Financial Crime World

Botswana Takes Steps to Combat Money Laundering with New Legislation

Introduction

Botswana has made significant strides in enhancing its anti-money laundering (AML) laws to comply with international standards set by the Financial Action Task Force (FATF). The country’s efforts have been driven by a need to strengthen its financial system and prevent illicit activities.

Background

In 2018, Botswana was identified as vulnerable to money laundering and terrorist financing during a FATF compliance evaluation. As a result, it was grey-listed for four years, joining countries like Yemen, South Sudan, Barbados, and Albania. This designation had severe consequences, including:

  • Inhibiting foreign investments
  • Damaging the country’s reputation
  • Increasing bureaucracy and costs for investors

Government Response

To address these issues, the Botswana government devised an action plan to ensure compliance with FATF recommendations. Key reforms included:

  • Developing a comprehensive AML/CTF strategy and policy informed by national risk assessments
  • Implementing risk-based supervision and monitoring programs
  • Improving the dissemination and use of financial intelligence

Legislation and Regulations

The Companies Act was amended to require companies to disclose beneficial owners, a measure aimed at preventing shell companies and money laundering. The Financial Intelligence Act, 2022, has also been enacted, applying to accountable institutions and specified parties such as:

  • Trustees
  • Lawyers
  • Non-bank financial institutions

Importance of AML Compliance

According to the Ministry of Finance and Economic Development, these reforms are critical in maintaining the integrity of Botswana’s financial system. The government is prioritizing AML compliance in its National Development Plan 11 objectives.

Red Flags for Money Laundering

Businesses and individuals are advised to familiarize themselves with red flags that may indicate money laundering or illicit activity, including:

  • Secretive new clients
  • Unusual or multiple transactions
  • Unclear ultimate beneficial ownership
  • Negative media
  • Jurisdictional risk

Implementing Know Your Customer (KYC) Procedures

Implementing a strict supplier onboarding process is essential in preventing such activities. This includes verifying the identity of customers and conducting regular reviews to ensure compliance.

Conclusion

As Botswana continues to strengthen its AML laws, the government is committed to maintaining a culture of compliance and law and order in its financial dealings with other countries.