, etc all at once.
Taking an isolated approach will not likely result in tangible results that are required to see Zimbabwe progress on the AML/CFT front.
Compliance officers have a critical role to play in improving and implementing the country’s controls on AML/CFT deficiencies.
There are industry specific bodies like the Bankers Association of Zimbabwe Compliance Committee, which plays an integral part in driving compliance and being the middleman between the financial industry players and the various regulators that control the sector.
However, compliance issues affecting Designated Non-Financial Businesses and Professions (DNFBPs) were not being adequately addressed at the industry level.
This is the gap that the Compliance Society of Zimbabwe (CoSoZ) has bridged. It is an organisation that is represented by specialists across a lot of industries and sectors.
The organisation focuses on continuous professional development, compliance programme and framework formulation and implementation, specialist training that is tailored to meet organisational needs among other things.
Dialogue and cross partnerships being spearheaded by CoSoZ with the Central Bank of Zimbabwe’s Financial Intelligence Unit, Zimbabwe Anti-Corruption Commission and other stakeholders should also take into cognisance national issues like the FATF mutual evaluation findings so that the multi-disciplinary efforts yield the much-needed results.
The multi sector AML/CFT taskforce set up by the central bank’s Financial Intelligence Unit (FIU) is a noble idea since it is constituted by stakeholders from diverse backgrounds, which makes it easier to have a balance when national events inclined to AML/CFT issues are being addressed.
However, the authorities must consider adding more stakeholders like new car dealerships and dealers in precious art, jewellers among other players since they also play a crucial role in the fight against ML/FT.
However, the removal of the country from the FATF grey list is a welcome achievement that deserves celebration. The relevant stakeholder must still be reminded that a lot still needs to be done and the country must keep its blinkers on to avoid getting carried away.
Zimbabwe is one of the first countries in the region to conduct National Risk Assessment (NRA) ahead of other economies like South Africa and Botswana and consequently requesting regulated entities to conduct institutional risk assessments informed by the findings of the NRA.
This is a good development that ensures adoption of the risk-based approach premised on identified high risk areas. For the 2018/2019 NRA, the national money laundering threat for Zimbabwe was assessed to be medium, with the main ML major predicate offences being used to generate proceeds being;
- Contravention of the Customs and Excise Act,
- Contravention of the Gold Trade Act,
- Corruption and
- Contravention of the Income Tax Act.
Zimbabwe must continue to prioritise addressing these issues and evidence the remedial efforts being applied.
The financial crime landscape is ever evolving and requires continuous improvement of the AML/CFT frameworks/programmes for the country.
Both the public and private sector have a duty of making sure that best practice and good standards are adopted from an AML/CFT point of view.
Guided by the FATF and other international bodies best practice must be adopted to ensure that our systems are not used and manipulated by financial criminals and/or for terrorism related activity.
Mugwagwa writes in his capacity as a financial crime specialist and councillor of the Compliance Society of Zimbabwe. — [email protected]. These weekly New Perspectives articles published in the Zimbabwe Independent and co-ordinated by Lovemore Kadenge, an independent consultant, past president of the Zimbabwe Economics Society (ZES) and past president of the Institute of Chartered Secretaries & Administrators in Zimbabwe (ICSAZ). [email protected] and mobile No. +263 772 382 852.