Financial Crime World

Criminal Proceeds from Drugs and Other Offences Fuel Money Laundering in Lesotho

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Lesotho is facing a significant problem of money laundering (ML) and terrorist financing (TF), with criminal proceeds from various illegal activities being laundered within the country.

Sources of Illicit Funds

  • Criminal proceeds from drugs, diamond offences, human trafficking, motor vehicle theft, robbery, embezzlement of funds, theft, counterfeit currency, and extortion are being laundered.
  • These funds are mainly funneled through financial institutions, lawyers, real estate, and motor vehicle industries.

Concerns over Money Laundering and Terrorist Financing Risks

  • The authorities have expressed concerns that the position on ML/TF risks has not changed since the last National Risk Assessment (NRA).
  • Lesotho’s vulnerability to illegal cross-border movement of cash is a major concern, with controls not being applied since 2018.
  • The report highlights the close link between Lesotho’s TF risks and South Africa.
  • Intelligence suggests that Al Qaida is trying to radicalize and recruit Basotho citizens to join its ranks.
  • Lesotho’s overall Terrorism threat was assessed as medium in the NRA, but TF was rated as low.

Shortcomings in Anti-Money Laundering and Combating the Financing of Terrorism Framework

  • There are significant shortcomings in Lesotho’s anti-money laundering (AML) and combating the financing of terrorism (CFT) framework.
  • Limited understanding of the beneficial owner concept is a major issue, with most accountable institutions considering the majority shareholder to be the same as the beneficial owner, except for foreign-owned banks.

Other Concerns

  • Many financial institutions and designated non-financial businesses and professions (DNFBPs) have not designated supervisory authorities for AML/CFT purposes.
  • Deficiencies in the legal framework on legal arrangements hinder law enforcement agencies’ ability to identify and verify beneficial owners.
  • Lesotho’s lack of proactive seeking or provision of constructive and timely mutual legal assistance (MLA) and extradition is another major concern.

Recommendations

  • Strengthening the legal and institutional frameworks to address ML/TF risks.
  • Implementing measures to improve the understanding of beneficial ownership concepts.
  • Designating supervisory authorities for AML/CFT purposes.
  • Improving the legal framework on legal arrangements to facilitate law enforcement agencies’ ability to identify and verify beneficial owners.
  • Enhancing proactive seeking and provision of constructive and timely MLA and extradition.