Financial Crime World

Mozambique Struggles to Comply with Anti-Money Laundering Regulations

In an effort to prevent the use of its financial system for money laundering and terrorist financing, Mozambique has implemented various laws and regulations over the years. However, recent reports suggest that the country is still struggling to comply with these regulations.

Since 2002, Mozambique has had a legal framework in place aimed at preventing and suppressing the use of its financial system for criminal activities. In 2007, the Financial Intelligence Office of Mozambique (GIFiM) was created to help ensure timely implementation and effective application of anti-money laundering provisions.

Challenges

Despite these efforts, Mozambique was placed on the Financial Action Task Force’s (FATF) “grey list” in 2022, citing concerns over its lack of progress in implementing effective measures against money laundering and terrorist financing. In response to this criticism, a new Anti-Money Laundering/Combating Terrorist Financing Law (AML/CTF Law) was passed in August 2023.

The AML/CTF Law

  • Defines money laundering as the conversion, transfer, or concealment of proceeds from criminal activities with the aim of concealing their illicit origin
  • Establishes stricter standards for entities that play a role in the financial system, such as banks and insurance companies

Obliged Entities

Under the new law, obligated entities are required to:

  • Assess the ultimate beneficial owners (UBOs) of their clients
    • A UBO is defined as a natural person who has final control over a client or transaction
    • This includes individuals who own or control 10% or more of a company’s capital or voting rights, or those who exercise control over the management of a legal person

Registry for UBOs

The AML/CTF Law also establishes a registry for UBOs, which will be implemented by the Legal Entities Registry Office.

Penalties

Failure to comply with the duties and obligations under the law can result in:

  • Fines ranging from 2 million to 10 million Mozambican meticals (MZN) for financial entities
  • Fines ranging from 1 million to 5 million MZN for non-financial entities
  • Ancillary penalties, including:
    • Revocation or suspension of authorizations
    • Inhibition from exercising a position
    • Impediment to carrying out business activities
    • Placement under enhanced supervision
    • Closure of activities
    • Publication of the condemnatory sentence at the expense of the offender

Challenges Remain

Despite these efforts, Mozambique still faces significant challenges in implementing effective measures against money laundering and terrorist financing. The country’s financial sector remains vulnerable to abuse, and the lack of progress in implementing effective measures is a major concern for the FATF and other international organizations.