Tanzania: Blow to Battle Against Money Laundering

Regional efforts to fight money laundering and terrorist financing suffered a blow this month when the Tanzanian government broke ranks at a council of finance ministers by preventing approval of a report that painted it in a bad light.

Assessments of the efforts by Tanzania and SA to fight money laundering and terrorist financing were tabled for adoption by a meeting of finance ministers in Maseru on August 20.

The reports had been approved by officials of the regional body co- ordinating the fight against the illegal practices and were due to be adopted at ministerial level. SA put its report forward. Tanzania did not.

"Postponement of the approval by the council of ministers... was unexpected, as the approval of the Tanzania report was on the ministers' agenda," said Paul Vlaanderen, president of the Paris-based Financial Action Task Force (FATF), the peak intergovernmental body on the issue.

The Tanzanian move clouds the region's processes to combat money laundering and terrorist financing .

"It may raise perceptions of higher risk from a money-laundering control perspective of the region and institutions that have correspondent relations with Tanzanian financial institutions," said a source from the Eastern and Southern Africa Anti-Money Laundering Group.

The extent of money laundered is unknown, but in 1996 the International Monetary Fund put it at 2%-5% of the world's gross domestic product.

Developing countries have a vulnerability to money laundering in a higher level of cash transactions compared to developed countries. The global financial crisis increases this vulnerability as a loss of confidence in the formal banking system encourages more people to stick to cash.

The group's 14 members submit themselves to mutual evaluations, based on on-site visits and adoption of the resulting reports. The Tanzanian report highlighted a failure to implement an antimoney-laundering law on the island of Zanzibar, a source with knowledge of the meeting said. The finance ministers agreed to meet again by December to approve the Tanzanian report, the source said.

"The postponement of the approval of the Tanzania report has no consequences for the group. That might change if the report would not be approved.

"In that case the FATF would have to consider the consequences," Vlaanderen said.

Tanzania's finance minister on Friday defended his decision at the ministerial council. "What we said is there are some weaknesses (in the report) that have to be corrected," Finance Minister Mustafa Mkulo told Business Day. "Ministers agreed that it had to be redone and will be discussed some time in December."

South African officials declined to comment.

Source: AllAfrica