Zimbabwe is classified among a group of high risk countries that are under surveillance by the global money laundering and terrorist financing watchdog, the Financial Action Task Force (FATF), Business Times can report.
The classification contained in the FATF June report comes as Zimbabwe risks being isolated from the international financial system in the event that it fails to adhere to at least 40 recommendations made by French-based organisation.
Zimbabwe is a signatory to a number of FATF protocols on money laundering. Other countries have already complied.
Well-placed government and banking sources told Business Times this week that the country was battling to meet the conditions.
They said failure to meet the conditions would result in Zimbabwe being secluded from the international financial system.
The sources said failure to implement these recommendations would also pose a serious threat on the country’s cross border transactions which in some instances may be intercepted over suspicion of financing terrorism activities.
“Zimbabwe is under threat of being secluded from the international financial system if the 40 recommendations made by FATF are not met because some countries have already accomplished.
“The 40 recommendations have already been recognised, endorsed, or adopted by many international bodies, as many countries have made a political commitment to combat money laundering,” one source said.
One of the key demands by FATF is to make the Financial Intelligence Unit (FIU) a standalone body like what other countries have done.
Banks are of the argument that implementing FATF recommendations will include making the FIU a standalone body like what is done in other organisations. The FIU was established in 2004 in terms of section 3 of the Bank Use Promotion and Suppression of Money Laundering Act [Chapter 24:24] and exists as a Unit in the administrative establishment of the Reserve Bank of Zimbabwe but has its own governing statutes giving it a mandate distinct from that of the central bank.
FIU director Oliver Chiperesa said the assessment on countries is done in cycles.
“The current cycle is likely going to be in 2023 but due to Covid-19 this may stretch to 2024,” Chiperesa said.
RBZ governor, John Mangudya told Business Times: “We have made significant progress in dealing with the areas of weaknesses under the FATF requirements.”
Under FATF, even non-financial institutions are supposed to comply with the recommendations.
In October 2019, Zimbabwe made a high-level political commitment to work with the FATF and the Eastern and Southern Africa Anti-money Laundering Group (ESAAMLG) to strengthen the effectiveness of its Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) regime.
Since the completion of its mutual evaluation report (MER) in 2016, Zimbabwe has made progress on a number of its MER recommended actions to improve technical compliance and effectiveness, including establishing a national coordination and cooperation structure on AML/CFT issues, amending the AML/CFT legal framework to apply a risk-based approach to supervision of financial institutions, widening the scope of disseminating financial intelligence, and establishing an asset forfeiture unit within the National Prosecuting Authority.
According to the National Anti-Money Laundering and Combating Financing of Terrorism strategic plan 2020-2025, Zimbabwe has set four key priority areas.
It will have AML/CFT awareness and capacity building. This will require that the various agencies of the national taskforce specifically those that are of a supervisory nature to ensure improved understanding by all relevant stakeholders from designated institutions right up to the public in general on the Money Laundering and Proceeds of Crime Act expectations and requirements, regulatory and supervisory frameworks, guidance and procedures which are easy to understand.
Another strategic priority is pursuing parallel investigations which would make more frequent use of external experts (for example forensic accountants) their parallel financial investigations when the expertise is not available in-house, among others. Zimbabwe will operationalise the asset recovery fund as it intensifies the confiscation and forfeiture of criminal proceeds.
The Registry of Companies will extend the existing register to include beneficial ownership information of companies and other commercial partnerships.
The FATF is an inter-governmental organisation founded in 1989 on the initiative of the G7 to develop policies to combat money laundering.