MINISTERIAL STATEMENT - Wednesday 12th March 2017 - BI-ANNUAL REPORT OF THE BANK USE PROMOTION AND SUPPRESSION OF MONEY LAUNDERING UNIT

From National Assembly Debates for Wednesday 12th April 2017

MINISTERIAL STATEMENT

TABLING OF THE BI-ANNUAL REPORT OF THE BANK USE PROMOTION AND SUPPRESSION OF MONEY LAUNDERING UNIT FOR THE PERIOD OF 1ST JULY TO 31ST DECEMBER, 2016

THE MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. CHINAMASA):

Madam Speaker, in terms of Section 8 (2) of the Bank Use Promotion Act [Chapter 24:24], the Minister responsible for Finance and Economic Development has a duty to, bi-annually, lay before Parliament a report on the activities of the Bank Use Promotion and Suppression of Money Laundering Unit of the Reserve Bank of Zimbabwe.  It is on that basis that I rise and lay before this august House this report which covers the period commencing from 1 July, 2016 extending to the 31st of December, 2016.

Madam Speaker, during the period under review, Zimbabwe successfully hosted, in Victoria Falls, the Eastern and Southern Africa Anti Money Laundering Group Council of Ministers, Task Force of the Senior Officials, the World Bank, the Financial Action Task Force, the Sub-Saharan Africa Public-Private Sector Dialogue on Anti-Money Laundering and Combating the Financing of Terrorism and other cooperating countries including the United States of America.  The meeting was attended by close to 400 delegates.  The country underwent its first National Risk Assessment within the context of Anti-Money Laundering and the findings were captured in the Zimbabwe’s Mutual Evaluation Report which report was adopted by the Anti-Money Laundering Group and the Financial Action Task Force in the October, 2016.

Madam Speaker, for clarity, the Financial Action Task Force I have just referred to, is an inter-Governmental body currently comprising 37 member States established in 1989, whose objective is to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity – [HON. MEMBERS:  Inaudible interjections.] –

THE TEMPORARY SPEAKER:  Order Hon. Members.  Your voices are too high, I cannot even hear the Minister.

THE MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. CHINAMASA):  To the integrity of the international financial system.  The Task Force is therefore, a “policy-making body” which works to generate the necessary framework to bring about national legislative and regulatory reforms in these areas.  Madam Speaker, crucially, the report on Zimbabwe contained recommendations on steps that need to be taken and legislative amendments that need to be effected by the country in order to mitigate or neutralise identified risks in combating financial terrorism.  For the information and benefit of this august House, the Financial Action Task Force, having assessed Zimbabwe’s laws and Institutional arrangements, determined that our level of compliance with Anti-Money Laundering “Best Practice” was as follows:

a) They assessed and said that we were compliant with 11 recommendations;

b) We were largely compliant with 8 recommendations;

c) Partially compliant with 15 recommendations; and

d) We were found not compliant with 6 recommendations.

While some progress has been noted to date, it stands clear that there remains space for considerable improvement, which improvement we are undoubtedly capable of achieving.

On the local front, Madam Speaker, most of banks operating in Zimbabwe are carrying out or have carried out their respective institutional or internal money laundering and terrorist financing risk assessment at the instance of the Financial Intelligence Unit, which is resident within the Reserve Bank of Zimbabwe (RBZ).  

This has resulted in improved capacity to identify suspicious transactions which saw the Financial Intelligence Unit of the (RBZ) receiving a total of 474 Suspicious Transaction Reports.  This represented 2.5% increase in number of reported cases as compared to the same period in 2015.

          Over this period, 80% of the Suspicious Transaction Reports were lodged by the banks, with money transfer agencies and an insurance company accounting for the remaining 20%.  There is therefore, significance progress being registered in monitoring suspicious transactions and in inter-institutional cooperation within our financial system.

DESIGNATED NON-FINANCIAL BUSINESSES, PROFESSIONS AND FINANCIAL INSTISTUTIONS

          With respect to Designated Non-Financial Businesses, Professions and Financial Institutions , the real estate sector, casinos, legal profession, precious stone and precious metal industry, among other Designated Non-Financial Businesses and Professions, such as Chartered Accountants, Public Accountants and other service providers, not otherwise required to be registered under any law, have been lagging behind in implementing the Anti-Money Laundering and Combating Financial Terrorism safeguards.  It is particularly apparent when it is noted that not a single report was made by a participant of these sectors over the period concerned.

          Madam Speaker, the concern by the Financial Action Taskforce is that sometimes money laundering is laundered through trust accounts of professional bodies.  We are obliged and directed that we should make amendments to our laws to make sure that these are more transparent than they have been in the past.  This is the case because the country’s laws do not currently require Anti-Money Laundering and Combating Financing Terrorism supervisory institutions (or ‘Competent Authorities’), financial institutions and Designated Non-Financial Businesses and Professions I have mentioned, to specifically adopt and implement a risk-based approach to Anti-Money Laundering and Combating Financing Terrorism measures taking into account the size of their businesses.

          It therefore goes without saying, that these sectors present a high money laundering risk to the financial system of Zimbabwe.  There is therefore the need, to ensure that these sectors are in full compliance with the aforementioned requirements on Anti-Money Laundering, which will undoubtedly include legislative amendments and training programmes in order to improve the members of that sector’s capacity to identify, assess and appreciate their own Money Laundering and Terrorism Financing risk, develop internal control procedures and processes on a risk-bases, taking into account the size of their business as well as monitor implementation.  They will be better positioned to thereafter report any suspicious transactions.

NON-PROFIT ORGANISATIONS (NPOs)

          Madam Speaker, with respect to Non-Profit Organisations or Private Voluntary Organisations, the legal regulatory framework for registration and licencing as well as monitoring of the Non-Profit Organisations sector needs to be enhanced by strengthening in the licencing and registration requirements of Non-Profit Organisations, which in our case are registered under the Private Voluntary Organisation Act [Chapter 15:05], this will be to facilitate monitoring of the sector so as to deal with terrorism financing vulnerabilities.  There is also need for amendment of the law to allow beneficiary information to be obtained as well as introduce proportionate, dissuasive and effective sanctions against Non-Profit Organisations found to be aligned to any terrorist activity.

CUSTOMER DUE DILIGENCE (CDD)

          The Money Laundering and Proceeds of Crime Act does not impose a direct obligation for financial institutions to establish and verify the identity of a customer who is a beneficial owner except for transaction sizes prescribed under Section 15 of the Act.  This is not consistent with the requirements of Recommendation 10 of the Financial Action Task Force standards.

          It is for this reason I shall pursue the strengthening of the Money Laundering and Proceeds of Crime Act by an amendment inserting a specific requirement for financial institutions to put in place risk-based systems and controls that would determine the circumstances under which a customer may utilise a business relationship or carry out a transaction prior to verification of their identity.

          These deficiencies extend to all types of Designated non-Financial Businesses and Professions as I alluded to earlier, which informs the need for intervention.

CORRESPONDENT BANKING

          Lastly, Madam Speaker, it is necessary that amendments to the Money Laundering and Proceeds of Crime Act be effected to address the problem of de-risking arising from the country’s failure to satisfy the requirements of correspondent banks, particularly with respect to customer due diligence obligations.

          Madam Speaker, in the context, de-risking refers to a practice in which financial institutions take deliberate steps to minimise their exposure to risk and thereby avoid financial loss.  This tends to include termination of relationships with a specified category of customers considered “high risk”, and also termination of relationships between correspondent banks and respondent institutions in jurisdictions which are considered ‘high risk’.

          There is therefore need to significantly improve the manner with which due diligence is carried out in order for our local institutions to successfully weed out high risk customers and thereby reduce the risk, by extension, associated with local correspondent institutions.  This process of due diligence will aid in combating money laundering within our financial system.

          Madam Speaker, I now submit, to this august House the Report of the Bank Use Promotion and Suppression of Money Laundering Unit under the Reserve Bank of Zimbabwe for the period 1st to 31st July, 2016.  I thank you.

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