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Zambia not immune to laundering, terrorist financing problems – FIC

ZAMBIA is not immune to money laundering and terrorist financing problems, says Financial Intelligence Centre (FIC) director compliance and prevention department Diphat Tembo.

During the dissemination of research findings of the Anti-Money Laundering/Countering Financing of Terrorism (AML/CFT) and Financial Action Task Force (FATF) processes, Tembo said there was no scope to deny that the country was not affected by such vices.

“We need to remain alert to the risk of money laundering and terrorist financing and develop preventive measures so that our civil society organisations are not used as conduits for criminality. We have an indispensable role to play to avoid the country from being blacklisted, which in the long run could negatively impact the operation of Non-Profit Organisations (NPOs) in Zambia,” he said.

Tembo said money laundering and the financing of terrorism were problems that should concern everyone.

He said they should not be problems for only the government, law enforcement agencies and the Financial Intelligence Centre to worry about. “Rather, the public sector, the business community, the private sector, the civil society and even ordinary citizens must play a role in combating these illegal activities. The effects of these vices can distort the economic fundamentals such as inflation, interest and exchange rates. Further, they can compromise the rule of law and the security of the nation,” he said.

Zambia is one of the countries that have assented to the Anti-Money Laundering (AML) and Financial Action Task Force (FATF)processes.

This means that laws and policies should conform to the requirements of the AML/FATF standards. Against this background, the Zambia Council for Social Development (ZCSD) conducted a study into the impact of implementing AML/FATF recommendations on civic space and find out awareness levels among NGOs in Zambia.

Tembo explained that a little over 30 years ago, in 1989, the Group of Seven (G7) met in Paris and agreed to create the Financial Action Task Force (FATF) to prevent the use of the banking system for the purpose of laundering money derived primarily from drug trafficking.

Tembo said following the fateful events of 2001, FATF expended its mandate to incorporate efforts to counter terrorist financing.

“Within six weeks of 9/11, eight new special recommendations on terrorist financing were produced – including special recommendation 8 on Non-Profits Organisations. The FATF which sets out the international standards known as the 40 recommendations is committed to monitoring effective implementation by member countries through the process referred to as mutual evaluation,” he said. “The rounds of evaluations of the FATF and its FATF-style regional bodies are a matter of great interest to states as the public ratings directly affect their relations with the international financial system,” he said.

Tembo said the creation of sham charities to channel money to terrorists, including the abuse of legitimate NPOs on the back of the donors and/or directors, had been a major concern for the FATF.

He said countries globally were responding to the FATF requirements differently.

Tembo said others had taken the easy path of adopting highly restrictive legislation for all NPOs, without a risk-based approach, under the guise of compliance with recommendation 8.

“For their part, banks have begun to discriminate NPOs from their client portfolios, refusing to open new accounts, hindering transactions with stringent documentation requirements, and even closing bank accounts abruptly and for no apparent reason,” he said.

Tembo said as states intensified anti-terrorism measures and regulations in response to FATF requirements, NPOs faced serious and growing obstacles in raising funds and implementing their programmes.

He said in most cases, their leaders did not link this new wave of regulations and financial restrictions with the commitments made by their governments to the FATF.

Tembo said Zambia underwent a mutual evaluation of its AML/CFT systems in 2018 and the mutual evaluation report was adopted by the Eastern and Southern Africa Anti-money Laundering Group (ESAAMLG) Council of Ministers in June 2019.

He said Zambia was found to be partially compliant with the recommendation 8 on NPOs. He took cognisant of the important role of civil society and the importance of ensuring that the implementation of FATF recommendation 8 should not disrupt or discourage legitimate activity, as well as not violate countries’ obligations under the charter of the United Nations and International Human Rights law.

“To this effect, changes being made to the NPO Act are not in any way shrinking the civil society space in Zambia but rather providing an enabling environment which allows for application of risk based approach to supervision or monitoring of NPOs,” said Tembo.

Meanwhile, NGOs registrar Pumulo Mundale Moyo said the government had taken advantage of the ongoing process to repeal and replace the NGO Act no. 16 of 2009 to comply with the FATF recommendation 8 regarding the protection of the NGO sector from abuse.

Moyo in a speech read for her by Chief Inspector of NGOs at Registrar for NGOs department at the MCDSS, Namatama Chinyama said the Ministry of Community Development and Social Services appointed a Technical Working Group (TWG) to facilitate the process of repeal and replacement of the NGO Act.

Moyo said the TWG was composed of representatives if NGOs and government institutions and has drafted the NGO Bill 2020 to replace the current Act.

“The Bill has defined a subset of NPOs which due to the nature of their activities or other characteristics may be a risk of being abused by people or organisations involved in terrorism or terrorist financing. Further, the Bill has provided for the role of government to undertake outreach activities to NPOs concerning terrorist financing issues for purposes of raising awareness and to protect the sector,” she said.

She said whilst it may be true that some jurisdictions may have abused the FATF requirement of recommendation 8 to stifle civil space for NPOs, the government acknowledges that while it was vital to protect NPOs from terrorist abuse, it was also important that the measures taken to protect them do not disrupt or discourage legitimate NGO activities and should not unduly or unintentionally restrict NGOs ability to access resources to carry out their legitimate activities.

“Rather such measures should promote transparency and greater confidence in the sector, across the donor community and with the general public that charitable funds and services are reaching their intended legitimate beneficiaries,” said Moyo.

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