Tackling Money Laundering in East and Southern Africa
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TACKLING MONEY LAUNDERING IN EAST AND SOUTHERN AFRICA AN OVERVIEW OF CAPACITY VOLUME ONE Edited by CHARLES GOREDEMA ISS MONOGRAPH SERIES • NO 107, OCTOBER 2004 ii Tackling money laundering in East and Southern Africa CONTENTS ABBREVIATIONS AND ACRONYMS iv ACKNOWLEDGEMENTS vi ABOUT THE AUTHORS vii EXECUTIVE SUMMARY ix CHAPTER 1 1 Overview CHAPTER 2 Botswana’s legislative capacity to curb money laundering 25 CHAPTER 3 The control of money laundering and terrorist funding in Kenya 38 CHAPTER 4 The capacity of financial institutions and the business sector in Lesotho to detect and control money laundering 76 CHAPTER 5 An evaluation of infrastructure to detect and control money laundering and terrorist funding in Malawi 100 iv Tackling money laundering in East and Southern Africa ABBREVIATIONS AND ACRONYMS CHAPTER 1: OVERVIEW CEO Chief Executive Officer DRC Democratic Republic of the Congo FATF Financial Action Task Force on Money Laundering ISS Institute for Security Studies LHDA Lesotho Highlands Development Authority SADC Southern African Devlopment Community SSC Social Security Commission TNC Transnational corportion UN United Nations CHAPTER 2: BOTSWANA BoB Bank of Botswana DCEC Directorate on Corruption and Economic Crime DCEA Directorate on Corruption and Economic Crime Act FIA Financial Intelligence Agency MACMA Mutual Assistance in Criminal Matters Act PSCA Proceeds of Serious Crime Act CHAPTER 3: KENYA CBK Central Bank of Kenya IDCM Interministerial Drug Co-ordinating Committee KACA Kenya Anti-Corruption Authority UN United Nations US United States UNDCP United Nations Drug Control Programme CHAPTER 4: LESOTHO FIU Financial Intelligence Unit LHDA Lesotho Highlands Development Authority LHWP Lesotho Highlands Water Project LRA Lesotho Revenue Authority UN United Nations Acronyms and abbreviations v CHAPTER 5: MALAWI FICA Financial Intelligence Centre Act SADC Southern African Development Community SARPCCO Southern African Regional Police Chiefs Co- ordinating Organisation SGS Society Generale Desuiveillance UN United Nations CURRENCIES ZAR South African Rand Ksh Kenya Shilling Tsh Tanzania Shilling Ush Uganda Shilling BP Botswana Pula MWK Malawi Kwacha EUR Euro LSL Lesotho Loti MZM Mozambique Metical US$ United States Dollar Z$ Zimbabwe Dollar C$ Canadian Dollar N$ Namibian Dollar vi Tackling money laundering in East and Southern Africa ACKNOWLEDGEMENTS As an applied policy research institute that strives to conceptualise, inform and enhance the security debate in Africa, the Institute for Security Studies (ISS) is committed to undertake independent research and analysis, facilitate and support the formulation of policy, raise the awareness of the public and of decision makers, and monitor trends and policy implementation. The ISS has been fortunate to secure the generous assistance of the Royal Danish government in this endeavour. The ISS enlisted the professional research services of the eminent researchers who contributed to the two volumes that comprise this monograph, namely Ray Goba, Peter Edopu, Jai Banda, Kamogediso Mokongwa, Nomzi Gwintsa, George Kegoro, Bothwell Fundira and Eugene Mniwasa. In conducting the studies used in compiling this monograph, each researcher interacted with persons, agencies and institutions too numerous to list. The ISS expresses its gratitude to the Royal Danish government, to all the researchers who contributed material to the monograph and to all persons, agencies and institutions that provided information to them. The ISS also thanks Fiona Adams for language editing and layout. Executive summary vii ABOUT THE AUTHORS Charles Goredema is a Senior Research Fellow with the Institute for Security Studies (ISS) in Cape Town where he specialises in research into money laundering, organised crime and corruption in Southern Africa. He holds qualifications in law from the Universities of Zimbabwe and London and practised as a prosecutor in the Justice Ministry in Zimbabwe in 1983 before embarking on an academic career in 1987. He joined the ISS in August 2000 after teaching criminal justice law at the Universities of Zimbabwe, Cape Town and the Western Cape. He has published extensively in the spheres of criminal justice and human rights law. Kamogediso Mokongwa is the Managing Partner at Mokongwa Lekoba Attorneys, a law firm in Gaborone, Botswana. She holds an LL.B from the University of Botswana and a Masters degree in legislative drafting from the University of the West Indies. George Kegoro is the secretary of the Law Society of Kenya and an advocate of the High Court of Kenya. He holds an LL.B from the University of Nairobi. Following his graduation in 1992, he joined the public service in Kenya in the Attorney General’s office, where he worked as a research officer in the Kenya Law Reform Commission before joining the Law Society of Kenya as Deputy Secretary in 1995. He has been involved in anti-corruption work as part of the statutory mandate that the Law Society of Kenya has to advise the government and the public in Kenya on all matters relating to, or ancillary to, the law and the administration of justice. He has also consulted for Transparency International Kenya on wide range of issues relating to the fight against corruption. Mokhibo Nomzi Gwintsa is a Researcher in the Organised Crime and Corruption Programme of the ISS in Cape Town, focusing on money laundering research. She holds an LL.B from the National University of Lesotho. She was involved for a number of years in research on women and on children’s rights and has undertaken consultancy work on media law and on money laundering. viii Tackling money laundering in East and Southern Africa Jai Banda is a lawyer in private commercial practice with Sacranie, Gow and Company, one of the longest-established law firms in Blantyre, Malawi. Born in Zimbabwe of Malawian parents, he read law at the Universities of Lesotho and Zimbabwe. Following graduation he practised briefly with a law firm specialising in commercial law in Harare before taking up his present appointment. He is a director of several companies in Malawi, including the major electricity supplier, Eskom. He has contributed to ISS publications on organised crime legislation in Southern Africa and is knowledgeable on the incidence of economic crime in Malawi. EXECUTIVE SUMMARY In the first of this two-volume monograph, Charles Goredema, in a broad overview, presents an outline of factors impacting on the capacity of key sectors of the relevant infrastructure to detect the laundering of tainted money and other illicit proceeds. To some extent the overview assesses their strengths and/or weaknesses against the backdrop of real challenges identified from sub-regional case studies. In Botswana money-laundering control appears to be shared by the police, the Bank of Botswana and the Directorate for Economic Crime and Corruption. Anti- money laundering law is of recent origin in the country. In Chapter 2 of this volume, Kamogediso Mokongwa reviews its enforcement and comments on the perceived capacity of the relevant institutions. In his contribution on the control of money laundering in Kenya in Chapter 3, George Kegoro observes that this will require concerted and co-ordinated action at two levels. At the first level, measures are required to detect and punish economic crime, from which illicit money is derived. The principal sources of proceeds of crime—which include corruption, drug trafficking and violent crime— were identified in an earlier study. Measures to control offences related to these activities will augment whatever control mechanisms are introduced against money laundering in Kenya. Also examined are the measures required at the second level, to address the problem of money laundering directly, as an independent and logical result of economic crime. In recent years, Lesotho has come under the international spotlight over a variety of criminal and civil cases arising from the corruption and bribery of a top official by a number of international companies. Some major international banks were used to facilitate the laundering of the proceeds. The revelations brought into question the integrity of these institutions and had a potentially damaging effect on their reputation. Lesotho has now been placed in a position where it has to keep up the momentum to portray a genuine and sustained commitment to fight corruption. This requires a commitment to put in place institutional mechanisms to fight not only corruption, but also money laundering. Nomzi Gwintsa analyses x Tackling money laundering in East and Southern Africa the prevailing legislative and institutional environment in Lesotho in Chapter 4 of this volume and assesses the country’s capacity. Criminal entrepreneurs are continually looking for new routes for laundering the proceeds of crime. Economies like that of Malawi, with emerging financial centres but inadequate controls, are particularly vulnerable. The need has long been acknowledged for money laundering in Malawi to be fought by establishing a comprehensive anti-money laundering regime, with legal and complementary regulatory tools. Malawi does not yet have dedicated anti-money laundering laws. At the time of writing, a Bill was under consideration. In anticipation of its adoption, Chapter 5, written by Jai Banda, evaluates the potential of existing infrastructure in Malawi to implement laws against money laundering. In the second volume of this monograph, Ray Goba examines the capacity of the financial and commercial services sectors in Namibia to detect, prevent or assist in the prosecution of money laundering crimes. In Chapter 1 of that volume he gives an extensive coverage of the situation in Namibia, as experienced through recent cases. Tanzania does not have anti-money laundering laws. In Chapter 2 of the second volume, Eugene Mniwasa examines the measures adopted to address the problem of money laundering and the financing of terrorism in Tanzania. In the face of formidable challenges, all sectors in Uganda that are charged with detecting activities predicate to money laundering are engaged in efforts to combat money laundering itself, as well. The lack of laws that specifically deal with money laundering continues to be an impediment.