Financial Crime World

Botswana’s Financial Crime Case Studies: A Step Towards Compliance with International Standards

Introduction

In a bid to enhance Botswana’s compliance with international standards and recommendations by the Financial Action Task Force (FATF), several laws were revised in 2022. The FATF, an intergovernmental global money laundering and terrorist financing watchdog, sets standards to prevent illicit activities and identifies high-risk jurisdictions that are at risk of being used for these activities.

Background

Botswana was previously grey-listed by the FATF in October 2018 after a compliance evaluation found it vulnerable to illicit activities. The country was ranked alongside countries like Yemen, South Sudan, Barbados, Albania, and now South Africa as having weak measures in place to stop the flow of illicit funds.

Consequences of Non-Compliance

Being on the FATF grey list has severe consequences for Botswana’s economy, including:

  • Inhibiting foreign investments
  • Stunting economic growth
  • Resulting in reputational risk
  • Increased bureaucracy and costs for investors
  • NGOs may suffer as donors become reluctant to send funds
  • International aid funders like the World Bank and IMF apply additional restrictions

Action Plan to Ensure Compliance

To address these concerns, the Ministry of Finance and Economic Development devised an action plan to ensure compliance with the FATF. The key reforms include:

  • Developing a comprehensive anti-money laundering (AML) and counter-terrorism financing (CTF) strategy and policy informed by national risk assessment results
  • Developing risk-based supervision and monitoring programs
  • Improving the dissemination and use of financial intelligence

Amendments to Laws

Several laws have been amended, including the Companies Act, which requires companies to disclose their beneficial owners. This is a significant milestone in achieving the National Development Plan’s objectives.

The Financial Intelligence Act, 2022 applies to accountable institutions and specified parties such as:

  • Trustees
  • Non-profit organizations
  • Lawyers
  • Real estate practitioners
  • Accountants
  • Non-bank financial institutions
  • Car dealerships

Red Flags of Illicit Activity

Red flags of any transaction include:

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

Implementing a strict supplier onboarding process, known as Know Your Customer (KYC), is essential to perform due diligence before engaging in business transactions.

Consultation and Assistance

As the proposed Bill comes into effect, individuals and businesses should consult with experts to understand its implications and application. For assistance, please contact us at info@peolegal.co.bw or +267 3975779.