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EU BLACKLISTS SADC MEMBERS FOR DIRTY MONEY

15/11/2020 06:11:00 BY SABELO MAJOLA

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mfanukhona@times.co.sz

MBABANE - The European Commission (EC) is presently blacklisting countries that are not doing enough to combat money laundering.

So far, the commission has blacklisted quite a number of countries for having deficiencies in their anti-money laundering and counter-terrorism financing regimes.

The EC is one of the institutions of the European Union (EU). It enforces the EU law.

The listed countries include member states of the Southern African Development Community (SADC). These are Mauritius, Zimbabwe and Botswana. Other blacklisted African countries are Uganda and Ghana. They are now considered as high risk third countries.

The consequences of the blacklists are that banks and other financial institutions in the EU member states have to apply extra checks (enhanced customer due diligence requirements) for transactions involving high risk third countries identified on the list.

Customer due diligence corresponds to a series of checks and measures that a bank or an obliged entity has to use in case they have suspicions of a risk of money laundering or terrorist financing.

suspicious transactions

Enhanced due diligence measures include extra checks and monitoring of those transactions by banks and obliged entities in order to prevent, detect and disrupt suspicious transactions.

The EU’s Fifth Anti-Money Laundering Directive in the possession of the Times SUNDAY indicates that the commission will consider the following when listing the countries that are a threat to the union’s financial system –

Criminalisation of money laundering and terrorist financing.

Customer due diligence and record keeping requirements. Reporting of suspicious transactions. The availability and exchange of information on beneficial ownership of legal persons and legal arrangements.

The powers and procedures of competent authorities. Their practice in international cooperation, the existence of dissuasive, proportionate and effective sanctions.

In case a country is lax on the abovementioned requirements, the commission can put it on the list of high risk jurisdictions.

On May 7, 2020, the European Commission adopted a new delegated regulation in relation to third countries, which have strategic deficiencies in their AML/CFT (Anti-money laundering and counter-terrorist financing) regimes that pose significant threats to the financial system of the EU.

money laundering

Meanwhile, the European Union’s move to put Mauritius on a money laundering ‘blacklist’ has cast a cloud over its reputation as a domicile for local fund managers looking to invest in projects on the continent. Associated Press (AP) reported that this development has left local fund managers apprehensive about doing business in the island nation. Other countries that have been put on the blacklist are The Bahamas, Barbados, Cambodia, Jamaica, Mongolia, Myanmar, Nicaragua and Panama.

In a statement, the Mauritius Government pointed out that the EU did not speak to it about its concerns and that this move could have far-reaching implications for the economy.

“Placing Mauritius on the blacklist will cause irreversible damage to our reputation. This will undermine investor confidence, reduce cross-border investment flows and lead to a severe disruption of our banking system. As a result, further harm will be caused to our economy,” reads the statement from the Government of Mauritius.

Mauritius’s Ministry of Financial Services and Good Governance has since said it was working closely with the Financial Action Task Force (FATF) to address its concerns.

It said it remained confident that Mauritius would be removed from the blacklist, and very soon – possibly by the end of this year or February 2021 by the latest.

financial centre

It is reported that the concerns over the blacklisting are being taken seriously as Mauritius has ambitions of becoming an important financial centre. Its favourable tax regime and increasingly sophisticated financial sector has seen it grow from a tax haven into a hub for investors to distribute funds around the continent over the past few years.

Aside from the impact on Mauritius, the blacklisting also looms over South African fund managers who have set up offshore operations on the island. According to the AP, Jersey Finance’s survey of over 60 investors and fund managers operating in jurisdictions worldwide and with a connection to South African managers found that local funds were not shy when it came to setting up there.

Zakhele Lukhele, the Chairman of the Eswatini Bankers Association, said Eswatini was out of the sanction list. However, Lukhele pointed to the fact that there was a lot that needed to be done to close the gaps.

He disclosed that an evaluation would be undertaken by the Eastern and Southern Africa Anti-Money Laundering Group early next year.

He urged local banks and non-banking entities to present a good case for the country to avoid sanctioning. He appealed to customers to cooperate with financial institutions when undertaking the KYC (Know Your Customer) data updates so that the country avoids sanctions

Drawn for comment on Friday, Michael Motsa, EU’s Information Officer, said he was on leave and asked that he handle the issue this week.

Attempts to use the online media contact form for Eswatini Financial Intelligence Unit to get hold of the management were unsuccessful.

The unit, in its website, states that Eswatini is part of the Eastern and Southern African Anti-Money Laundering Group, a regional network that aims to prevent money laundering and combat terrorism.

According to Eswatini’s Review Report issued by the United Nations Office on Drugs and Crime (UNODC) in February 2020, the country has established a domestic regulatory and supervisory regime for banks and non-banking financial institutions.

It is stated in the report that the regime also covers money transmission service providers. The report states that the anti-money laundering framework includes requirements for customer and beneficial owner identification, with additional due diligence measures in the case of high-value transactions, recordkeeping and the reporting of suspicious transactions.

A national risk assessment was completed in 2017 and relevant guidance for accountable institutions was issued, the UNODC said. However, the UN agency mentioned in its report that challenges have been reported in implementation, given the recent adoption of the requirements.

enforcement agencies

MLFTPA provides for domestic coordination by FIU in the analysis and dissemination of suspicious transaction reports to law enforcement agencies and for information sharing by FIU at the international level (Section 91 of the Money Laundering and Financing of Terrorism (Prevention Act), 2011, further provides for international cooperation through mutual legal assistance.

With regard to domestic cooperation, the famous POCA (Prevention of Organised Crime Act) overrides bank secrecy restrictions for the purposes of cooperation and information-sharing.

The Act applies to all offences punishable by imprisonment for a period of one year or more, including offences against the laws relating to the prevention of corruption and money laundering. The UNODC states that Eswatini’s National Task Force on Anti-Money Laundering and Combating Financing of Terrorism (AML/CFT) coordinates inter-agency cooperation.