Understanding Anti-Money Laundering (AML) and Compliance: A Zimbabwean Perspective

FUNGAI CHIMWAMUROMBE AND THEOPHILUS MUBEMI

Anti-Money Laundering (AML) is a critical framework designed to prevent and combat the illegal act of disguising the origins of money obtained through illicit means. In Zimbabwe, as in many other jurisdictions, AML is an essential component of financial and legal systems aimed at safeguarding the economy from criminal activities. This article explores the fundamental pillars of AML and the compliance requirements within the Zimbabwean context.

Pillar 1: The Legal and Regulatory Framework

Zimbabwe’s AML legal and regulatory framework is primarily governed by the Money Laundering and Proceeds of Crime Act (MLPCA) [Chapter 9:24], alongside the Banking Act [Chapter 24:20] and the Reserve Bank of Zimbabwe (RBZ) guidelines. The MLPCA establishes the legal basis for AML measures, defining money laundering offenses, setting out the responsibilities of financial institutions, and mandating customer due diligence (CDD).

The key components of Zimbabwe’s AML legal framework include the defining of offenses that caters for the clear specification of activities and conduct that resultingly constitute money laundering and associated crimes. The establishment of obligations to which are meant to mandate financial institutions in the implementation of robust AML policies and procedures. Lastly, there is also the reporting Requirements to which engineered to enable and require institutions to report suspicious transactions to the Financial Intelligence Unit (FIU) so as to curtail crimes of that nature.

Pillar 2: Customer Due Diligence (CDD)

Customer Due Diligence (CDD) is a cornerstone of AML compliance, requiring financial institutions to identify and verify the identity of their customers. In Zimbabwe, CDD involves several critical steps to which primarily includes Know Your Customer (KYC) which dictates that institutions must mandatorily collect and verify customer information, including identification documents and proof of address. Risk Assessment also then follows as an essential step which works towards the evaluation of risk level associated with each customer based on factors such as the nature of the business, geographic location, and transaction patterns to mention but a few. In addition to the above, CDD also then requires an ongoing monitoring under which any institution is expected to continuously and meticulously monitor transactions to detect and report any suspicious activities.

It therefore becomes clear in the premise that, CDD measures are designed in a way to ensure that financial institutions have a clear understanding of their customers, enabling them to identify and mitigate risks associated with money laundering and terrorist financing.

Pillar 3: Record Keeping and Reporting

Effective record keeping and reporting also stand out to be essential for AML compliance. As such, Zimbabwean regulations require that all financial institutions (registered) maintain comprehensive records of all transactions and customer information for a stipulated period of time, typically five years. Such records thus, include transaction Records detailing logs of all transactions, including the date, time, amount, and parties involved. Customer Information that is all available documentation verifying the identity and risk assessment of every customer.

In addition to the above, it is therefore pointing worthy to note that financial institutions must also report suspicious activities to the FIU. All suspicious transaction reports (STRs) are therefore crucial for identification and conduct of investigations on potential money laundering activities.

Pillar 4: Internal Controls and Risk Management

Robust internal controls and risk management practices are vital for an effective AML regime. In Zimbabwe, financial institutions are required to establish comprehensive AML programs that include policies and procedures centred on developing and implementing detailed AML policies and procedures tailored to the institution’s specific risks.  The regular conducting of training programs to ensure that employees are well-trained in AML practices and aware of their responsibilities. Further to the above, there also is the carrying out of independent audits for purposes of assessment of the effectiveness of AML controls and identify areas for improvement.

Pillar 5: International Cooperation

Money laundering is a transnational crime, requiring international cooperation to effectively combat it. Zimbabwe collaborates with international organizations such as the Financial Action Task Force (FATF) and the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) to align its AML practices with global standards. Such cooperation therefore thrives on Information Sharing, that is the exchanging of information with international counterparts to allow for tracking and investigations especially on cross-border money laundering activities. The cooperation also calls for provision of technical assistance in the form of support and guidance from international bodies to enhance the country’s AML framework. Lastly, the cooperation also requires what might be phrased as Mutual Legal Assistance to which endeavours collaboration with other jurisdictions in the prosecution and adjudication of money laundering cases. As a highlight from the above, it clear that international cooperation in any way, strengthens Zimbabwe’s capacity to combat money laundering and aligns its AML regime with global best practices.

Conclusion

AML and compliance are fundamental to the stability and integrity of Zimbabwe’s financial system. By adhering to the pillars of a robust legal and regulatory framework, comprehensive customer due diligence, meticulous record keeping and reporting, effective internal controls, and international cooperation, Zimbabwe can effectively combat money laundering and protect its economy from illicit activities. Financial institutions, regulators, and law enforcement agencies must work together to ensure that AML measures are continuously strengthened and effectively implemented.

Fungai Chimwamurombe is a registered legal practitioner and Senior Partner at Zenas Legal Practice and can be contacted for feedback at fungai@ zenaslegalpractice.com and WhatsApp 0772 997 889.

Theophilus Mubemi is a registered legal Practitioner and Junior Lawyer at Chimwamurombe Legal  Practice and can be contacted for feedback at theophilus@zenaslegalpractice.com. Whatsapp +263 71 793 6310