Zim under EU financial crime spotlight

ZIMBABWE is among 12 countries put under the spotlight by the European Union because it has deficiencies under its Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) measures.

The EU wants a new system to tackle money laundering and financial crime and it is considering creating a new authority to police financial crime and monitor banks more strictly. According to a document authored by the commission obtained by NewsDay Business last week, Zimbabwe’s financial system is risky.

Financial Action Task Force (FATF ) is an intergovernmental organisation founded in 1989 as an initiative of the Group of Seven (seven of the largest economies in the world) to develop policies to combat money laundering.

“In October 2019, the FATF identified Zimbabwe as a jurisdiction having strategic AML/CFT deficiencies for which Zimbabwe has developed an action plan with the FATF. The Commission assessed the latest information received in this context from the FATF relating to these deficiencies and other relevant information,” reads part of the EU document.

The deficiencies identified by the FATF include “insufficient understanding of the key money laundering/terrorist financing risks among the relevant stakeholders and lack of implementation of the national AML/CFT policy based on the identified risks; and lack of implementation of risk-based supervision for financial institutions and Designated Non-Financial Business Professions (DNFBPs), including inadequate capacity building among the supervisory authority.”

“Lack of adequate risk mitigation measures among financial institutions and DNFBPs entailing the application of proportionate and dissuasive sanctions to breaches; shortcomings in the legal framework and mechanism to collect and maintain accurate and updated beneficial ownership information for legal persons and arrangements, and to ensure timely access by the competent authorities.”

It also noted “gaps in the framework and implementation of targeted financial sanctions related to terrorist financing and proliferation financing. On this basis, Zimbabwe should be considered as a country having strategic deficiencies in its AML/CFT regime under Article 9 of Directive (EU) 2015/849.”

Article 9 of Directive (EU) 2015/849 was implemented by the European Parliament and its council on May 20, 2015 to prevent the use of the financial system for purposes of money laundering or terrorist financing.

As a result of Zimbabwe being listed, banks and other financial institutions have to apply extra checks for transactions involving Zimbabwe and other countries on the list. The other countries are the Bahamas, Barbados, Botswana, Cambodia, Ghana, Jamaica, Mauritius, Mongolia, Myanmar/Burma, Nicaragua, and Panama.

The enhanced measures will lead to extra checks and monitoring of those transactions by banks and obliged entities in order to prevent, detect and disrupt suspicious transactions.

However, the regional bloc was quick to mention that these measures do not entail any type of sanctions, restrictions on trade relations or impediments to development aid though it noted scrutiny would also be given to financial transactions.

“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 high risk of money laundering or terrorist financing. 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 told NewsDay Business in an emailed response.

“The Fifth Anti-Money Laundering Directive clarifies the type of enhanced vigilance to be applied, which includes obtaining additional information on the customer and on the beneficial owner or obtaining the approval of senior management for establishing a business relationship.”

EU added: “The listing does not entail any type of sanctions, restrictions on trade relations or impediment to development aid but requires banks and obliged entities to apply enhanced vigilance measures on transactions involving these countries”.

EU noted that the listing comes as criminals and terrorists are not sitting back during the coronavirus pandemic.

“Europol (European Union Agency for Law Enforcement Co-operation) has provided a recent assessment of new threats posed by criminal groups trying to take advantage of the pandemic,” the EU said.

“The EU is committed to protecting the integrity of its financial system and preventing financial flows involving countries with strategic deficiencies in their anti-money laundering and countering terrorist financing regimes.”–newsday.co.zw

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