- DCEC, BURS inundated with fraud, tax evasion cases from politically exposed persons-report
- Some of the crimes are of high risk to Money Laundering in Botswana
- Botswana does not have measures targeting politically connected people-report
- Financial intelligence promises to clampdown on criminals, ‘we are independent’
The Botswana Unified Revenue Services (BURS) and The Directorate on Corruption and Economic Crime (DCEC) are inundated with cases involving politically connected persons (PEPs) most of whom do not want to pay tax and those deeply engaged in fraudulent acts, a newly released report shows.
A ‘politically exposed person’ (PEP) in financial terms is someone who, through their prominent position or influence, is more susceptible to being involved in bribery or corruption. Many PEPs hold positions that can be abused for the purpose of laundering illicit funds or other predicate offences such as corruption or bribery.
According to The Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) 2017 report compiled by international expects who were in Botswana, a risk place, to meet with several authorities last year, the “Suspicious Transactions Reports (STRs) which the Financial Intelligence Agency (FIA) gets from reporting entities are mainly on fraud and tax evasion and most of the cases involve politically exposed persons (PEPs). This is consistent with information provided to the assessors during interviews with both the public and private sectors that these predicate offences make up some of the crimes which are high risk for Money Laundering in Botswana.”
The report shows that as at the time of the on-site visit, there were already four requests which were made to the FIA for deeper investigations and recommendations, wherein DCEC and BURS were found by the assessors to be challenged in the field of financial intelligence.
Responding to DCEC and BURS request on PEPs, FIA “where applicable…provided information on details of incorporation and directors of the concerned companies, statement of accounts, sources of income, assets owned by the subjects, and also requested information from other Financial intelligence units.”
Because of the risks associated with PEPs, the Financial Action Task Force-FATF recommendations on Money Laundering require the application of additional Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) measures to business relationships with PEPs. These requirements are preventive (not criminal) in nature and should not be interpreted to mean all PEPs are involved in criminal activity.
Botswana was rated non-compliant with the requirements of this recommendation on PEPs. “The main reason was that there were no requirements in the AML/CFT law regarding Politically Exposed Persons (PEPs). Botswana has not yet issued laws to deal with PEPs. There is no legal framework in Botswana providing obligations on PEPs.”
The conclusion was that all the requirements are not met as Botswana has no legal framework dealing with obligations which apply to PEPs. Botswana was as a result rated non-compliant on guarding against PEPs.
Financial Intelligence Agency and its Operations
FIA only commenced its core operations in February 2014 and has been found to be the only well structured and resourced institution to enable it to carry out its core functions. In fact, the report paints it as the only agency well-equipped to curb and nab illicit financial flows and other associated crimes.
Speaking to this publication, its director, Dr Abraham Sethibe said his “Organisation enjoys operational independence but admitted that there are a few but minor challenges to deal with.”
FIA was established under the FI Act. Although the legal framework in Botswana provides for receipt of suspicious transactions by the FIA from all reporting entities, in practice the FIA is recognised as the only national centre in Botswana responsible for receipt and analysis of suspicious transactions and other information relevant to money laundering, associated predicate offences and terrorist financing, and for the dissemination of the results of that analysis to competent authorities.
“The agency has filled 32 out of 38 established positions and has a dedicated analysis unit. The staff of the FIA have adequate and diverse skills to analyse transaction reports and produce quality financial intelligence for use by the LEAs and foreign counterparts. At the time of the on-site visit, the FIA was enhancing its data mining and analysis tools, and building strategic analysis capability,” the report showed.
At the time of the DCEC’s on-site visit, the organization was considering four intelligence reports it had received from the FIA to determine if there was potential for ML offences to have been committed.
The report further says that the FIA made 26 disseminations from February 2014 to June 2016. “Most disseminations were done between end of 2015 and early June 2016 and investigations were still going on for some of the cases. The DCEC got 6 disseminations out of which 2 were closed for lack of enough evidence.”
FIA, as a supervisory authority for reporting entities that do not have a supervisory authority, is responsible for the supervision of 2 state entities, which are statutory banks (CEDA and BDC), dealers in precious and semi-precious stones, car dealers and money remitters.
State entities are created by the constitution and regulated by the Minister of Trade and Industry, car dealers are licenced under the Trade Act by the Town/District Council and money remitters are issued with a letter of no objection by Bank of Botswana to enable them to operate.
According to the report, the FIA has sufficient resources to carry out its core functions. “However, it requires capacity to carry out its supervisory role. The BoB and FIA have not demonstrated an understanding of Money Laundering/TF risks applying to their regulated entities.”
The assessors said there is need for more engagement between the FIA and other LEAs who receive the intelligence reports from FIA on how the reports can enrich and inform their investigations, including commencing of ML investigations and not limit such investigations and prosecutions only to predicate offences.
“The authorities, in particular FIA should carry out more awareness on how the financial intelligence it disseminates to BPS, DCEC and BURS can be effectively used to initiate or support ML investigations,” the assessors advised.
Prior to the FIU’s commencement of its core operations in February 2014, reporting entities were filing STRs to the DCEC with copies made to the BoB. In September 2014, the BoB wrote all banks advising them to stop sending any copies of STRs to the Central Bank. Setting up of the FIA started in 2013 and when it was ready to perform its core functions, all the 22 STRs held by the DCEC were handed over to the FIA. The FIA makes disseminations to the DCEC, BPS, BURS, DIS, and Immigration Department.
However, the assessors were concerned that no comprehensive statistics were kept by the FIA in relation to requests for additional information, which, in turn, made it difficult for the assessors to quantify Anti-money laundering and counter –terrorist financing measures in Botswana.
The FIA received a total of 246 STRs from 2014 to June 2016, with most of the reports filed by banks. As one way of addressing low ML investigations, the FIA and DCEC arranged for staff exchange in which two financial analysts from FIA were attached to the DCEC for 6 months each, from November 2015 to April 2016 and May 2016 October 2016 respectively.
The aim of the attachments was to impart ML investigative and analytical skills to the DCEC and provide guidance on making requests and spontaneous disclosures to the FIA. However, fruits from this exercise are yet to be realised.