Namibia’s Financial Sector Exposed to Money Laundering, Terrorist Financing, and Proliferation Financing Risks

Introduction

A recent sectoral risk assessment by Namibia Financial Institutions Supervisory Authority (NAMFISA) has revealed that the country’s financial sector is vulnerable to money laundering, terrorist financing, and proliferation financing risks. The assessment evaluated the inherent and residual risks of these crimes in nine sectors, highlighting the need for enhanced anti-money laundering and combating the financing of terrorism (AML/CFT) controls.

Assessment Findings

The assessment found that:

• Industries with the highest inherent risk ratings for money laundering are unit trust managers, investment managers, and stockbrokers.
• The industries with the lowest inherent risk ratings for terrorist financing are unlisted investment managers and special purpose vehicles, as well as friendly societies.
• Proliferation financing risks were highest in the long-term insurance sector.

Risk-Rating Tool

The assessment used a risk-rating tool to evaluate the money laundering, terrorist financing, and proliferation financing risks in each sector. The tool considered various factors, including:

• Type and category of clients
• Products and services offered
• Distribution channels
• Jurisdiction or geographic location of business operations

Key Stakeholders Impacted

The sectoral risk assessment is relevant to the following key stakeholders:

• Regulated entities in the assessed sectors, which must strengthen their AML/CFT controls to mitigate money laundering, terrorist financing, and proliferation financing risks.
• Commercial banks, which must take appropriate measures to manage these risks posed by their clients.
• Law enforcement agencies, which must prioritize crime prevention, detection, and investigation of proceeds or potential proceeds of unlawful activities.
• The executive, legislature, and judiciary, which must ensure that national laws, policies, and strategies are risk-sensitive and enable the country to effectively curb money laundering, terrorist financing, and proliferation financing.

Methodology

The assessment methodology involved:

• Sourcing data from authorized institutions and regulated institutions through a questionnaire
• Extracting data on management controls from on-site and off-site inspection reports produced by NAMFISA or the Financial Intelligence Centre (FIC)
• Analyzing the data using a risk-rating tool, which evaluated various factors including client information, products and services offered, distribution channels, and jurisdiction or geographic location of business operations
• Considering management controls such as customer due diligence, record keeping, reporting of suspicious transactions, and staff training and awareness

Conclusion

The sectoral risk assessment is a critical tool for identifying money laundering, terrorist financing, and proliferation financing risks in Namibia’s financial sector. It highlights the need for enhanced AML/CFT controls and effective supervision and regulation to mitigate these risks and protect the integrity of the financial system.