Money Laundering Paper


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Money Laundering Paper , Advocate Jeremy lewis

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Money Laundering Paper

  1. 1. PROSECUTING THE ICT INDUSTRY: MONEY LAUNDERING AND PROCEEDS OF CRIME ACT (“POCA”) 1. Purpose of POCA. Why bother the CSZ & ICT industry ? 2. Who/what are now targeted ? Financial Institutions & DNFBPs - Duties of -STRs 3. What is prohibited ? Transactions & Wire Transfers 4. How ? Instrumentality 5. Penalties - Powers of NPA - Criminal + Civil liabilities - Defences 6. Powers of Ministers + RBZ 7. What should CSZ do now ?
  2. 2. FI ‗s + DNFBP‘s , called “dodgies”, are subjected to AML/CFT regulation because their services render them vulnerable to abuse by criminals for “dodgy transactions ” enabling ML or TF purposes
  3. 3. ― FI ‖  ―‖ means any  Section 2 person who conducts as a business any of the following for or on behalf of a customer—  (a) acceptance of deposits and repayable funds from the public, including private banking  (b) lending, consumer credit, mortgage credit, factoring ,f inancing of commercial transactions  (c) financial leasing  (d) transfer of money or value  (e) managing means of payment, credit and debit cards, travellers‘ cheques, money orders , bankers‘ drafts, and electronic money;  (f) issuing financial guarantees and commitments;
  4. 4. g)Trading in money market instruments forex  money transfer agencies   bureaux de change. interest rate and index instruments transferable securities commodity futures trading participation in securities
  5. 5. Banks Building Societies RBZ. Infrastructure Development Bank AFC POTRAZ Asset managers. Moneylenders Collective Investment Schemes POSB Any person providing any financial service declared to be a financial service
  6. 6. Designated Non-Financial Business or Professions • • • • casino licensee, lottery licensees ―gaming operator‖ estate agent precious stones dealer precious metals dealer • any person engaged in mining or exportation of, or dealing in •  Legal Practitioners  Chartered Secretaries  Public Accountants and Auditors  Chartered Accountants Estate Administrators platinum
  7. 7. who do :- (j) safekeeping & administration on behalf of other persons; of cash or liquid securities (k) investing, administering of money on behalf of other persons; (l) underwriting ,placement of life insurance and other investmentrelated insurance, (m) currency changing; (n) the provision— A. or cession of a life insurance policy or the provision of reinsurance B. of investment-related insurance services; or C. of insurance underwriters or brokers;
  8. 8. WHAT IS MONEY LAUNDERING?  variously defined as the process of – ► concealing illicit gains from criminal activity; ► cleaning-up dirty money; ► taking the proceeds of criminal activity and making them appear legal;  Criminals want their illegal funds laundered because they can then move their money through society freely, without fear that the funds will be traced to their criminal deeds.  laundering prevents the funds from being confiscated by the police…
  9. 9. Sect 8 Money laundering offences  (1) Any person who converts or transfers property— (a) knowing, believing or crime; and suspecting that it is the proceeds of (b) for the purpose of concealing or disguising the illicit origin of such property, or of assisting any person who is involved in the commission of a serious offence , to evade the legal consequences of his or her acts or omission;  (2) ..who conceals or disguises the true nature, source, location, disposition, movement or ownership of or rights with respect to property, knowing or suspecting that such property is the proceeds of crime…  (4) Participation in, association with or conspiracy to commit, an attempt to commit, and aiding, abetting, facilitating and counselling the commission of any of the offences referred to in subsections (1), (2) and (3)  commits an offence.
  10. 10. Section 8 penalties Money laundering offences Fine  Prison $5k 25 or 2x value of ppty years  – both
  11. 11. 9 Terrorist financing offences  (1) Any person who by any means, directly or indirectly,  provides or collects funds, or attempts to do so, with the intention that they should be used or in the knowledge that they are to be used in whole or in part—  (a) in order to carry out a terrorist act; or  (b)    by a terrorist to facilitate that person’s activities related to terrorist acts or membership in a terrorist organization; or  (c) by a terrorist organisation;  commits an offence.   (3) It shall also be an offence to— (a) participate as an accomplice in an offence within the meaning of subsection (1);  (2) An offence is committed— (a) even if the terrorist act there referred to does not occur or is not attempted; and (b) even if the funds were not actually used to commit or attempt the terrorist act there referred to; and (c) regardless of the State or territory in which the terrorist act is intended or does occur.
  12. 12. Section 9 penalties Terrorist financing offences Fine $ 5 k or 2x value of ppty Prison 35 years  – both
  13. 13.  Since 1989  set 40 Recommendations which all countries (whether FATF members or not) are expected to implement for combating ML, TF and Proliferation.  who are either members of the FATF itself or members of FSRBs. 180 countries FSRBs are associate members of the FATF. include:  Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG)  of which Zimbabwe is a member;
  14. 14. ― Grey List ― of 23 countries committed to the FATF standard, but have not yet implemented it. addressing AML/CFT deficiencies are…. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Algeria Angola Antigua and Barbuda Argentina Bangladesh Brunei Darussalam Cambodia Kyrgyzstan Mongolia Morocco 11. 12. 13. 14. 15. 16. 17. 18. 19. Namibia Nepal Nicaragua Sudan Tajikistan Trinidad and Tobago Turkmenistan Venezuela Zimbabwe
  15. 15. The role of FIU established in 2004 within RBZ  receive STRs from “dodgies”, analyze the data and pass on financial intelligence on suspected ML, TF or other crime to law-enforcement agencies.  oversee AML/CFT compliance by “dodgies” and their reporting institutions’ supervisory bodies.  coordinate formulation and implementation of AML/CFT policies at national level and act as the national contact point for AML/CFT coordination and cooperation with relevant external organizations such as FATF, ESAAMLG and other FIUs.  under POCA “competent supervisory authorities” ie CSZ are required to co-operate with the FIU to ensure compliance by the respective institutions or and/or  levy persons whom they regulate supervise. monetary and administrative penalties against “dodgies” and their competent supervisory authorities non-compliant CSZ. / uncooperative
  16. 16. Financial Institutions & DNFBPs - Duties of – PENALTY us$ 700 or prison for 3 years or both   Customer identification and verification requirements: Sections 15-23 Cross- border correspondent relationships  - if unable to validate, immediate report to FIU  Record-keeping requirements: kept for 5 years after business relationship ended Section 24  Putting in place internal programmes to combat ML and TF: Section 25 (d) policies and procedures to prevent the misuse of technological developments including those related to electronic means of storing and transferring funds or value; Compliance officer shall be designated at management level and  Requirements for ongoing due diligence & monitoring of special transactions: Section 26
  17. 17. What is prohibited ? STR‘s red flags for IT Agents Employees & Consultants of ―dodgies‖  Neither the FATF Standards, nor POCA define what a “suspicious transaction” is.  Examples of “red flag indicators” that should commonly raise suspicion of possible ML/TF include:► Moving funds to and from a “dodgy” employer’s Client account without any underlying legal transaction backed up with instructions to/provision of services by the “dodgie’s” o Eg funds being deposited into the “dodgie” client account, from which the funds are subsequently transferred to 3rd parties, with no apparent underlying transaction/instruction. ► Unexplained aborted transactions / instructions o IT should be wary of clients who, after depositing funds with the “dodgie” for a specified purpose, make an unexplained u-turn and ask the funds to be paid back to the client or 3rd parties, without rational explanation for the u-turn. o In such cases, the “client” simply used their “dodgie” client account to place dirty money in the financial system and clean it up. Cash purchases of high value assets e.g. real estate, in circumstances where the amount of funds is inconsistent with the client’s known or apparent legitimate sources of income.  In Zimbabwe, where mortgage finance is difficult, cash purchases of immovable property are common and, very often the legal practitioner, accountant and estate agent involved never carry out client due diligence to ascertain who their client really is and what the source of funds is. They want their fees + their Commissions
  18. 18. Wire Transfers Section 13  ― any transaction exceeding us1000  carried out on behalf of an originator through a financial institution Section 15(c) (including an institution that originates the wire transfer and an intermediary institution that participates in completion of the transfer) by electronic means with a view to making an amount of money available to a beneficiary person at another financial institution.
  19. 19. OBLIGATIONS REGARDING Wire Transfers Verification of identity of originator; Obtain or maintain the account number or unique reference number of originator; Verification of the originators address, place of birth and national registration; Include the above information in records and also in the message accompany transfer. ??? ECOCASH MPESA ??? ?? ZIMSWITCH ? HOMELINK
  20. 20. shell banks Section 14  (1) No FI shall establish or maintain any anonymous account, or an account under fictitious names.  (2) No shell bank may be established or permitted to operate in or through the territory of Zimbabwe.  (3) No person shall enter into or continue business relations with a shell bank or a respondent FI in a foreign country that permits any of its accounts to be used by a shell bank  (4) No DNFBP shall effect or facilitate a transaction where any director, principal, officer, partner, professional, agent or ―dpoppae‖ of the business or profession knows or has reasonable grounds to suspect that a party to the transaction is acting anonymously or under a name that is not his or her own, unless the dpoppae concerned in the transaction is satisfied as to the true identity of the party and that there are legitimate reasons for the party so to act. employee DNFBP  (5) Where a has effected or facilitated a transaction in which a party is acting anonymously or under a name that is not his or her own, the dpoppae concerned in the transaction shall, on behalf of the business or profession of which he or she is the dpoppae, record its reasons for doing so and shall keep the record for at least 5 years after the completion of the transaction. by gross negligence— imprisonment for 10 years, or both .  (6) Any person who intentionally or
  21. 21. Penalties - Powers of NPA Criminal 1. interdicts applicable for twelve (12) months unless renewed before expiry; 2. property seizure orders where there is likelihood of dissipation or alienation of property; 3. confiscation orders after conviction, or before conviction when accused absconds or dies; 4. benefit recovery orders to recover to the State all proceeds of crime; 5. civil forfeiture order where the property is tainted/terrorist property or used as an instrumentality for such purposes. 6. Property freezing orders to preserve tainted, terrorist property or property used as an instrumentality for such purposes 7. Monitoring order for information where a defendant has carried out or is carrying out suspicious transactions 8. Customer Information Order where information of a certain customer is required from financial institution 9. Production order where information concerning nature, identity, ownership and location and appurtenant documents will be required to enable transfer and conveyancing  Compensation order made against NPA by a court as compensation of defendant for property previously under confiscation, property, benefit recovery order etc where it has been subsequently proven that the defendant was not guilty in a criminal trial
  22. 22. Powers of Director of FIU liabilities Sects 4(1),(6) (8) , and Civil 5 and 6  may issue Directive(s) for the best administration of the objectives of POCA, providing for civil penalties , upon application to High Court/Administrative Court/other superior courts be confirmed, varied ,or set aside. – directing :  certain individuals shall no longer be allowed to be employed entirely or in certain institutions, professions or capacities;  revocation and cancellation of the named individual or institution; licenses ,registration, permits etc of sanctions against errant individuals or persons. Fine not exceeding US$ 5OO per day of default of compliance  how adequate / actionable /legal are the means of enforcement?  ? Declaration of Rights of the new Zimbabwe Constitution
  23. 23. What should CSZ do now ? IT is in control  Training Members and non-members  Creating awareness of global provisions of ML laws ,  or face designation by the Minister as a DNFPB  - like the Law Society already is  – claiming client privilege as a ―defence‖ for non compliance with STR‘s  Applied globally - IF RBZ & FIU DO THEIR WORK  Therefor SELF –REGULATE ? To create good e-government practices ?
  24. 24. AFRICAN PROVERB If you want to go fast go alone If you want to go far go together
  25. 25. ICT Policy ?  Legislation  Regs to be drafted Draft ICT Act ?  IMPLEMENTATION  By CSZ ?  STRATEGY DECLARATION e – Government ZIMBABWE ?
  26. 26. Every tech religion must have a high priest
  27. 27. Lawyers lost their clout ? Law breakers now in control ?
  28. 28. Law makers playing catch-up Legal practitioners in front
  29. 29. Law enforcers 2 steps behind
  30. 30. Law publishers going nowhere w/o ICT policy draft ICT Bill now with Minister who opened this Summerschool ?