Crackdown on lawyers over ‘dirty cash’

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  • Government agencies on crackdown
  • P10 million allegedly laundered through three law firms
  •  Trusts are a threat to anti-money laundering laws- Kgathi
  • Lawyers conflicted on client privacy and illicit funds?
  • LSB, FIA, AML Acts demand financial reporting
  •   We are yet to discuss the NPF matter – Law Society

LAWRENCE SERETSE

Financial law enforcement agencies have launched a covert crackdown on corrupt law firms partaking in and facilitating the processing of illicit money, by not reporting suspicious transactions as required by the law.

The crackdown comes after Directorate of Corruption and Economic Crime (DCEC) investigations revealed gross irregularities in reporting financial transactions and government’s realisation that some law firms are facilitating the funnelling of dirty money through trust accounts despite the law being clear that “suspicious transactions” involving prominent political figures should be reported.

The financial investigating agencies are said to have identified various law firms who have allegedly found ways to circumvent the regulatory and oversight bodies, by using legal grey areas in the law that allow for money laundering the proceeds of corruption.

Insiders say that the investigations also include those mentioned in the charge sheet of the controversial National Petroleum Fund (NPF) case, and whether they should be charged with using their trust accounts as vehicles through which to launder the proceeds of unlawful activities cited by the Directorate of Public Prosecutions (DPP).

Information reaching The Botswana Gazette is that The Botswana Unified Revenue Services (BURS) and Financial Intelligence Agency (FIA) are said to be working with the Directorate of Corruption and Economic Crime (DCEC) to assess issues of compliance with the tax law and financial reporting of cash transactions by lawyers and their firms’ trust accounts.

The Gaborone Regional Magistrate on November 29th 2018 heard a case in which two trained lawyers, one a High Court Judge, Zein Kebonang and his twin brother Member of Parliament for Lobatse Advocate Sadique Kebonang and ten (10) others were facing a cumulative total of 65 criminal charges arising from the NPF scandal.

In the DPP charge sheet three law firms, Briscoe Attorneys, Kaluzi Associates and Gailbraith Attorneys, although not facing any charges, are said to have performed transactions linked to the alleged money laundering charges that the Kebonang twins, Bakang Seretse, Mogomotsi Seretse, Kenneth Kerekang, Kago Stimela and their respective companies are facing.

The DPP alleges that a total of about P10 million was funnelled through three law firms.

• Briscoe Attorneys – On 4th of April 2017, the firm received P3,300,010.00 transfer from Basis Points account with Capital Bank into Briscoe Attorneys’ Standard Chartered Bank trust account. The instruction from the client was to pay P3,000,000.00 to purchase house Number 336 Broadacres, Extension 13, Gauteng, South Africa, for Sadique Kebonang

• Briscoe Attorneys – On 1st September 2017; P2,000,000.00 was transferred from Basis Points account held with Capital Bank into Briscoe Attorneys’ Standard Chartered Bank trust account.  When contacted for comment last week Briscoe said she was engaged, and further efforts to reach her were futile at press time.

• Gailbraith Attorneys – that on 19th September 2017, P2,745,098.00 was transferred from M & B Properties (represented by Bakang Seretse as Director) account at Capital Bank to Galbraith Attorneys in South Africa for the purchase of house number 354 Broadacres, Extension 13, Gauteng, South Africa, for Zein Kebonang. Gailbrath was not available for comment and the firms phone rang unanswered.

• Kaluzi & Associates – On 1st September 2017; P2, 000,000.00 was transferred from Recon Security Training t/a Basis Points account number 0002704005347 held with Capital Bank to Kaluzi & Associates. Kaluzi declined to provide any comment.

The Botswana Gazette has been informed that the transactions were not reported to  FIA, but the FIA has declined to comment on the matter. Prior to the June 2018 amendment of the Financial Intelligence Act, the Banks were required to report suspicious transactions.

FIA boss Abraham Sethibe declined to make comments on whether there have been any reports made to him on suspicious transactions by any law firm, “I cannot deny or confirm such,” he said in a brief interview with this publication.

Are lawyers knowingly breaking the law?

Botswana’s Financial Intelligence Act mandates lawyers to report suspicious transactions, even by their own clients when buying or selling of shares and real estate, managing client money, securities and assets, bank savings and trust accounts.  The law further indicates that despite attorneys receiving such information from clients under a privileged veil of confidentiality, such confidentiality does not apply in respect of criminal wrongdoing.

In the latest report by the Global Initiative Against Transnational Organized Crime (GIATOC) THE ROLE OF LAWYERS IN COMBATING MONEY LAUNDERING AND ILLICIT ASSET FLOWS, Charles Goredema an independent consultant specializing in research on economic crime in Africa states that trusts and foundations are valuable to clients who intend to disguise their ownership and/or control of assets acquired from the proceeds of crime or corruption.

In common-law jurisdictions, legal professionals assist clients by setting up trusts or foundations and through them beneficial interests in assets, which can be separated from legal or apparent interests. The veil of secrecy allows for dark money to be easily moved from one place to another with little or no detection. The Legal Practitioner’s Act of Botswana requires law firms to submit their business transactions to regular audits to ensured that lawyers do not assist, inadvertently or otherwise in criminality.

The Kebonang twins alone are accused of spending an estimated P5.7 million on the purchase of property in South Africa. Goredema’s report discovers that transactions for the sale or purchase of real estate are considered the most susceptible to money laundering through intermediaries such as lawyers, in terms of both the placement of proceeds of crime and the integration of laundered proceeds.

On June 28, the Leader of Opposition Duma Boko when debating the proposed Trust Property Control Bill advised his fellow members of parliament to register their legitimate assets under trusts as an investment vehicle.

“It is very important for you to have trusts. If you do not, you must try and have a trust.” He said a trust was a more relaxed legal vehicle that enables one to secure themselves and their property.

However, when presenting the Bill Defense Minister Shaw Kgathi said while most Trusts and similar legal arrangements are set up for legitimate and noble causes, research by the International Financial Organizations such as the Financial Action Task Force (FATF) indicate that these corporate vehicles can and are being used, intentionally or unintentionally for money laundering and terrorist financing activities.

“An environment such as ours in Botswana, where trust arrangements are not subjected to accountability and transparency requirements, can facilitate undesirable results,” Kgathi said during the parliamentary debate.

The services of a trust or foundation may be exploited by Politically exposed persons (PEP) – such as the Kebonang twins who are now facing charges; and to secure an alleged payment from Basis Points Ltd which was managing millions in the National Petroleum Fund accounts. To prevent exposure of the money laundering, the trained lawyer twins ensured that the funds were not sent directly to their bank accounts, but instructed that payment be made to an attorney’s trust account for onward transmission to third parties or corporate entities.

The attorney is thereafter requested to transfer funds to named beneficiaries, for example the real estate management companies M & B Properties and Seef Properties and for various vehicles, some which have been impounded by the DCEC under the Criminal Procedure and Evidence Act. A white Toyota Land Cruiser registration number B539 BCJ belonging to Sadique Kebonang is impounded at the DCEC Head Office over suspicions that it was purchased using NPF funds.

In light of this background, Goredema in his report also states that lawyers frequently find themselves caught between their obligations to regulatory authorities and their fidelity to their clients.

“This becomes particularly problematic when, as intermediaries in business transactions, they become aware of, or are requested to facilitate, illicit financial flows (IFFs). Lawyers can become complicit in, or even initiate, economic crime, as the case studies in this report show. They may become complicit through negligence. The extent to which this occurs on a global scale was revealed by the Panama and Paradise papers, but it is of particular concern for developing economies, where such crimes can have especially devastating effects,” he stated in the report.

Recognizing the dilemma lawyers face when caught between an oath to client confidentiality and a responsibility to report financial misconduct, the report suggests ways in which they might contribute to anti-money-laundering (AML) measures, in particular stressing the importance of client due diligence (CDD), the involvement of lawyers in national risk assessments and the need to tailor combating strategies within judicial environments.

Contacted for comment on the involvement of lawyers in the NPF scandal, Law society of Botswana Executive Secretary Tebogo Moipolai said that the society has not yet convened to discuss the allegations levelled against their members, named in the NPF charge sheet.

However, he mentioned that FIA requires reporting of certain suspicious transactions and any funds in a law firm’s trust account should be pursuant to the work that the lawyers have conducted or are going to conduct on behalf of the client.

Two law firms featured prominently among the questionable offshore financial dealings reported in the Panama and Paradise papers, respectively: Mossack Fonseca and Appleby. Panama-based Mossack Fonseca featured in the transactions detailed in the 2016 Panama Papers, while Appleby, whose head office is in Bermuda, crafted a significant proportion of the transactions covered in the Paradise Papers, publicized in the second half of 2017.  Mossack Fonseca was raided by tax authorities and were last month taken to court to face criminal prosecution.

The role of the banks, Capital Bank and Bank Gaborone mentioned in the DPP charge sheet with 65 counts of alleged criminal activity is purportedly also under investigation by the financial regulatory bodies for violations of the Anti-Money Laundering Act, Counter- Terrorism Financing Act and the KYC (know your customers) clause of the FIA Act.