Anti Money Laundering

Money launderers may also sneak cash into foreign countries to deposit, deposit cash in smaller increments to avoid arousing suspicion, or use illicit cash to buy other cash instruments. Launderers will sometimes invest the money, using dishonest brokers willing to ignore the rules in return for large commissions.^[1]

Why is money laundering illegal?

The objective of the criminalisation of money laundering is to take the profit out of crime. The rationale for the creation of the offence is that it is wrong for individuals and organisations to assist criminals to benefit from the proceeds of their criminal activity or to facilitate the commission of such crimes by providing financial services to them.

How is money laundered?

The processes are extensive. Generally speaking, money is laundered whenever a person or business deals in any way with another person’s benefit from crime. That can occur in a countless number of diverse ways.

Traditionally money laundering has been described as a process which takes place in three distinct stages:

• Placement, the stage at which criminally derived funds are introduced in the financial system.
• Layering, the substantive stage of the process in which the property is ‘washed’ and its ownership and source is disguised.
• Integration, the final stage at which the ‘laundered’ property is re-introduced into the legitimate economy.

This three staged definition of money laundering is highly simplistic. The reality is that the so called stages often overlap and in some cases, for example in cases of financial crimes, there is no requirement for the proceeds of crime to be ‘placed’.^[2]

AML in Zimbabwe

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, Zimbabwe’s financial system is risky.

“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.” 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 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.”^[3]

This is the reason authorities in Hungary have opened a money-laundering investigation after Drax International LLC that was two weeks old received a huge payment of US$2 million from Zimbabwe’s government. When the payments were referred to Interpol, the company took flight and opened a new branch in Dubai, from where it sent Zimbabwe a new invoice of nearly US$1 million – to be paid into an account in the African tax haven of Mauritius. The documents obtained from Interpol and Zimbabwean police which confirm that the transactions are being investigated as a possible “crime”.

Drax Consult SAGL registered the Hungary branch on February 20, 2020, stating in official documents that the company carries out activities including “business consulting, marketing, advertising and business management consulting for foreign companies trading in medical and cosmetic products.” Just two weeks later, on March 5, the new company’s bank account was credited with US$2 million, made as deposits of US$1 million each. The payments were a 10 percent deposit on a consignment of drugs and medical supplies on a contract worth US$20-million.

The huge deposits were the first transactions performed on the bank account, and officials immediately flagged them as suspicious before calling in Interpol. The international police organisation was not satisfied with the justification for the payments provided by Dedja, and has now launched a money laundering enquiry in conjunction with authorities in Hungary and Zimbabwe.

“Based on the huge amount of the transferred money, and that the money was sent from Zimbabwe to a Hungarian branch of a Swiss company, furthermore that there was no other transfer (to the account), it seems there is a well-founded suspicion that the money comes from a crime,” Interpol wrote to the ZRP.^[4]

References